The intersection of class actions and arbitration continues to raise issues for parties to consider in evaluating whether arbitration clauses do or do not permit class actions in arbitration. One such issue involves who gets to decide whether there can be class arbitration, a court or the arbitrator? The answer to that question, and to the related question of whether a class arbitration can proceed, depends on the language in the arbitration clause.
On July 30, 2014, the United States Court of Appeals for the Third Circuit held that whether an arbitration agreement allows for class arbitration is a "question of arbitrability" that is to be decided by the court, rather than by the arbitrator(s), unless the arbitration agreement contains language "unambiguously delegating" resolution of this issue to the arbitrator(s). Opalinski v. Robert Half International Inc., No. 12-4444 (3d Cir. July 30, 2014). A panel of three arbitrators from the American Arbitration Association (AAA) recently distinguished Opalinski and held that an arbitration agreement unambiguously delegates resolution of this issue to the arbitrators by incorporating AAA rules because those rules state that this issue is to be decided by the arbitrators. Burkett v. Chesapeake Energy Corp., Arbitration No. 14 20 1300 0436 (Sept. 11, 2014).
The Burketts leased certain of their gas interests in their property to defendants. They contend that defendants underpaid royalties due to them and other similarly situated landowners under a certain clause in the lease. The Burketts sought to bring a claim on behalf of a class of similarly situated landowners against defendants by filing a class arbitration demand. The arbitration agreement in the lease states, "The resolution of all such disputes shall be determined in arbitration in accordance with the rules of the American Arbitration Association." The rules of the American Arbitration Association at the time the lease was entered into included Supplementary Rules that govern class arbitration. Rule 3 of the Supplementary Rules specifically provides that the arbitrator is to decide whether class arbitration is available under the arbitration agreement: "Upon appointment, the arbitrator shall determine as a threshold matter, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class."
The arbitrators in Burkett held that the inclusion of language in the arbitration agreement stating that the arbitration is to be conducted in accordance with AAA rules, which include a rule stating that the arbitrator is to decide the availability of class arbitration, is a sufficient basis to hold that the parties unambiguously delegated the resolution of this question to the arbitrator under Opalinski. The arbitrators distinguished Opalinski because although the arbitration agreement there also incorporated AAA rules, the AAA rules in effect when the Opalinski arbitration agreement was entered into did not discuss class arbitration or provide rules for dealing with it. The arbitrators further noted that several courts within the Third Circuit have held that incorporation of AAA rules in the arbitration agreement is clear and unmistakable evidence that the parties agreed to submit arbitrability questions to the arbitrators.
The arbitrators concluded that a specific reference to class arbitration within the arbitration agreement itself is not necessary to find that the parties had agreed to submit arbitrability questions to the arbitrators. The arbitrators determined that the Supreme Court set forth no such requirement in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010), and that the arbitrator's decision in Sutter v. Oxford Health Plans LLC, which was affirmed by the District Court, the Third Circuit, and the Supreme Court, supported such a conclusion.
The arbitrators further concluded that defendants were not being forced to arbitrate substantive class disputes that they did not agree to arbitrate because the AAA Supplementary Rules for Class Arbitrations were in existence when the arbitration agreement was entered into, meaning the parties anticipated class arbitration, and the arbitration agreement did not contain a class action waiver, as approved by the Supreme Court in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). The arbitrators further noted that defendants have not included class arbitration waivers in other leases post-dating Concepcion, indicating an acceptance of class arbitration.
Therefore, parties with arbitration agreements that incorporate AAA rules should be aware that arbitrators may interpret their arbitration agreements as delegating resolution of the availability of class arbitration to the arbitrators, despite that their arbitration agreement does not specifically so state and despite the Third Circuit's holding in Opalinski that this issue is presumptively for the courts to resolve. These parties should also be aware that arbitrators may interpret their failure to include a class arbitration waiver as acquiescence in class arbitration. Parties that wish to avoid this result may specifically state in their arbitration agreement that class arbitration is prohibited or that the availability of class arbitration is for the courts, not the arbitrators, to resolve.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
