Joining the Sixth and Third Circuit Courts of Appeals, the Fourth Circuit this week held that “whether an arbitration clause permits class arbitration is a gateway question of arbitrability for the court.” Dell Web Communities, Inc. v. Carlson, 2016 WL 1178829 (4th Cir. Mar. 28, 2016).
At issue was whether a federal judge or an arbitrator would decide whether class arbitration was appropriate for claims of construction defects in “approximately 2,000” homes. The individual arbitration agreements had no explicit language regarding the availability of class actions. The district court had determined the arbitrator should decide the availability of the class mechanism.
The Fourth Circuit reversed. It reviewed recent case law from SCOTUS, noting that while the Court “has not conclusively told us who gets to decide whether an arbitration agreement provides for class arbitration,” it has provided plenty of hints that the issue should be presumptively for courts. As a result, the Fourth Circuit declined to follow its own unpublished precedent, and remanded the case to the district court for a determination “whether the parties agreed to class arbitration.”
This is an important trend in putative class action cases where the plaintiffs have signed arbitration agreements. Defendants now have three federal appellate decisions to cite in favor of the proposition that courts should decide whether a class is allowed. Keeping those decisions in court will help build precedent regarding the type of language in arbitration agreements that can constitute an agreement to class actions.