I have been making my way through the rest of the May arbitration cases (the photo shows how high my stack got), and one thing that stands out is this: I was right. Delegation clauses remain a hot topic in arbitration law.
Three recent cases demonstrate the power of having a delegation clause in an arbitration agreement.
The Fifth Circuit enforced a delegation clause in Edwards v. DoorDash, 2018 WL 1954090 (5th Cir. Apr. 25, 2018), a case involving a putative FLSA class action brought by “Dashers.” Not to be confused with reindeers who pull Santa’s sleigh, these Dashers deliver restaurant food to people’s homes. And they all signed an Independent Contractor Agreement with an arbitration agreement. That agreement called for AAA rules and waived class and collective actions. In response to the filing of the class action, DoorDash successfully moved to compel individual arbitration. On appeal, the class representative argued the arbitration agreement was unconscionable. But once the Fifth Circuit was satisfied that the independent contractor agreement was validly formed, it found the incorporation of AAA rules was a valid delegation clause that the plaintiffs had failed to challenge. The case was sent to arbitration.
In another Fifth Circuit case, Arnold v. HomeAway, Inc., 2018 WL 2222661 (5th Cir. May 15, 2018), incorporation of AAA rules also served as the parties’ delegation clause. In that case, consumers filed putative class action complaints against a company that facilitates short-term vacation rentals. HomeAway argued that its 2016 terms and conditions applied, which contained an arbitration clause providing that arbitration would be governed by AAA rules and that awards would be “on an individual basis.” The consumers argued that the 2015 terms and conditions applied, which lacked an arbitration agreement (and that any subsequent modification was invalid). The district court denied the motion to compel arbitration, finding the arbitration agreement illusory.
On appeal, the Fifth Circuit faulted the district court for ignoring the delegation clause in the terms and conditions. It found the incorporation of AAA rules was a clear and unmistakable delegation of questions relating to the validity of the arbitration agreement to an arbitrator. Because the plaintiffs’ challenge to the arbitration agreement was not specific to the delegation clause, arbitration must be compelled.
Not far away, in the Supreme Court of Alabama, another delegation clause was enforced. Eickhoff Corp. v. Warrior Met Coal, LLC, 2018 WL 2075985 (Alabama May 4, 2018), did not involve a putative class action, but something just as sexy: five agreements between the parties, only two of which had arbitration clauses (both calling for AAA rules). When one party filed in court, the other moved to compel arbitration. The party opposing arbitration claimed that its court claims were based on the three contracts without arbitration clauses and the trial court agreed. The Supreme Court reversed, finding that the incorporation of AAA Rules was an enforceable delegation clause, delegating questions of scope to an arbitrator, and it should have resulted in an order compelling arbitration.