Applying the Supreme Court’s recent decision in Oxford Health Plans v. Sutter, the 11th Circuit affirmed an arbitrator’s conclusion that the parties’ agreement permitted class-wide arbitration. As in Oxford Health Plans, however, the court in Southern Communications Services, Inc. v. Thomas declined to address whether a court should have made that decision because the parties agreed to let the arbitrator decide it.

Whether a court, rather than an arbitrator, should decide whether class arbitration is available is an open question in the 11th Circuit, and federal courts elsewhere are sharply divided. In Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., the Supreme Court strongly suggested that courts should make the decision because it is a gateway issue of arbitrability, but it did not formally rule because the parties had agreed to allow the arbitrator to resolve the issue. Likewise, in Southern Communications, the parties’ agreement to remit the issue to the arbitrator deprived the 11th Circuit of the opportunity to decide it.

This threshold jurisdictional issue has very important ramifications. Under the Federal Arbitration Act (FAA), decisions by an arbitrator must be accorded great deference by a reviewing court. By contrast, a district court’s decision on the availability of class-wide arbitration would be reviewed de novo by the appellate court.  

The 11th Circuit found that it was bound by the FAA and Oxford Health Plans to accord great deference to the arbitrator’s decision to conduct class-wide arbitration, even if the arbitrator misconstrued the parties’ contract. “[T]his would not be the case,” the court observed, if a court had made the decision on class-wide arbitration since judicial determinations are reviewed more broadly.

Many arbitration agreements today contain express class action waivers that avoid the arbitrability issue raised in Southern Communications and Oxford Health Plans. The use of such express waivers was upheld by the Supreme Court in AT&T Mobility v. Concepcion. But if an arbitration agreement does not contain an express class action waiver, the arbitrability defense should be asserted because it can be waived if not preserved in a timely fashion.

Ballard Spahr regularly counsels clients on how to address the issues raised in Southern Communications and Oxford Health Plans through drafting and enforcement of arbitration agreements. The firm’s Consumer Financial Services Group pioneered the use of pre-dispute arbitration provisions in consumer financial services agreements. It is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance. 

The Group also produces CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe to the blog, use the link provided to the right.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, or Mark J. Levin at 215.864.8235 or levinmj@ballardspahr.com.


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