Happy August! What’s a better way to start the month than thinking about class arbitrability! Again. Ugh.
Trust me, I would much rather consider so many other exciting arbitration issues, but this one seems to be occupying a lot of court attention, so I’d be remiss not to report on it.
Since my last update, I ran across a recent state court’s perspective on the question of who decides class arbitrability. In Alabama Psychiatric Servs. P.C. v. Lazenby, 2019 WL 2560096 (Ala. June 21, 2019), the Alabama Supreme Court essentially sided with the Second, Tenth, and Eleventh Circuits, concluding that a traditional delegation suffices to commit questions of class arbitrability to an arbitrator. That said, the court only generically references the circuit split.
The underlying facts of Lazenby are straight forward. A group of employees filed a putative class action against their employer in state court. The employer brought a motion to compel arbitration and, at the same time, asked the court to determine whether class arbitration was available. The arbitration agreement was silent on the question. The state court compelled arbitration but declined to determine the class arbitrability issue, instead sending it to the arbitrator.
The arbitrator, in turn, decided that class arbitration was authorized. He did so, though, on pretty sketchy legal bases. Essentially, he says that the agreement was written by the employer, so ambiguities should be read against the drafter. (Of course, you’ll remember that SCOTUS rejected a similar argument earlier this year in Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 203 L.Ed.2d 636 (2019).) He then adds that the arbitration agreement promised employees that it was not altering their substantive rights, but that doing away will class proceedings would alter their substantive rights. (This, of course, runs afoul of just about everything SCOTUS has said about class waivers, including in American Express Co. v. Italian Colors, 570 U.S. 228 (2013).)
The employer sought to vacate the arbitration clause construction award. The lower court upheld it.
On appeal, the Alabama Supreme Court assumed without deciding that the “availability of class arbitration is a question of arbitrability,” by which it meant a question that should be resolved by a court absent a delegation provision. The court then found that the parties included such a delegation. (Technically, this issue is a little procedurally wonky, as the original court compelling arbitration reached this conclusion on dubious grounds but the employer failed to properly appeal, so the Supreme Court punts.)
The interesting thing about this decision is that Alabama Supreme Court concluded that once the parties delegated the question of class arbitrability to the arbitrator, they were stuck with the arbitrator’s conclusions so long as he arguably applied the law, even if he got it wrong. In other words, the court determined that there was nothing special about class arbitrability.
As the previous post on this blog indicates, that’s turning into a hotly debated conclusion. In fact, this Alabama case comes very close to being diametrically opposed to what the Fifth Circuit concluded in 20/20 Communications, Incorporated v. Crawford, 2019 WL 3281412 (5th Cir. July 22, 2019).
It doesn’t take a crystal ball to guess that this “who decides class arbitrability” issue will be at the heart of the next chapter in SCOTUS’s ongoing fascination with class arbitration. The trouble, though, is that there aren’t many great cases yet that tee the issue up cleanly.