Spirited Court Widens Circuit Split Over Who Decides Class Arbitrability

In Spirit Airlines, Inc. v. Maizes, 2018 WL 3866335 (11th Cir. Aug. 15, 2018), the Eleventh Circuit concluded that an arbitration agreement providing that the rules of the American Arbitration Association (“AAA”) will cover all disputes constitutes clear and unmistakable evidence that the parties intended for an arbitrator to decide whether class arbitration is available.

Members of a Spirit Airlines reward club had filed an arbitration claim against the airline on behalf of a putative class.  The dispute was governed by agreements between individual members and Spirit, under which “any dispute” was committed to arbitration under the AAA rules.  Spirit then filed a lawsuit in district court, seeking a declaration that the agreement did not provide for class arbitration.  The district court dismissed the case, ruling that the agreement required the arbitrator to decide whether class arbitration was available.

Writing for the court, Judge Martin affirmed the dismissal of Spirit’s case.  Because the parties agreed that the availability of class arbitration was a “question of arbitrability,” it would be for the arbitrator only if there were “clear and unmistakable” evidence that the parties intended to commit that question to the arbitrator.  The Eleventh Circuit has already ruled that an arbitration clause clearly and unmistakably commits a question of arbitrability to the arbitrator when it incorporates the AAA rules and the AAA rules specify that the question is for the arbitrator.  Terminix Int’l Co. v. Palmer Ranch Ltd. P’ship, 432 F.3d 1327, 1332 (11th Cir. 2005) (holding that the question of whether the arbitration agreement was enforceable was for the arbitrator to answer).  Applying Terminix to the facts at hand, the court concluded that the parties had clearly and unmistakably specified that the arbitrator was to decide whether class arbitration was available:  The agreement plainly selected the AAA rules; the AAA rules incorporate the AAA Supplementary Rules for Class Arbitrations; and these supplementary rules provide that the arbitrator will decide whether an arbitration clause permits class arbitration.  Simple.

Simple?  But then why had four other circuits held the other way, with only the Fifth Circuit in agreement with the Spirit court?  Judge Martin explained that these decisions had all relied on Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010).  In Stolt-Nielsen, the Supreme Court held that an arbitral decision that class arbitration was available should be vacated where there was no contractual basis to conclude that the parties had agreed to submit to class arbitration.  The Court reasoned that the availability of the class mechanism changed the nature of arbitration to too great a degree to assume from a party’s mere silence that it had agreed to class arbitration.  But Judge Martin respectfully pointed out that Stolt-Nielsen addresses the question of whether class arbitration is available, rather than the related but distinct question of who decides its availability.  Accordingly, the court did not read Stolt-Nielsen to alter its conclusion that the arbitrator should decide whether class arbitration was available.  Given the volume of recent appellate litigation that this important question has generated, it may not be too long before we find out whether the Supreme Court agrees.

Posted by Nick Boyd.

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