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05.09.13

Class Action Waivers in Arbitration Agreements Comments on Two Important Pending Supreme Court Cases

Terry F. Moritz, Principal

Green Tree Financial v. Bazzle 539 U.S. 444 (2003)

•  Green Tree can be seen as the seminal case in the development of Supreme Court Jurisprudence on the use and

appropriateness of class actions in an arbitration setting. In effect the arbitration bar misread the Courts Decision in Green

Tree.

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Class Action Waivers in Arbitration Agreements

•  In 2010, the U.S. Supreme Court held "that a party may not be compelled under the [Federal Arbitration Act] to submit to class

arbitration unless there is a contractual basis for concluding that the party agreed to do so." Stolt-Nielsen v. AnimalFeeds

International Corp., 559 U.S. 662 (2010). But the Court

expressly declined at the time "to decide what contractual basis may support a finding that the parties agreed to authorize class-

action arbitration.” Id. at 1776 n. 10.

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•  In AT&T Mobility LLC v. Concepcion, ____U.S. ___, 131 S. Ct. 1740, 1753 (2011), the U.S. Supreme Court held that the

Federal Arbitration Act preempts state common law rules invalidating class waivers in arbitration clauses as

unconscionable.

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The Court’s View of Class Arbitration

•  “Class-Wide arbitration includes absent parties, necessitating additional and different procedures and involving different

stakes. Confidentiality becomes more difficult. And while it is theoretically possible to select an arbitrator with some expertise

relevant to the class-certification question, arbitrators are-are

not generally knowledgeable in the often dominant procedural aspects of certification, such as the protection of absent

parties.” AT&T Mobility 131 S.Ct.1740, 1750-1751.

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•  In 2012, the U.S. Supreme Court granted certiorari in Oxford Health

Plans LLCC v. Sutter, Docket No. 12-135, on the following issue,

about which there is a split among the circuit courts: Whether an

arbitrator acts within the arbitrator’s powers under the Federal

Arbitration Act or exceeds those powers by determining that parties

affirmatively “agreed to authorize class arbitration” based solely on

their use of broad contractual language precluding litigation and

requiring arbitration of any dispute arising under their contract. The

case was argued March 25, 2013.

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Oxford Health Plans Professional Services Contract Arbitration Provision

•  "No civil action concerning any dispute arising under this agreement shall be instituted before any court , and all such

disputes shall be submitted to final and binding arbitration in New Jersey , pursuant to the Rules of the American Arbitration

Association with one arbitrator"

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•  In 2013 the U.S. Supreme Court granted certiorari (Sotomayor, J.,

recused) in Italian Colors Restaurant v. American Express Travel

Related Servs. Co., 667 F.3d 204 (2d Cir. 2012), to decide whether the

FAA permits courts, invoking the “federal substantive law of

arbitrability,” to invalidate arbitration agreements on the ground that

they do not permit class arbitration of a federal-law claim. The case

involves the issue of enforcement of a mandatory arbitration clause in

a commercial contract which clause contains a class action waiver.

The case was argued February 27, 2013.

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•  Oxford Health Plans LLCC v. Sutter and Italian Colors Restaurant v. American Express Travel Related Servs. Co.

were both argued to the Supreme Court this term. Decisions are expected by the end of the Court’s term.

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•  The Seventh Circuit has not directly addressed the question of whether the arbitrability of class claims is a question for a court or an arbitrator to decide. In Employers Insurance Co.

of Wausau v. Century Indemnity Co., 443 F.3d 573 (7th Cir.2006), the Seventh Circuit held that the question of whether several parties may be consolidated for a single arbitration

must be made by the court rather than the arbitrators, subject to judicial review after an award has been made. Accord Blue Cross Blue Shield of Massachusetts, Inc. v. BCS Ins.

Co., 671 F.3d 635, 636 (7th Cir. 2011). The Seventh Circuit has looked to consolidated arbitration cases to guide its analysis regarding class arbitration. Champ v. Siegel Trading

Co., 55 F.3d 269, 274–75 (7th Cir.1995), abrogated on other grounds by Green Tree Financial Corp. v. Bazzle, 539 U.S. 452 (2003) (finding “no meaningful basis to distinguish

between” class arbitration and consolidated arbitration for purposes of seeking guidance from other circuits' decisions regarding consolidated arbitration).

Class Action Waivers in Arbitration Agreements