11 June 2014
Practice Group:
Commercial Disputes
Supreme Court Will Not Review Sixth Circuit Ruling
That Courts Decide the Availability of Classwide
Arbitration
By Andrew C. Glass and Roger L. Smerage
Recent Supreme Court decisions have favored the enforcement of consumer arbitration
agreements requiring individual, rather than classwide, dispute resolution. A number of
courts, however, have found that arbitrators, whose decisions are subject only to minimal
scrutiny, 1 should decide the availability of classwide arbitration. Those courts relied on a
2003 plurality decision from the Supreme Court, Green Tree Financial Corp. v. Bazzle, 2
which suggested that ordinarily an arbitrator should make that decision. Recently, however,
the Supreme Court declined to review a Sixth Circuit decision, Reed Elsevier, Inc. v.
Crockett, 3 which reached the opposite conclusion from Bazzle. The Supreme Court’s refusal
casts significant doubt on whether the Bazzle plurality’s suggestion remains a viable theory.
In Reed Elsevier, the Sixth Circuit held that the issue of whether an arbitration agreement
provides for classwide arbitration was a gateway issue of arbitrability for a court, not an
arbitrator, to decide. The subject dispute arose over legal research fees charged by
LexisNexis (a division of Reed Elsevier, Inc.) to Crockett. To resolve the dispute, Crockett
filed an arbitration demand pursuant to the terms of his agreement with LexisNexis. And,
although the agreement contained no reference to classwide arbitration, Crockett purported
to assert claims on behalf of a putative class of LexisNexis subscribers. LexisNexis sued
Crockett in federal court seeking a declaration that the arbitration agreement did not allow
Crockett to assert class claims. The district court agreed, and Crockett took an appeal to the
Sixth Circuit. 4
Before analyzing the district court’s reasoning, the Sixth Circuit first had to determine if the
district court was the correct body to decide whether the arbitration agreement permitted
class proceedings. Noting the Supreme Court’s recent reiteration in Stolt-Nielsen S.A. v.
AnimalFeeds International Corp. 5 that the Bazzle decision was not precedential, the Sixth
Circuit predicted the Supreme Court would rule differently from the Bazzle plurality if directly
presented with the question. Indeed, the court of appeals reasoned that “recently the
[Supreme] Court has given every indication, short of an outright holding, that classwide
arbitrability is a gateway question” presumptively for a court to decide. Accordingly, the Sixth
Circuit held that the district court properly decided the classwide arbitrability issue, as the
arbitration agreement contained no delegation of that issue to the arbitrator. 6
Two other federal courts of appeal had previously adopted the Bazzle plurality position as
their own, holding that an arbitrator should decide the availability of classwide arbitration on
the basis that is a mere procedural determination. 7 In light of this split of authority among the
courts of appeals, Crockett sought Supreme Court review of the Sixth Circuit’s decision.
Although the Court declined to grant Crockett’s petition, the Court’s recent discussion of the
issue in dicta in Stolt-Nielsen—where the Court remarked that “we see the question as being
Supreme Court Will Not Review Sixth Circuit Ruling That Courts Decide
the Availability of Classwide Arbitration
whether the parties agreed to authorize class arbitration”—indicates that a majority of the
justices view the issue as one that may worth consideration in a future case. 8
In the meantime, Reed Elsevier remains the law of the Sixth Circuit, as recently recognized
by another panel of judges of that court. 9 In the Third and Fourth Circuits, a contrary position
holds, and in some circuits, the question remains unanswered, leaving each district court
judge free to decide whether to follow the Bazzle plurality or the Reed Elsevier approach.
Accordingly, where an arbitration agreement lacks an express class waiver provision,
whether the arbitrator or the court will decide whether arbitration will be classwide remains a
jurisdiction-specific issue until the Supreme Court settles the issue.
Authors:
Andrew C. Glass
andrew.glass@klgates.com
+1.617.261.3107
Roger L Smerage
roger.smerage @klgates.com
+1.617.951.9070
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© 2014 K&L Gates LLP. All Rights Reserved.
1
See 9 U.S.C. § 10.
539 U.S. 444 (2003) (plurality op.).
3
734 F.3d 594 (6th Cir. 2013), petition for writ of certiorari denied 2014 WL 469583 (U.S. May 19, 2014; No.
13-928).
4
734 F.3d at 596.
5
559 U.S. 662 (2010).
6
734 F.3d at 598-99. The Sixth Circuit also affirmed the district court’s ruling on the merits, agreeing that
the arbitration agreement contained neither an express or implied agreement to arbitrate claims on a
classwide basis. Id. at 599-600 (“[t]he principal reason to conclude that this arbitration clause does not
authorize classwide arbitration is that the clause nowhere mentions it”).
7
See Quilloin v. Tenet Healthsystem Phila., Inc., 673 F.3d 221, 232 (3d Cir. 2012); Davis v. ECPI College of
Tech., L.C., 227 F. App’x 250, 254 (4th Cir. 2007) (unpublished). In Employers Insurance Co. of Wausau v.
Century Indemnity Co., 443 F.3d 573, 577-81 (7th Cir. 2006), the Seventh Circuit concluded that although
2
2
Supreme Court Will Not Review Sixth Circuit Ruling That Courts Decide
the Availability of Classwide Arbitration
Bazzle was not controlling, the issue of whether consolidation of arbitrations (as opposed to classwide
arbitration) was permissible under the arbitration agreement was a procedural one for the arbitrator to
decide. Some courts consider the First Circuit to have adopted the Bazzle plurality’s suggestion in Fantastic
Sam’s Franchise Corp. v. FSRO Ass’n Ltd., 683 F.3d 18 (1st Cir. 2012), but that case was not a class
action. Rather, the plaintiff-in-arbitration was an association of franchisees that sought to sue on behalf of
its members. In Sanford v. MemberWorks, Inc., 483 F.3d 956 (9th Cir. 2007), the plaintiff presented the
issue to the court, but the Ninth Circuit declined to address it. Also, although two Ninth Circuit panels have
suggested—in unpublished cases—that Bazzle is controlling, see Veliz v. Cintas Corp., 273 F. App’x 608
(9th Cir. 2008), Johnson v. Gruma Corp., 123 F. App’x 786 (9th Cir. 2005), those cases are not precedential
under Ninth Circuit rules. See 9th Cir. R. 36-3(a).
8
559 U.S. at 684-87 (emphasis in original). Also, in a footnote in Oxford Health Plans LLC v. Sutter, 133 S.
Ct. 2064 (2013), Justice Kagan, writing on behalf of a unanimous Court, noted that the Court had yet to have
opportunity to decide the issue in the years following Bazzle. 133 S. Ct. at 2068 n.2.
9
See Huffman v. Hilltop Cos., LLC, 747 F.3d 391, 398-99 (6th Cir. 2014).
3