Recently in Opalinski v. Robert Half International Inc.,2 the Third Circuit joined the Sixth Circuit in holding that the question of whether parties to an arbitration agreement consented to class arbitration is an issue for courts, rather than arbitrators, to decide, unless the parties clearly agree otherwise. The court reasoned that proceeding on a class basis so fundamentally changes the nature of arbitration that whether the parties agreed to do so is a substantive gateway issue—i.e., an issue of "arbitrability"— for courts to decide, rather than a procedural issue for arbitrators.3
The Third Circuit decision in Opalinski and the Sixth Circuit decision in Reed Elsevier, Inc. v. Crockett4 represent significant victories for parties hoping to avoid class arbitration when an arbitration clause is silent on the availability of class procedures. This article discusses why it is important for courts, rather than arbitrators, to decide the availability of class arbitration; how and why the law on this subject has slowly and circuitously developed; the Third Circuit's and Sixth Circuit's rationales for reaching the conclusion they did; and what parties should take away from these decisions.
When an Arbitrator Decides the Availability of Class Arbitration, Parties Lack Effective Review of that Decision.
To understand the significance of Opalinski and Crockett, consider what happens when an arbitrator, rather than a court, decides the availability of class arbitration. In Oxford Health Plans LLC v. Sutter, the parties voluntarily submitted the question of whether the arbitration could proceed on a class basis to the arbitrator.5 The parties' arbitration clause provided that "[n]o civil action concerning any dispute arising under this Agreement shall be submitted before any court, and all such disputes shall be submitted to final and binding arbitration[,]" but said nothing about the availability of class arbitration.6 The arbitrator ruled that the arbitration clause permitted class arbitration, reasoning that the intention of the clause was "to vest in the arbitration process everything that is prohibited from the court process[,]" including class actions.7
Defendant Oxford Health Plans LLC ("Oxford") argued that this was a garden-variety arbitration clause that lacked any of the terms or features that would indicate an agreement to use class procedures, and filed a motion in federal court to vacate the arbitrator's order under § 10(a)(4) of the Federal Arbitration Act ("FAA").8 The FAA allows a district court to vacate an arbitrator's order only in very narrow circumstances, one of which is where the arbitrator exceeds his power, as set forth in § 10(a)(4).9 When seeking to vacate an arbitrator's order under § 10(a)(4), "[i]t is not enough ... to show that the [arbitrator] committed an error—or even a serious error."10 Instead, because the parties "bargained for the arbitrator's construction of their agreement, an arbitral decision even arguably construing or applying the contract must stand, regardless of a court's view of its (de)merits."11 Accordingly, the only question before the Supreme Court in Sutter was "whether the arbitrator (even arguably) interpreted the parties' contract, not whether he got its meaning right or wrong."12
Footnotes
1 Sarah Zielinski is a senior associate in the Antitrust & Trade Regulation practice group of McGuireWoods LLP. In addition to her antitrust practice, she has represented parties in disputes before arbitrators and district and appellate courts regarding whether an arbitration may proceed on a class basis.
2 761 F.3d 326, 2014 U.S. App. LEXIS 14538 (3d Cir. 2014) ("Opalinski").
3 Id. at *6-11.
4 734 F.3d 594 (6th Cir. 2013) ("Crockett").
5 133 S. Ct. 2064, 2067 (2013) ("Sutter").
6 Id.
7 Id.
8 Id. at 2070.
9 Id.; see also 9 U.S.C. §10(a)(4).
10 Sutter, 133 S. Ct. at 2068.
11 Id. (internal quotations omitted).
12 Id.
Originally published in 2014 American Bar Association, Section of Antitrust Law
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