Splitting Hairs: Resolving the Circuit Split on AAA Incorporation in Class Arbitration Delegation

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Volume 42 Issue 2 Article 5

2021

Splitting Hairs: Resolving the Circuit Split on AAA Incorporation in Splitting Hairs: Resolving the Circuit Split on AAA Incorporation in

Class Arbitration Delegation Class Arbitration Delegation

Jacob Petersen

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Arbitration Delegation,"

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124

SPLITTING HAIRS: RESOLVING THE CIRCUIT SPLIT ON AAA INCORPORATION IN

CLASS ARBITRATION DELEGATION

Jacob Petersen

TABLE OF CONTENTS

I. INTRODUCTION...................................................................................................................... 125

II. BACKGROUND: ARBITRATION, DELEGATION, AND CLASS ARBITRATION ............................ 126

a. Brief History of Arbitration ............................................................................................. 126

b. Delegation of Authority Between Courts and Arbitrators ............................................... 128

c. Class Arbitration.............................................................................................................. 128

III. THE SUPREME COURT’S ATTITUDE TOWARD CLASS ARBITRATION ................................... 129

IV. THE CIRCUIT SPLIT ............................................................................................................ 133

a. Initial Decisions for Courts: Reed Elsevier and the “Daisy-Chain” .............................. 134

b. Opening the Split: Sappington and Its Progeny .............................................................. 140

V. RESOLVING THE SPLIT ......................................................................................................... 143

a. Author’s Solution ............................................................................................................. 144

b. The Supreme Court’s Solution ......................................................................................... 147

c. Effects of This Decision ................................................................................................... 150

VI. CONCLUSION ...................................................................................................................... 151

2021 Graduate Summa Cum Laude, Mitchell Hamline School of Law. He is an active member of the Minnesota

State Bar Association, Federal Bar Association, and Phi Alpha Delta. He extends special thanks to his writing

assistants, Elliot and Abby.

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I. INTRODUCTION

“Who decides whether class arbitration is available?” This seemingly simple question has

fueled much litigation and is hotly debated between the Federal Courts of Appeals. This question

also implicates other foundational questions: “Is class arbitration a proper remedy in this case?”

“Is class arbitration a good tool to resolve disputes?” “Are the class-action waivers that lead to

the use of class arbitration conscionable?” “Is the use of arbitration clauses in consumer,

employment, and other contracts between large organizations and single persons a just practice?”

This article does not presume to answer any of those questions. Instead, this article

examines a very narrow issue that has caused a substantial circuit split: “Is incorporation of the

American Arbitration Association (AAA) rules in an arbitration clause a proper delegation of

authority to the arbitrator to decide whether class arbitration is available?” The solution to this

problem, and to the class arbitrability delegation problem in general, is important because it will

determine how many claims go to class arbitration. Arbitrators are more likely to decide that

class arbitration is available because they believe they can handle the challenge and can bill

much more time in a class arbitration. Courts, meanwhile, will embrace the Supreme Court’s

skepticism against class arbitration and rule that it is not available. Therefore, a resolution on this

issue will have a profound impact on the number of class arbitrations filed and resolved.

I begin with a brief examination of the background of arbitration, the delegation doctrine,

and class arbitration. Then, I examine the Supreme Court’s treatment of class arbitration and the

question of who decides class arbitrability. Next, I define the different positions the federal

circuits have taken on the AAA incorporation question, which has resulted in a four to three

circuit split. Finally, I propose my own resolution of the split, analyze the Supreme Court’s likely

solution, and examine possible effects of that decision.

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II. BACKGROUND: ARBITRATION, DELEGATION, AND CLASS ARBITRATION

a. Brief History of Arbitration

Arbitration is a quasi-judicial alternate dispute resolution process where the parties agree

to present their dispute to a neutral entity (generally one person or a panel of three) to issue a

binding decision on the merits of the case.

Clauses requiring arbitration are a common feature of

modern consumer agreements, employment contracts, and website terms and conditions.

Arbitration is often preferred to litigation in commercial contexts because it is cheaper and faster

than litigating a lawsuit, and the ability to choose the decision-maker means the parties can

ensure the arbitrator has subject-matter knowledge.

In the first century and a half of American jurisprudence, judges were loath to enforce

agreements to arbitrate signed before the dispute arose because they infringed on the jurisdiction

of the courts to resolve disputes.

To counteract this hostility, the United States Congress passed

the Federal Arbitration Act (FAA) in 1925. The Act holds agreements to arbitrate disputes are

“valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the

revocation of any contract.”

It also allows a party to petition a court to compel arbitration

and

to confirm arbitral awards.

Parties can also ask a court to vacate or modify an award under

limited circumstances.

Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 382 (2002).

Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682–83 (2010).

Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 982 (2d Cir. 1942).

Federal Arbitration Act, 9 U.S.C. § 2.

Id. at § 4.

Id. at § 9.

Id at §§ 10–11; see, eg. Lawrence R. Mills & Thomas J. Brewer, “Exceeded Powers”: Exploring Recent Trends in

Cases Challenging Tribunal Authority, 31 ALTS. TO HIGH COST LITIG. 113 (2013) (finding vacatur in around 20% of

petitions).

127

Arbitrations are often conducted through arbitral organizations. One of the most

prominent is the American Arbitration Association (AAA), a group founded in 1926 to provide

an out-of-court solution to resolve disputes.

The AAA publishes and maintains a variety of rules

that are often incorporated into arbitration clauses, even if the arbitration will not be

administered by the AAA. Unless otherwise stated, incorporating AAA rules into an arbitration

clause is an incorporation of the Rules of Commercial Arbitration.

The Supreme Court initially maintained some skepticism about arbitration after the FAA

was ratified.

Starting in the 1980s, though, the Supreme Court has held consistently in favor of

binding arbitration agreements, finding that the FAA supported an overall “federal policy

favoring arbitration.”

Supreme Court and the federal circuits have found this policy to overrule

traditional contract defenses such as lack of mutual assent,

unconscionability,

and the

inability to vindicate rights.

Courts have also found this policy to overrule constitutional

defenses based in the Fifth Amendment Due Process Clause

and the Seventh Amendment right

to a civil jury.

The Supreme Court’s expansive support for arbitration has resulted in the

common use of arbitration clauses in adhesive contracts, because the drafters can be sure that the

clauses will be enforced, and it is highly unlikely that the courts will step in to interfere.

AAA Mission Statement, AM. ARB. ASS’N, www.adr.org/mission (last visited Dec. 23, 2019).

Commercial Arbitration Rules and Mediation Procedures, Am. Arb. Ass’n, 10 (rules effective Oct. 1, 2013),

https://www.adr.org/sites/default/files/Commercial%20Rules.pdf [hereinafter AAA Commercial Arbitration Rules].

See, e.g. Wilko v. Swan, 346 U.S. 427, 436–37 (1953) (finding that arbitration could not be compelled in a claim

brought under the Securities Act because arbitration did not allow full vindication of the plaintiff’s rights).

See, e.g. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983) (“questions of

arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration. . . . [A]ny doubts

concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is

the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”).

Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017).

Chavarria v. Ralphs Grocery, Inc., 733 F.3d 916 (9th Cir. 2013).

Am. Express Co., v. Italian Colors Rest., 570 U.S. 228 (2013).

Davis v. Prudential Sec., Inc., 59 F.3d 1186 (11th Cir. 1995).

Janiga v. Questar Cap. Corp., 615 F.3d 735 (7th Cir. 2010).

128

b. Delegation of Authority Between Courts and Arbitrators

However, there is one question where courts consistently assert their authority over

arbitration: whether and how the parties agreed to resolve their dispute through arbitration in the

first place, and whether a court or arbitrator decides these questions. These questions are split

into “substantive” arbitrability (whether the parties agreed to arbitration in the first place) and

“procedural” arbitrability (the specific procedures to be followed in arbitration). Courts

presumptively decide questions of substantive arbitrability unless the parties clearly and

unmistakably delegate otherwise.

If there is such a delegation, the decision of whether a

specific dispute is subject to arbitration will be decided by the arbitrator(s).

The courts’ power

over the arbitral process only applies to these “gateway questions” of whether the dispute goes to

arbitration at all. Once it is found or agreed that a dispute will be arbitrated, all question of

“procedural arbitrability” will be decided by the arbitrator, who is presumably better suited to

determine what procedures will best fit the situation.

c. Class Arbitration

Emerging in the 1980s,

class arbitrations allow a party to file and proceed with an

arbitration for or against a class in a manner similar to class-action lawsuits. Class-action

lawsuits, authorized by Rule 23 of the Federal Rules of Civil Procedure, allow parties to assert a

claim on behalf of or sue a class of parties “so numerous that joinder of all parties is

impracticable,” among other criteria.

Class action suits are often filed on behalf of a group of

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (quoting AT&T Tech., Inc. v. Commc’n Workers,

475 U.S. 643, 649 (1986)).

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).

Howsam, 537 U.S. at 86.

S.I. Strong, Does Class Arbitration "Change the Nature" of Arbitration? Stolt-Nielsen, AT&T, and A Return to

First Principles, 17 HARV. NEGOT. L. REV. 201, 206 (2012) (citing Keating v. Superior Court, 645 P.2d 1192, 1209–

10 (Cal. 1982), rev'd on other grounds sub nom; Southland Corp. v. Keating, 465 U.S. 1 (1984)).

See FED. R. CIV. P. 23.

129

people or organizations seeking recourse for damages that are too small to bring suit over when

compared to the costs of litigation.

Under Supreme Court precedent, waivers against filing or

participating in class action suits incorporated in an arbitration clause are enforceable.

Class

arbitration is a unique device that imports elements of judicial class actions to adjudicate class

disputes that are subject to an arbitration clause.

These proceedings are often conducted according to rules promulgated by the AAA, who

published Supplementary Rules for Class Arbitrations in 2003.

Rule 3 of these Rules holds that

it is the arbitrator’s duty to analyze a contract to determine the availability of class arbitration.

The Federal Courts of Appeals are split on the question of whether incorporating the AAA Rules

of Commercial Arbitration also incorporate the Supplementary Rules for Class Arbitrations

(detailed in § V, infra).

III.

THE SUPREME COURT’S ATTITUDE TOWARD CLASS ARBITRATION

The United States Supreme Court has considered class arbitrations a few times within the

last twenty years, starting with Bazzle, followed by Stolt-Nielsen, Concepcion, and Oxford

Health Plans. In these cases, the Court’s attitude toward class arbitration as a procedure has

shifted, and no decisions regarding whether class arbitrability is a procedural or substantive

Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 245 (2013) (Kagan, J., dissenting).

Id. at 238 (citing AT&T Mobility v. Concepcion, 563 U.S. 333, 351 (2011)).

Strong, supra note 20, at 205–06.

Supplementary Rules for Class Arbitrations, Am. Arb. Ass’n (rules effective Oct. 8, 2003),

https://adr.org/sites/default/files/Supplementary_Rules_for_Class_Arbitrations.pdf [hereinafter AAA Supplementary

Rules].

Id. at 4.

130

question of arbitrability have stuck. These cases lay the groundwork for the consideration of the

law and policy behind AAA incorporation delegating class arbitrability.

The first case essential to this analysis is Green Tree Fin. Corp. v. Bazzle.

In Bazzle,

two separate plaintiffs in South Carolina filed claims against a lender.

The plaintiffs moved to

certify a class-action suit in state court, and Green Tree responded with a motion to compel

arbitration under an arbitration clause per the FAA.

The court certified the class, compelled

arbitration, and ordered class arbitration.

After arbitrators selected by Green Tree, found in

plaintiffs’ favor in both cases, Green Tree moved to vacate the arbitrator’s awards, claiming the

arbitration clause did not allow for class arbitration.

The South Carolina Supreme Court held

that that class arbitrations were allowed in the dispute because the clause was silent on the

matter. Green Tree appealed to the United States Supreme Court.

The Court ruled by a plurality (4–1–4) that under the contract’s arbitration clause, the

question should have been resolved by the arbitrator. The plurality opinion held that the contract

clause submitted all questions and controversies to the arbitrator, which included whether class

arbitration was available.

The Court noted that courts decide only the “gateway” issues of

substantive arbitrability that class arbitration is not one of those issues because it is a matter of

contract interpretation after arbitrability has been decided, and arbitrators are well suited to

Because they were decided after the Circuit cases I discuss below and did not influence those decisions, I will be

examining Epic Sys Corp. v. Lewis, 138 S. Ct. 1612 (2018) and Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019),

the latest Supreme Court cases about class arbitration, below.

Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, (2003).

Id. at 448.

Id.

Id. at 449.

Id.

Id. at 449–50.

Id. at 451–52.

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interpret such matters.

In essence, Bazzle held that class arbitrability was a procedural question

for the arbitrator to decide.

Justice Stevens held in concurrence that South Carolina made the

right decision allowing class arbitration. However, because the plurality opinion more closely

matched his own, he joined it to avoid a deadlocked Court.

In addition to delegating class arbitrability to the arbitrator, Bazzle signaled the Court’s

implicit approval of class arbitration.

In response, the AAA created and released its

Supplementary Rules of Class Arbitrations, mere months after the Bazzle’s opinion.

The Court stepped back from Bazzle (but did not overrule it) in Stolt-Nielsen S.A. v.

AnimalFeeds International Corp.

In Stolt-Nielsen, an arbitrator certified a class arbitration in

an anti-trust claim brought against a shipping company, which decision the parties appealed all

the way to the United States Supreme Court.

In the lower court, the parties stipulated that the

agreement was silent on class arbitration.

Justice Alito penned the 5-3 majority opinion rejecting the arbitrator’s decision to allow

class arbitration. The Court took a skeptical view of class arbitration, stating that it brings

“fundamental changes” to the arbitration process: it does not solve a single dispute, but many

with a single stroke of a pen; it is not confidential (confidentiality being a large draw of

arbitration); it binds many absent parties to an arbitration award; and companies can be held

Id. at 453.

Id. at 451.

Id. at 455 (Stevens, J., concurring).

While the plurality decision does not discuss the merits of class arbitration as a procedure, its implicit acceptance

of class arbitration in holding that arbitrators will decide class arbitrability acted as a silent approval of the

procedure.

AAA Supplementary Rules, supra note 25.

Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010).

Id. at 669–70.

Id. at 662.

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liable for large awards just like in traditional class-actions, with much less recourse for judicial

or appellate review.

Therefore, the Court ruled that where a contract is silent on class

arbitration, it is not allowed.

Overall, Stolt-Nielsen is openly skeptical of class arbitration when

compared to Bazzle’s silent acceptance.

Justice Ginsburg’s dissent held that because the parties had submitted the question of

class arbitrability directly to the arbitrator, they properly delegated the issue to the arbitrator.

She also disputed the majority’s skepticism toward class arbitration by noting that class

arbitrations, much like class-action suits, are often the only way for people to litigate small

claims against large companies, and therefore, should not be made more difficult to start or

join.

Stolt-Nielsen’s majority opinion seemed to establish that class arbitrability was not a

procedural question of arbitrability, which under the First Options

rule would leave the

question of whether a contract allows for class arbitration to the courts. However, Justice Alito’s

majority opinion did not address that question directly, so there was still no direct answer to the

question of “who decides” whether class arbitration is available in a silent contract.

The Court’s decision in AT&T Mobility LLC v. Concepcion

doubled down on the

Court’s skepticism towards class arbitration. In addition to the misgivings expressed in Stolt-

Nielsen, Justice Scalia noted that arbitrators are generally not qualified to certify a class.

Justice

Id. at 686–87.

Id. at 687.

Id. at 693–96 (Ginsburg, J., dissenting).

Id. at 699.

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995).

AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).

Id. at 347–51.

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Scalia also extended Stolt-Nielsen’s attack on class arbitration, noting, “[w]e find it hard to

believe that defendants would bet the company with no effective means of review, and even

harder to believe that Congress would have intended to allow state courts to force such a

decision.”

Therefore, the Court was vocally resistant of any finding that required parties to

participate in class arbitration not explicitly agreed to.

The Supreme Court’s ruling in Oxford Health Plans LLC v. Sutter

left open the

question of who decides whether class arbitration is available.

Instead, it seemingly took a step

back from Stolt-Nielsen by establishing that an arbitrator’s clause construction award will be

upheld under the FAA as long as the arbitrator “(even arguably) interpreted the contract.”

Oxford Health Plans is largely silent as to the desirability or lack thereof of class arbitration.

Therefore, Stolt-Nielsen and Concepcion spoke loudest, and both were skeptical (to put it lightly)

of class arbitration. These four decisions laid the groundwork for the subsequent circuit split on

proper delegation of class arbitrability decisions.

IV.

THE CIRCUIT SPLIT

The Supreme Court’s decisions in Bazzle, Stolt-Nielsen, Concepcion, and Oxford Health

Plans left open the questions of whether the availability of class arbitration is a substantive or

procedural question of arbitrability, and of what constitutes “clear and unmistakable” delegation

Id. at 351.

Id.

Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013).

The Court noted that Oxford would have had a good chance to argue that issue in this case, had they not agreed in

the lower courts to have the arbitrator decide. Id. at 569 n.2.

Id. at 569.

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of authority when it comes to class arbitration decisions. The circuits all agree that the question

of class arbitrability in the absence of a delegation is decided by courts.

Instead, the circuits are split on the much narrower question of whether incorporating the

procedural rules of the AAA acts as an incorporation of Rule 3 of the Supplementary Rules of

Class Arbitrations and shows “clear and unmistakable” intent to delegate the question of class

arbitrability to the arbitrator.

a. Initial Decisions for Courts: Reed Elsevier and the “Daisy-Chain”

The Sixth Circuit Court of Appeals was the first circuit to consider this question in the

wake of Stolt-Nielsen and Concepcion in Reed Elsevier Inc. v. Crockett.

There, the court

considered whether class arbitration was available in a dispute between a lawyer and Reed

Elsevier Inc., owner of legal research database LexisNexis. Per the arbitration clause of his

contract with LexisNexis, Crockett filed a grievance against LexisNexis with the AAA claiming

his firm was being charged more than it agreed to in the contract.

The arbitration clause stated

that “any controversy, claim or counterclaim . . . arising out of this Order . . . will be resolved by

binding arbitration under this section and the then-current Commercial Rules and supervision of

the American Arbitration Association (‘AAA’).”

The complaint alleged two class claims for

arbitration: a class of law firms who had been overcharged, and a class of clients to whom those

See Reed Elsevier Inc. ex rel. LexisNexis v. Crockett, 734 F. 3d 594, 598–99 (6th Cir. 2013); Del Webb

Communities, Inc. v. Carlson, 817 F.3d 867, 873 (4th Cir. 2016); Opalinski v. Robert Half Int’l Inc., 761 F.3d 326,

335–36 (3d Cir. 2014); Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966, 972 (8th Cir. 2017); Wells Fargo

Advisors, LLC v. Sappington, 884 F.3d 392, 395 (2d Cir. 2018) (“assume[d] without deciding”); Spirit Airlines, Inc.

v. Maizes, 899 F.3d 1230, 1232 (11th Cir. 2018); Dish Network LLC v. Ray, 900 F.3d 1240, 1243-45 (10th Cir.

2018).

See cases cited supra note 17.

Reed Elsevier, 734 F.3d at 594.

Id. at 596.

Id. at 599.

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overcharges had been passed.

LexisNexis responded by filing suit in the Southern District of

Ohio, asking for a declaration that the arbitration clause did not allow class arbitration and to

enjoin the filed class arbitration.

The Court granted summary declaratory judgment denying

class arbitration,

and an appeal followed.

The Sixth Circuit found that while the contractual

language closely mirrored the contract in Bazzle (which the Supreme Court had found to be a

proper delegation of the class arbitrability question), the fact that the contract did not mention

class arbitration meant that Stolt-Nielsen applied, and the courts would decide whether class

arbitration was available.

The Fourth Circuit was the next court to consider the AAA incorporation issue in Del

Webb Communities, Inc. v. Carlson.

In Del Webb, the parties’ dispute over construction defects

in new homes led to the invocation of an arbitration clause: “The rules of the American

Arbitration Association (AAA), published for construction industry arbitrations, shall govern the

arbitration proceeding[.]”

After winding through South Carolina state courts, Carlson filed a

demand for class arbitration with the AAA on behalf of approximately 2,000 other plaintiffs, at

which point the AAA case manager announced the arbitrator would decide class arbitrability.

Del Webb moved again to compel bilateral arbitration, stating the court should decide class

arbitrability. The district court found that, under Bazzle, class arbitrability is a procedural

question and that the arbitrator decides it as a matter of course, and an appeal followed.

Id.

Reed Elsevier, Inc. v. Crockett, No. 3:10CV248, 2012 WL 604305, at *13 (S.D. Ohio Feb. 24, 2012), aff'd sub

nom. Reed Elsevier, 734 F.3d 594 (6th Cir. 2013).

Reed Elsevier, 734 F.3d at 596.

Id. at 599–600.

Del Webb Communities, Inc. v. Carlson, 817 F.3d 867 (4th Cir. 2016).

Id. at 869.

Id. at 869–70.

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The Fourth Circuit’s opinion focuses on the Supreme Court’s criticisms of class

arbitration, as seen in Stolt-Nielsen and Concepcion.

Like those cases, the opinion in Del Webb

holds that because class arbitration is too different from ordinary arbitration, it is not considered

to be agreed upon in a standard arbitration clause.

The Fourth Circuit remanded the case to the

district court to decide arbitrability.

While the circuit did not make an express decision

regarding AAA incorporation as it relates to class arbitrability delegation, the fact that they

ordered the district court to decide class arbitrability under a clause incorporating AAA rules

indicates they would rule alongside the Sixth, Third, and Eighth Circuits in finding that AAA

incorporation is not a valid delegation.

The Third Circuit Court of Appeals has considered class arbitration issues on several

occasions. In 2014, the circuit held as a preliminary matter that the availability of class

arbitration is a question of substantive arbitrability for the court to decide.

The court then ruled

in Chesapeake Appalachia, LLC v. Scout Petroleum, LLC

that AAA incorporation does not

delegate class arbitrability to the arbitrator. In Chesapeake, parties to a mineral rights lease

disputed royalties owed under the contract.

The arbitration clause held, in relevant part:

“[D]isagreement between Lessor and Lessee . . . shall be determined by arbitration in accordance

with the rules of the American Arbitration Association.”

After Scout Petroleum filed a class

arbitration with the AAA, Chesapeake filed for declaratory judgment with the Middle District of

The court cited Stolt-Nielsen’s holding that class arbitration is so fundamentally different as to constitute a

different procedure, and Concepcion’s holding that because arbitration awards cannot be appealed, companies are

more likely to suffer grievous losses to an arbitral mistake versus the lesser amounts at stake in most bilateral

arbitrations. Id. at 875–76 (citing Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 685 (2010) and AT

& T Mobility LLC. v. Concepcion, 563 U.S. 333, 350 (2011).

Del Webb, 817 F.3d at 876–77.

Id. at 877.

Opalinski v. Robert Half Int’l Inc., 761 F.3d 326, 335–36 (3d Cir. 2014).

Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746 (3d Cir. 2016).

Id. at 748.

Id. at 749.

137

Pennsylvania in April 2014, asking that the court declare class arbitration was not available. The

motion was denied, sending the question of class arbitrability to the arbitrators. On July 30,

2014, the Third Circuit released its opinion in Opalinski that availability of class arbitration is for

the court to decide. The arbitrators soon ruled that the incorporation of the AAA rules acted as a

clear and unmistakable delegation of authority to the arbitrators and asked the parties to submit

briefs as to whether class arbitration was allowed.

Chesapeake filed with the court to vacate the

class construction award, which the court granted because the award was contrary to Opalinski.

After multiple district courts found they would decide class arbitrability in cases against

Chesapeake Appalachia,

Scout Petroleum and other plaintiffs appealed to the Third Circuit to

resolve the issue of whether AAA incorporation was “clear and unmistakable” enough to

delegate the class arbitrability decision to the arbitrator.

The Court concluded that the arbitration clauses did not overcome the “onerous burden”

to conclude that courts decide class arbitrability.

The opinion heavily cited Reed Elsevier,

Opalinski, Stolt-Nielsen, and Oxford Health Plans to support its decision, but the most

interesting analysis in the decision concerns the “daisy-chain of cross-references” required to

find a delegation of authority through AAA incorporation.

The court laid out the chain as such:

in order to find a delegation, a court must look first to the lease, which incorporates the AAA

rules.

Rule 1 of the AAA Rules of Commercial Arbitration holds that unless contracted

Id. at 751.

Id. at 752.

While it is beyond the scope of this article, a full examination of the procedural and arbitral history of Chesapeake

would make a fascinating case study on the interweaving of arbitration and litigation and whether arbitration is

really cheaper or faster than litigation in the current legal climate.

Chesapeake Appalachia, 809 F.3d 746.

Id. at 758.

Id. at 758–61.

Id. at 749.

138

otherwise, AAA incorporation clauses refer to the Rules of Commercial Arbitration.

Rule 7 of

those rules delegates authority to the arbitrator to decide their own jurisdiction.

The court

found that at the time of their decision, there was no direct reference in the Rules of Commercial

Arbitration to the Supplementary Rules of Class Arbitrations. However, the court found that they

would have to make a jump to the Supplementary Rules of Class Arbitrations to answer the “who

decides class arbitration” question. Specifically, a court would have to go to Rule 3 of the

Supplementary Rules to find that the AAA rules delegate the ability to certify a class to

arbitrators.

However, the Court found that because there are no references in the Rules of

Commercial Arbitration to the Supplementary Rules, the leap from AAA incorporation to

delegation of class arbitrability is a step too far to be “clear and unmistakable.”

Thus, the Third

Circuit held that AAA incorporation is not a sufficient delegation of authority to decide class

arbitrability.

The Eighth Circuit became the most recent to rule that AAA incorporation is not a proper

delegation of authority to decide class arbitrability in Catamaran Corp. v. Towncrest

Pharmacy.

In this case, a putative class of over eighty-five pharmacies claiming they had not

been paid under a prescription drug benefits plan filed for a class arbitration with the AAA, per

their contract holding that disputes would be arbitrated by the AAA according to its rules.

Catamaran filed suit in district court seeking declaratory judgment that the contract did not allow

Id.

Id. at 749–50.

Id. at 762.

The Court found that while the overwhelming weight of case law indicates that AAA incorporation is a valid

delegation of arbitrability questions to arbitrators in bilateral arbitrations, they followed Stolt-Nielsen in holding that

class arbitrations are sufficiently different procedures to justify creating a new rule. Id. at 763–65.

Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966 (8th Cir. 2017).

139

for class arbitration.

The district court denied Catamaran’s summary judgment motion, finding

that incorporation of AAA rules was a proper delegation to the arbitrator to decide class

arbitrability, and Catamaran appealed.

The Eighth Circuit found the district court would decide class arbitrability in the presence

of a AAA incorporation.

Their decision explicitly followed the Sixth Circuit’s skepticism

toward class arbitration in Reed Elsevier and the Third Circuit’s finding in Chesapeake that AAA

incorporation is not proper delegation. Thus, the Court overruled the district court’s summary

judgment and remanded for the district court to determine class arbitrability.

Thus, by the end of 2017, four circuits had held that AAA incorporation is not

sufficiently clear and unmistakable delegation to overcome the strong presumption that a court

should decide class arbitrability. The Sixth Circuit led the charge in Reed Elsevier by holding

that the significant differences between bilateral and class arbitration means an explicit

delegation of authority is required for an arbitrator to decide class arbitrability. Then, the Fourth

Circuit applied the Supreme Court’s skepticism against class arbitration in reaching a similar

decision in Del Webb. The Third Circuit in Chesapeake expanded on these holdings, noting that

finding a clear delegation of authority through incorporation of the AAA rules requires a “daisy-

chain” of cross-references that takes a court far afield of the actual text of the contract. With the

Eighth Circuit’s decision in Catamaran marking the Fourth Circuit to rule in favor of courts

Id. at 969.

Id. at 970.

Id. at 973.

Id. at 972–73.

140

deciding class arbitrability with no dissent, the answer to the question of AAA incorporation

could safely have been said to be “well-settled law.”

b. Opening the Split: Sappington and Its Progeny

However, in 2018, three circuits went against the tide and opened a circuit split. The

Second Circuit opened the split in Wells Fargo Advisors, Inc. v. Sappington.

There, two

separate groups of employees filed class arbitration claims for unpaid overtime with both the

Financial Industry Regulatory Authority (“FINRA”) and the AAA per their employment

contracts, which required FINRA to arbitrate all disputes and AAA to arbitrate if FINRA

rejected the claim.

One of the clauses in dispute specifically stated, “[a]ny controversy relating

to your duty to arbitrate . . . or enforceability of this arbitration clause . . . shall also be arbitrated

before the FINRA.”

After FINRA declined to arbitrate because it forbids class arbitration,

Wells Fargo moved to compel bilateral arbitration in all claims before the AAA per the

employment contract, which the district court declined. Wells Fargo then appealed to the Second

Circuit.

The Second Circuit “assumed without deciding” that class arbitrability is a gateway

matter for the courts to decide, absent clear and unmistakable evidence that the parties agreed

otherwise.

However, the Second Circuit found that under Missouri law, the delegation of “any

controversy or dispute,” buffered by their exclusion of specific controversies from arbitration,

indicated a clear delegation to decide all disputes about arbitrability to the arbitrator.

They then

Wells Fargo Advisors v. Sappington, 884 F.3d 392 (2d Cir. 2018).

Id. at 394–95.

Id. at 395.

Id. at 394–95.

Id. at 395–96.

Id. at 396 (emphasis in original).

141

tackled Chesapeake’s “daisy-chain” reasoning directly, holding that by incorporating the 1993

AAA rules into the contract, the parties agreed to Rule 1’s provision that the AAA’s rules in

effect at the time arbitration commences will be enforced.

Therefore, the 2013 edition of the

Commercial Arbitration Rules and Rule 3 of the Supplementary Rules for Class Arbitrations

both applied and delegated authority to the arbitrator.

They responded to Wells Fargo’s “chain

of inferences” argument by noting that Missouri state law necessitates full incorporation of the

rules. The Second Circuit then criticized its sister circuits for “apparently” ignoring state law in

holding that incorporation was not a sufficient delegation.

100

While the Second Circuit

acknowledged the issues of class arbitration as laid out in Chesapeake and Catamaran, it found

the arbitration clause to be clear enough to warrant allowing the arbitrator to decide class

arbitrability.

101

Next, the Eleventh Circuit weighed in with Spirit Airlines, Inc. v. Maizes.

102

There, a

group of Spirit customers claimed the airline was breaking promises in fare-club agreements.

103

Spirit sued in the Southern District of Florida seeking a declaration stating that the clause did not

allow class arbitration. The clause informed that “[a]ny dispute arising between Members and

Spirit will be resolved by . . . arbitration . . . in accordance with the rules of the American

Arbitration Association then in effect.” The district court granted the class representatives’

motion to dismiss the suit, and Spirit Airlines appealed.

104

Id. at 396–97.

Id. at 397.

100

Id. at 397–98.

101

Id. at 399.

102

Spirit Airlines, Inc. v. Maizes, 899 F.3d 1230 (11th Cir. 2018).

103

Id. at 1231–32.

104

Id. at 1232.

142

The Eleventh Circuit found incorporation of the AAA rules gives clear and unmistakable

delegation of authority to the arbitrator. Precedent informed proper delegation from AAA

incorporation in a bilateral arbitrability dispute.

105

The court was unconvinced by its sister

circuits’ decisions contrary to Reed Elsevier. One such case, Stolt-Nielsen, did not justify holding

class arbitrability to a different standard than bilateral arbitrability.

106

Finally, the court looked at

the clause through Florida contract law, which supported delegation as well.

107

Thus, although

the decision never cited Sappington, the Eleventh Circuit agreed with the Second Circuit’s

reasoning in finding proper delegation through AAA incorporation.

The Tenth Circuit followed Maizes ten days later in its Dish Network, LLC v. Ray

opinion.

108

There, an arbitration clause between Dish Network and an employee incorporated the

AAA rules, but had no other express delegation clauses

109

(unlike the contract in Sappington,

which textually delegated almost all authority to the arbitrator

110

). The parties initially submitted

clause construction to the arbitrator, who ruled both that they had the authority to decide class

arbitrability, and that class arbitration was allowed under the contract.

111

Dish Network moved to

vacate, was denied, and appealed to the Tenth Circuit.

112

The court found under both Tenth Circuit precedent and Colorado state law that the broad

language of the contract incorporated Rule 7 of the AAA Commercial Arbitration Rules and

Rule 3 of the Supplementary Rules for Class Arbitrations.

113

Thus, it was a clear delegation to

105

Id. at 1233–34 (citing Terminix Int’l Co., LP v. Palmer Ranch, LP, 432 F.3d 1327, 1332 (10th Cir. 2005)).

106

Maizes, 899 F.3d at 1234.

107

Id. at 1235–36.

108

Dish Network, LLC v. Ray, 900 F.3d 1240 (10th Cir. 2018).

109

Id. at 1241–42.

110

Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392, 395 (2d Cir. 2018).

111

Ray, 900 F.3d at 1242.

112

Id. at 1242–43.

113

Id. at 1245.

143

the arbitrator to decide their own jurisdiction.

114

It also reasoned by example from a series of

cases holding incorporation of the JAMS (a different arbitration organization) rules of arbitration

constituted a proper delegation of class arbitrability decisions.

115

It additionally incorporated

Sappington’s critique of the other circuits’ decisions.

116

Therefore, Ray deepened the circuit split

and raised questions about the incorporation of other arbitration organization rules.

There are a few common threads to pull from these decisions. First is the greater reliance

on state law. The pro-court decisions rarely, if ever, relied on state cases in examining the AAA

incorporation issues, while Sappington, Maizes, and Ray all relied on their interpretations of state

law in their opposite rulings.

117

Additionally, these cases rejected Reed Elsevier and Stolt-

Nielsen by finding that class arbitration is not so different from bilateral arbitration to warrant

different treatment under the delegation doctrine.

118

Finally, they rejected Chesapeake’s “daisy-

chain” reasoning by noting that, per state law, incorporation of arbitral organization rules acts as

a full incorporation and does not trigger a chain of references analysis.

119

RESOLVING THE SPLIT

Therefore, at the time of writing, there was a four to three split on the question of whether

AAA incorporation is a proper delegation of class arbitrability decisions. The primary

disagreements fall along two lines: interpretation of the Supreme Court’s attitude toward class

arbitration and whether the leap from AAA incorporation to AAA Supplementary Rules for

114

Id.

115

Namely, the First, Second, Fifth, Ninth, and Eleventh Circuits. See quotations in Ray, 900 F.3d at 1245. It is

interesting to note that all these circuits have either not ruled on AAA incorporation or ruled that it is proper

delegation, which indicates these circuits would side with the Second Circuit that AAA incorporation is a sufficient

delegation. Ray, 900 F.3d at 1244–45.

116

Id. at 1247.

117

See cases cited supra notes 91, 94, 101, 107.

118

Id.

119

Id.

144

Class Arbitrations Rule 3 is too attenuated to be read as a “clear and unmistakable” delegation of

authority to the arbitrator.

The “improper delegation” camp (led by the Sixth Circuit) cites the Supreme Court’s

skepticism of class arbitration by ruling that because class arbitrations are so fundamentally

different from bilateral arbitrations they require precise delegation language.

120

Additionally, the

Third Circuit in Chesapeake laid out a strong argument that the chain of cross-references

required to move from incorporating AAA rules to finding delegation of class arbitrability is too

attenuated to be “clear and unmistakable.”

121

The “proper delegation” camp (led by the Second Circuit) responds by arguing that their

sister courts did not properly apply state law,

122

that the differences between class arbitration and

bilateral arbitration are not large enough to warrant different treatment,

123

and the “daisy-chain”

is not long enough to violate the “clear and unmistakable” standard.

124

These positions on the

AAA incorporation issue are mutually exclusive, so when the Supreme Court weighs in there

will be a winner and a loser. How will this split be resolved?

a. Author’s Solution

If I were on the Supreme Court deciding this issue, my opinion would focus heavily on

Howsam’s “clear and unmistakable” delegation standard.

125

As an initial matter, I would agree

with the circuits in holding that class arbitrability is an issue of substantive arbitrability that is

120

Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594, 598 (6th Cir. 2013).

121

Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746, 748–51 (3d Cir. 2016).

122

Dish Network LLC v. Ray, 900 F.3d 1240, 1245 (10th Cir. 2018); Spirit Airlines, Inc. v. Maizes, 899 F.3d 1230,

1235–36 (11th Cir. 2018); Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392, 397–98 (2d Cir. 2018).

123

Maizes, 899 F.3d at 1234.

124

Ray, 900 F.3d at 1244–45; Sappington, 884 F.3d at 396.

125

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002).

145

left to the court absent clear delegation otherwise.

126

I hold as such because class arbitration uses

a radically different set of rules from traditional bilateral arbitration, so finding it to be a mere

“procedural” difference from bilateral arbitration does not make sense.

127

Therefore, I would rule

in accord with the Courts of Appeals that class arbitrability is a substantive question for the

courts to decide (absent proper delegation).

As to the matter of AAA incorporation, I find the Third Circuit’s “daisy-chain of cross

references” reasoning in Chesapeake

128

to be persuasive. Under Howsam, courts decide

questions of substantive arbitrability unless the contract “clearly and unmistakably provide[s]

otherwise.”

129

In situations where a contract is ambiguous or silent on delegation, courts

presumptively decide.

130

Taking Howsam’s requirement for a “clear and unmistakable

delegation” at face value, a clause that arbitration is controlled by the rules of the AAA does not

textually establish that an arbitrator will decide class arbitrability. Rule 1 of the AAA Rules of

Commercial Arbitration states that incorporation of AAA rules refers to the Rules of

Commercial Arbitration unless otherwise stated. The Rules of Commercial Arbitration, in turn,

do not mention class arbitration or the Supplementary Rules thereof.

131

Because the Commercial

Arbitration Rules do not mention class arbitration or the Supplementary Rules, analysis of the

contract then takes the reader further afield to find an answer to the question of “who decides

class arbitrability.” Following this chain requires one to find the AAA’s Supplementary Rules for

Class Arbitrations, then finally Rule 3 delegating authority to the arbitrator.

132

Because finding

126

AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 351 (2011).

127

In this, I agree with the Court’s holding in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 686–87

(2010).

128

Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746, 748–51 (3d Cir. 2016).

129

Howsam, 537 U.S. at 83.

130

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945 (1995).

131

AAA Commercial Arbitration Rules, supra note 9, at 10.

132

AAA Supplementary Rules, supra note 25, at 3–4.

146

delegation requires looking outside not only the text of the contract, but outside the incorporated

Commercial Arbitration Rules to the unmentioned Supplementary Rules of Class Arbitrations

(requiring analysis three steps removed from the contract), the leap from AAA incorporation to

delegation of class arbitrability is too attenuated to meet the “clear and unmistakable” standard

established by Howsam.

Another important factor is party expectations. When reviewing for arbitrability and

delegation, courts are instructed to follow relevant state laws to determine the intent of the

parties.

133

In doing so, courts must determine whether parties would expect a court to decide the

question.

134

Per Stolt-Nielsen, silence on class arbitration is not seen as acceptance of class

arbitration.

135

It is reasonable to assume that attorneys drafting an arbitration clause that does not

explicitly mention class arbitration would expect courts to decide whether or not class arbitration

is available.

136

By leaving class arbitrability with the courts absent a clear delegation, party

expectations in the wake of Stolt-Nielsen will be upheld.

Finally, my analysis advances the policy of protecting unsophisticated parties. Signers of

consumer and employment contracts are often unrepresented and have little to no legal training.

Courts should encourage clear and careful contract drafting that uses plain language so

unrepresented parties understand what they are agreeing to. My resolution of the AAA

incorporation question limits contractual analysis to only the text of the contract and to the

incorporated AAA Rules of Commercial Arbitration (available to even unsophisticated parties

133

First Options, 514 U.S. at 944.

134

Howsam, 537 U.S. at 83.

135

Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 686–87 (2010).

136

Further assuming they even considered the possibility of class arbitration while drafting the clause. In cases

where the drafters did not contemplate class arbitration, they would also have a valid expectation to have a court

review the contract to determine whether they agreed to class arbitration.

147

via internet search). Therefore, unrepresented parties who take time to research a contract before

signing can determine what they are agreeing to without having to hire an attorney to follow the

daisy-chain to the Supplementary Rules. Ruling that AAA incorporation is a proper delegation

would require unrepresented parties to have the knowledge and resources to be able to follow the

daisy-chain and be able to understand what a class arbitration is and who will decide if it is

available. While this policy argument can be easily countered by pointing out that an

unsophisticated party would not even know what delegation is, let alone how to check for it, an

overarching policy favoring clear contract drafting requires ruling this way even on obscure legal

issues in order to set precedent that encourages drafting more easily-understood contracts.

Because class arbitrability is a substantive question of arbitrability, the leap from AAA

incorporation to the Supplementary Rules of Class Arbitrations is too attenuated, parties would

reasonably expect a court to decide class arbitrability absent clear delegation, and public policy

favors encouraging plain language in contracts to protect unsophisticated parties. Therefore, I

would side with the circuits that rule AAA incorporation does not delegate class arbitrability.

b. The Supreme Court’s Solution

The real question, however, is how the Supreme Court will rule on this issue. I predict the

Court will rule AAA incorporation to not be sufficient delegation, but for different reasons.

Specifically, the Court’s skepticism of class arbitration, as discussed above, will play a large role

in finding no delegation. I base this conclusion on the changes to the Court since Oxford Health

Plans and the positions the new justices staked out in Epic Systems Corp. v. Lewis

137

and Lamps

Plus, Inc., v. Varela.

138

137

Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).

138

Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019).

148

I examined the high Court’s skepticism above, but to review: in Stolt-Nielsen, the Court

held that class arbitration changes the nature of arbitration by including parties not subject to the

contract, resolving many ongoing and potential disputes at once, binding absent parties to that

resolution, and subjects defendants to massive liability without effective appellate review.

139

Concepcion echoed these concerns, also adding that class arbitration takes longer and is more

expensive than bilateral arbitration, and that many arbitrators are not qualified to handle class

certification.

140

However, the Court has welcomed two new justices since the decisions in Stolt-Nielsen

and Concepcion. In 2017, Justice Gorsuch filled Justice Scalia’s vacant seat,

141

and Justice

Kavanaugh replaced Justice Kennedy in 2018.

142

Scalia and Kennedy both ruled with the

majority opinions in Stolt-Nielsen and Concepcion, so replacing them may have caused a change

in the Court’s opinion toward class arbitration. However, examination of the Court’s recent class

arbitration decisions shows that the majority will not shift its skepticism to class arbitration.

143

In 2018, the Court released its opinion in Epic Systems Corp. v. Lewis.

144

Epic Systems

resolved several cases concerning a National Labor Relations Board (NLRB) decision creating a

right under the National Labor Relations Act (NLRA) for employees to demand class arbitration

even through a valid class-action waiver.

145

Then-new Justice Gorsuch wrote for the majority,

finding the NLRB decision to be in error because the agency overstepped its bounds in issuing a

139

Stolt-Nielsen, 559 U.S. at 686–87.

140

AT&T Mobility LLC v. Concepcion,563 U.S. 333, 347–51 (2011).

141

Neil Gorsuch, OYEZ, https://www.oyez.org/justices/neil_gorsuch (last visited Dec. 3, 2019).

142

Brett M. Kavanaugh, OYEZ, https://www.oyez.org/justices/brett_m_kavanaugh (last visited Dec. 3, 2019).

143

Since this piece was authored, Justice Ginsburg passed away and was replaced by Justice Barrett. However,

because the Court has not released any class arbitration decisions since Justice Barrett’s appointment, the author

declines to analyze her possible decision on this issue.

144

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018).

145

Id. at 1620–21.

149

ruling that infringed on the FAA, so the Court brought the ruling in harmony with the FAA.

146

The opinion firmly stood by Concepcion

147

and rejected Justice Ginsburg’s NLRA and public

policy-based defense of class arbitration as a tool for workers to combat exploitive employers

148

by noting that a “mountain of precedent” supports the Court’s policy favoring arbitration.

149

The

Court has a duty to find a balance between seemingly conflicting federal statutes (like the NLRA

and FAA in this case).

150

Epic Systems showed that Justice Gorsuch respects Stolt-Nielsen’s and

Concepcion’s skepticism towards class arbitration, as well as the Court’s overwhelming policy in

favor of arbitration.

In 2019, the Supreme Court decided Lamps Plus, Inc. v. Varela, the most recent Supreme

Court decision to deal with class arbitration.

151

There, the parties asked the Court to resolve the

question of class arbitrability in a case involving a contract ambiguous (but not silent) about

class arbitration.

152

Justices Gorsuch and Kavanaugh signed Chief Justice Robert’s majority

opinion that extended Stolt-Nielsen to forbid finding class arbitrability in ambiguous as well as

silent contracts.

153

The decision heavily quoted Stolt-Nielsen, Concepcion, and Epic Systems in

laying out the familiar arguments holding class arbitration in a separate category from bilateral

arbitration when construing arbitration agreements.

154

Because the new Justices signed onto this

opinion echoing past skepticism of class arbitration, it is logical to assume that they will continue

to follow that policy in the future. Both Epic Systems and Lamps Plus were clean 5-4 splits

146

Id. at 1624–25.

147

Id. at 1622–23.

148

Id. at 1640–41 (Ginsburg, J., dissenting).

149

Id. at 1630.

150

Id. at 1631–32.

151

Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019).

152

Id. at 1413.

153

Id. at 1415.

154

Id. at 1416.

150

between the “conservative” and “liberal” wings of the Court, showing that this Court will

maintain the skepticism against class arbitration well into the future.

155

Analyzing this skepticism is important because it will play a major role in the Supreme

Court’s decision to rule in favor of the courts deciding class arbitrability in AAA incorporation

cases. As discussed above, logic dictates that arbitrators are much more likely to find class

arbitrability than a court because it allows them to bill more hours and they believe they can

handle the complexity of class certification (despite Justice Scalia’s contrary belief

156

). Courts,

bound by the Supreme Court’s precedential skepticism toward class arbitrations and the multiple

rulings against finding class arbitrability in Stolt-Nielsen, Concepcion, Epic Systems, and Lamps

Plus, are unlikely to find class arbitrability.

Because it will reduce the amount of class arbitrations initiated, the Supreme Court will

rule that delegation on class arbitrability must be explicit to qualify under Howsam, and

incorporation of the AAA rules is not “clear and unmistakable” enough to delegate that

authority.

c. Effects of This Decision

A decision in favor of courts on this issue will have some immediate effects on drafters

and signers of arbitration clauses, and on the general practice of contract drafting to account for

class arbitrations.

The likely positive effect of such a decision will be to encourage more careful drafting of

arbitration clauses. Because drafters will (in theory) have to explicitly consider class arbitration

155

Epic Sys. Corp. v. Lewis, OYEZ, https://www.oyez.org/cases/2017/16-285 (last visited Dec. 3, 2019) (“swing

vote” Justice Kennedy sided with the conservatives, as he did in Stolt-Nielsen and Concepcion); Lamps Plus, Inc. v.

Varela, OYEZ, https://www.oyez.org/cases/2018/17-988 (last visited Dec. 3, 2019).

156

AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 348.

151

when writing clauses, they will write more detailed clauses that will be easier to understand

based purely on the text of the contract. Those who wish to delegate class arbitrability will have

to do so explicitly, leading to more careful drafting. Another positive effect will be the reduction

of litigation around AAA and other organization incorporations, because the question of class

arbitrability delegation has been answered, reducing case load in the federal courts.

However, the reduced availability of class arbitration will make it much harder for parties

to class-action waivers to combine their claims in arbitration, leading to further reduction of the

ability to effectively vindicate smaller claims.

157

Additionally, this ruling will close a loophole

currently available in the “proper delegation” circuits that allows a class to use AAA

incorporation as a work-around to class-action waivers. Finally, contracting costs may increase

as more time is required to draft and revise arbitration clauses to take note of class arbitration

possibilities.

VI.

CONCLUSION

The circuit split on the question of AAA incorporation’s delegation of class arbitrability

opens a fascinating window on the state of arbitral procedure, principles of contract construction,

and the judiciary’s role in the evolution of a private parallel to class-action lawsuits. Resolving

this question is important because it has opened a circuit split with mutually exclusive decisions

and clouds the law around class arbitration. Although there is not currently an answer, an

examination of the Supreme Court’s skeptical view of class arbitration shows it is likely the

Court will side with the Sixth, Fourth, Third, and Eighth circuits by finding AAA incorporation

is NOT a proper delegation of the class arbitrability decision to the arbitrator.

157

See, e.g., Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 248–49 (2013) (Kagan, J., dissenting).

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