Arbitrability of Class Action Claims – Turn-About is Fair Play

The normal pattern is for employees or consumers to challenge in court the scope of arbitration, and whether it is for the arbitrator or the court to make that determination. A California federal court judge has issued a decision against Guess?, Inc., who wanted the court, and not the arbitrator, to determine whether the employees can proceed with a class action in arbitration.

In a well-written opinion, the judge parses Supreme Court decisions of the past 15 years to decide whether the arbitrator or the courts are to decide arbitrability of class action claims. The judge noted that in Green Tree Financial Corp. v. Bazzle, a plurality of the justices decided that the issue was for the arbitrator and not the courts. However, she also noted that recent circuit court precedent has favored assigning this “gateway issue” to the courts. Relying on another Supreme Court case, Rent-A-Center, West, Inc. v. Jackson, the California judge agreed that the gateway question of arbitrability is to be determined by the arbitrator if the arbitration agreement “clearly and unmistakably” provides that the arbitrator is to decide that issue.

The Guess? arbitration agreement incorporated the rules of the American Arbitration Association for employment disputes. Those rules, in turn, incorporate the AAA’s Supplementary Rules for Class Arbitrations. Rule 3 of the supplementary rules provides that it is for the arbitrator to determine whether the arbitration clause permits a class action.

So instead of employees fighting an arbitrator’s determination of class action arbitrability, it was the employer. Relying on the same set of cases that have doomed a number of employee arguments against arbitration, a judge has held an employer to the same set of rules. The case is Guess?, Inc. v. Russell, 2015 U.S. Dist. LEXIS 154621 (subscription required).

About Stan Martin

Stanley A. Martin's Profile Image
Stan Martin holds a law degree and an undergraduate degree in architecture. He has been involved with the construction industry for more than 45 years, working in construction prior to law school and beginning his construction law practice. Over the course of his career, he has served on boards and committees for organizations including the Associated General Contractors of Massachusetts, the Boston Society of Architects, and the Massachusetts Building Congress.

Read More About Stan