Same As It Ever Was?

In last month's issue, we noted that in the past few years, the Supreme Court has issued several important decisions limiting the availability of class-wide arbitration.

While the impact on class-wide arbitration itself has been explored intensively, the potential impact on other forms of aggregation has received somewhat less attention, even though principles announced in these class arbitration cases could have an impact on the consolidation of commercial arbitration, including insurance coverage disputes. As we discussed, lower courts, however, largely consider the landscape for consolidation relatively unchanged.

We conclude the discussion herein.

Reed Elsevier and Other Decisions

In Southern Communications Services, Inc. v. Thomas, 720 F.3d 1352 (11th Cir. 2013), the Eleventh Circuit rejected an argument under Stolt-Nielsen that the arbitrator had exceeded his authority by permitting class arbitration of claims by cell phone customers challenging termination fees. Citing Oxford Health Plans, the court held that the arbitrator plainly “interpreted the parties' contract” under Georgia law and thus acted within his authority. Id' at 1359-60. Thus, given the reluctance to expand Stolt-Nielsen in the class arbitration context, there seems little danger at present of courts applying an expansive reading of the case to consolidation requests on grounds that the parties had not explicitly consented to consolidation.

At the same time, several courts have picked up on the less-than-subtle hint in Oxford Health Plans that the Supreme Court has not yet decided whether class arbitration demands may be evaluated by a court under the rubric of “arbitrability.” In Reed Elsevier, Inc. v. Crockett, 734 F.3d 594 (6th Cir. 2013), a lawyer filed a putative class arbitration demand against Lexis on behalf of firms charged additional fees and clients to whom those fees were passed. Lexis filed suit, and the district court agreed that classwide arbitration was presumptively a question of arbitrability for the courts and that the agreement in question did not permit it. The Sixth Circuit affirmed, noting that “recently the Court has given every indication, short of an outright holding, that classwide arbitrability is a gateway question rather than a subsidiary one.” Id. at 598. Similarly, in Opalinski v. Robert Half International Inc. , 761 F.3d 326 (3d Cir. 2014), a group of employees brought a putative class arbitation over overtime pay, and the employer moved to compel arbitration on an individual basis. Stressing that class arbitration involves absent individuals and is a different type of controversy than bilateral arbitration, the court held that class arbitrability was presumptively a question for the courts.

Conclusion

Overall, then, in the wake of the Supreme Court's recent arbitration decisions, lower courts have been more willing to reserve for themselves the question of whether an arbitration clause permits class arbitration, at least when the parties have not agreed that an arbitrator should decide the question. In general, courts have not otherwise recognized significant changes in the regime for aggregating arbitrations, and in particular, have not yet changed the basic framework for addressing consolidation requests other than class arbitrations. Those motions continue to be referred to an arbitration panel, which may interpret the agreement to determine whether the parties have granted explicit or implicit consent. Nonetheless, given the evolving jurisprudence with respect to class arbitrations and at least the potential for subsequent changes with respect to other forms of consolidation, parties would be well advised to address consolidation directly when drafting arbitration agreements. Courts remain highly likely to defer to the parties' explicit choices.

Jeff Bowen, a member of this newsletter's Board of Editors, is a Commercial Litigation partner at Perkins Coie LLP and a member of the Insurance Recovery practice group. He is also an Adjunct Professor at the University of Wisconsin Law School (LLM Program).

In last month's issue, we noted that in the past few years, the Supreme Court has issued several important decisions limiting the availability of class-wide arbitration.

While the impact on class-wide arbitration itself has been explored intensively, the potential impact on other forms of aggregation has received somewhat less attention, even though principles announced in these class arbitration cases could have an impact on the consolidation of commercial arbitration, including insurance coverage disputes. As we discussed, lower courts, however, largely consider the landscape for consolidation relatively unchanged.

We conclude the discussion herein.

Reed Elsevier and Other Decisions

In Southern Communications Services, Inc. v. Thomas , 720 F.3d 1352 (11th Cir. 2013), the Eleventh Circuit rejected an argument under Stolt-Nielsen that the arbitrator had exceeded his authority by permitting class arbitration of claims by cell phone customers challenging termination fees. Citing Oxford Health Plans, the court held that the arbitrator plainly “interpreted the parties' contract” under Georgia law and thus acted within his authority. Id' at 1359-60. Thus, given the reluctance to expand Stolt-Nielsen in the class arbitration context, there seems little danger at present of courts applying an expansive reading of the case to consolidation requests on grounds that the parties had not explicitly consented to consolidation.

At the same time, several courts have picked up on the less-than-subtle hint in Oxford Health Plans that the Supreme Court has not yet decided whether class arbitration demands may be evaluated by a court under the rubric of “arbitrability.” In Reed Elsevier, Inc. v. Crockett , 734 F.3d 594 (6th Cir. 2013), a lawyer filed a putative class arbitration demand against Lexis on behalf of firms charged additional fees and clients to whom those fees were passed. Lexis filed suit, and the district court agreed that classwide arbitration was presumptively a question of arbitrability for the courts and that the agreement in question did not permit it. The Sixth Circuit affirmed, noting that “recently the Court has given every indication, short of an outright holding, that classwide arbitrability is a gateway question rather than a subsidiary one.” Id. at 598. Similarly, in Opalinski v. Robert Half International Inc. , 761 F.3d 326 (3d Cir. 2014), a group of employees brought a putative class arbitation over overtime pay, and the employer moved to compel arbitration on an individual basis. Stressing that class arbitration involves absent individuals and is a different type of controversy than bilateral arbitration, the court held that class arbitrability was presumptively a question for the courts.

Conclusion

Overall, then, in the wake of the Supreme Court's recent arbitration decisions, lower courts have been more willing to reserve for themselves the question of whether an arbitration clause permits class arbitration, at least when the parties have not agreed that an arbitrator should decide the question. In general, courts have not otherwise recognized significant changes in the regime for aggregating arbitrations, and in particular, have not yet changed the basic framework for addressing consolidation requests other than class arbitrations. Those motions continue to be referred to an arbitration panel, which may interpret the agreement to determine whether the parties have granted explicit or implicit consent. Nonetheless, given the evolving jurisprudence with respect to class arbitrations and at least the potential for subsequent changes with respect to other forms of consolidation, parties would be well advised to address consolidation directly when drafting arbitration agreements. Courts remain highly likely to defer to the parties' explicit choices.

Jeff Bowen, a member of this newsletter's Board of Editors, is a Commercial Litigation partner at Perkins Coie LLP and a member of the Insurance Recovery practice group. He is also an Adjunct Professor at the University of Wisconsin Law School (LLM Program).