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).