In their 2013 concurrence in Oxford Health Plans LLC v. Sutter, Justice Samuel Alito, joined by Justice Clarence Thomas, questioned whether absent class members “will be bound by the arbitrator’s ultimate resolution of th[e] dispute” in a class arbitration. Justice Alito suggested that where an arbitration agreement provides “no reason to think that the absent class members ever agreed to class arbitration,” an affirmative answer was unlikely. He posited that “an arbitrator’s erroneous interpretation of contracts that do not authorize class arbitration cannot bind someone who has not authorized the arbitrator to make that determination.” Taken to its logical end, Justice Alito’s rationale would support an argument that class arbitrations should be limited to adjudicating only the claims of class members who affirmatively opt in to the class arbitration proceedings.Read More
The U.S. Supreme Court has issued numerous decisions over the past decade addressing arbitration agreements.  In one of the Roberts Court’s first forays into the arbitration arena, the Court held that class or collective arbitration is only available where the parties have affirmatively agreed to resolve their disputes through such procedures.  But who determines whether the parties have so agreed — a court or an arbitrator?
The U.S. Supreme Court has ruled that a plaintiff cannot file a class action outside the applicable statute of limitations merely because an unsuccessful prior class action tolled the limitations period for individual claims. In China Agritech v. Resh, the Court held that its prior jurisprudence “does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.” Rather, that jurisprudence only tolls the statute of limitations for unnamed class members to intervene in the action “individually or file individual claims if the class fails.” In reaching this conclusion, the Court recognized that “[t]he Federal Rules [of Civil Procedure] provide a range of mechanisms to aid courts in” overseeing complex litigation, such as where individual claims are added on after a denial of class certification. But, critically, “[w]hat the Rules do not offer is a reason to permit plaintiffs to exhume failed class actions by filing new, untimely class claims.”
The United States Supreme Court recently declined to review a ruling that courts, not arbitrators, determine the availability of classwide arbitration. Previous attempts by putative collective or class representatives to obtain certiorari on the issue were unsuccessful. See, e.g., Opalinski v. Robert Half International Inc., 61 F.3d 326, 330-35 (3d Cir. 2014) (“Opalinski I”) (For K&L Gates’ coverage on the denials of the prior petitions see here and here). The Court’s most recent decision in Opalinski v. Robert Half International Inc. suggests that the Court still does not perceive sufficient disagreement, if any, among the federal courts of appeals on the issue. 677 F. App’x 738, 740 (3d Cir. 2017) (“Opalinski II”). As a result, the trend continues that the availability of classwide arbitration is a gateway issue for the courts.
Recently, the Consumer Financial Protection Bureau (CFPB) promulgated its final arbitration agreement rule. The rule comes more than 11,000 comments, 13 months, and one change in presidential administration after the CFPB issued its proposed rule in May 2016. (K&L Gates previously reported on the issuance of the proposed rule here.) Yet despite its long history, Congress began taking steps to repeal the rule almost immediately.
Congress enacted the Federal Arbitration Act (“FAA”) in the 1920s to deter hostility toward arbitration. Despite numerous Supreme Court rulings over the decades upholding that goal, arbitration continues to face hostility. The Consumer Financial Protection Bureau (“CFPB”), for example, recently issued a proposed rule that would significantly expand the scope of the Dodd-Frank Act’s restrictions on arbitration agreements. The rule would severely restrict the use of pre-dispute arbitration clauses by providers of consumer products and services, primarily by prohibiting the use of class action waivers. And under the proposed rule, the CFPB would exercise close scrutiny over arbitration proceedings by requiring consumer financial services providers to report certain information about arbitrations to the CFPB.
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Is the availability of class-wide arbitration a “gateway” question for courts, or are arbitrators charged with such a decision once a matter is compelled to them? In Dell Webb Communities, Inc. v. Carlson, the Fourth Circuit Court of Appeals followed the lead of the Third and Sixth Circuits and held that courts — not arbitrators — should ordinarily make the decision. The Fourth Circuit’s decision should be welcome news to corporate defendants seeking to enforce individual (“bilateral”) arbitration agreements while preserving the ability to obtain meaningful appellate review of a determination allowing class-wide arbitration.
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