Authored by Patrick Bannon
Can an employer that has agreed to arbitrate “all disputes” with its employees be required to participate in “class arbitration,” even if its arbitration agreement doesn’t mention class proceedings? The answer often depends on who decides the question.
Arbitrators sometimes find that standard arbitration clauses amount to agreements to participate in class arbitration, even when the clauses don’t mention class arbitration and even though class arbitration is about the last type of proceeding most employers would ever want.
Judges, on the other hand, have been much less likely to interpret ordinary arbitration clauses as licenses for class arbitration.
Thus, who decides — judge or arbitrator — whether the parties have agreed to class arbitration is a question of huge practical importance. As the Supreme Court noted earlier this year, in its Oxford Health Plans, LLC v. Sutter opinion, the issue remains unresolved.
In Reed Elsevier, Inc. v. Crockett , the Sixth Circuit ruled that the “who decides” issue is presumptively for a judge, not an arbitrator.
Judges, the court wrote, are expected to decide “gateway disputes” relating to arbitration, including, to quote the Supreme Court’s 2003 Green Tree Financial Corp. v. Bazzle decision, “whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy.” By contrast, the appellate panel stated, the parties’ agreement to arbitrate creates a presumption that they wanted the arbitrator to decide mere “subsidiary questions,” issues closely related to the parties’ main dispute, such as whether a claim has been waived or lost through delay.
The Sixth Circuit concluded, apparently without difficulty, that whether the parties authorized class arbitration is a gateway issue. “The Supreme Court,” it wrote, “has given every indication, short of an outright holding, that classwide arbitrability is a gateway question.” The fundamental differences, examined in detail in AT&T Mobility v. Concepcion, between class and bilateral arbitration, the court ruled, make the question whether the parties agreed to class arbitration “vastly more consequential than even the gateway question whether they agreed to arbitrate bilaterally.” Accordingly, the Reed Elsevier appellate panel concluded unanimously, absent the parties’ “clear and unmistakable” agreement to the contrary, “whether an arbitration agreement permits classwide arbitration is a gateway matter, which is reserved for judicial determination…”
The Sixth Circuit’s Reed Elsevier decision holds out the promise that employers can expect their arbitration agreements to be read as intended — as authorizing arbitration as traditionally understood, not vastly different class proceedings with frequently unappealable and potentially catastrophic outcomes.