In August 2018, the Tenth Circuit Court of Appeals decided Dish Network L.L.C. v. Ray, an important ruling in the field of arbitration clauses and their effect on potential class action litigation. The Tenth Circuit specifically addressed the question of who should determine whether an arbitration clause allows classwide arbitration: a court or an arbitrator?
While the contract at issue and its accompanying arbitration clause did not expressly grant the right or ability to apply arbitration on a classwide basis, the Court concluded that the arbitrator appropriately interpreted the broad language of the contract as authorizing classwide arbitration. The Tenth Circuit cited the contract’s adoption of American Arbitration Association rules, granting arbitrators the power to determine their own jurisdiction and scope of authority. The Court reasoned that this explicit adoption of the AAA rules was clear and unmistakable evidence that the parties intended to empower an arbitrator to determine whether classwide arbitration of a dispute is permitted.
Through the Ray decision, the Tenth Circuit cast its vote in a growing circuit split. Now, the Tenth, Second, and Eleventh Circuits have ruled that an arbitrator may determine whether or not an arbitration clause permits classwide litigation. The Third, Fourth, Sixth, and Eighth Circuits have reached opposite conclusions. The Circuits that reject an arbitrator’s authority to determine whether classwide arbitration is allowed have held that adoption of AAA rules within the underlying contract is not sufficiently clear or unmistakable so as to bind the parties to class arbitration. The developing circuit split has turned largely upon the tension between explicit contract language, and the intent that can be implied from the adoption of AAA rules and the explicit content of those rules.
As a growing number of circuits reach opposite conclusions on the availability of classwide arbitration through the adoption of AAA rules, it is imperative that parties entering arbitration agreements be aware of whether or not the circuit governing the agreement has ruled on the issue. Parties should also consider spelling out their intent that classwide arbitration either is or is not permitted under the contract, thus removing any uncertainty. Clear and unequivocal language remains the best medicine to prevent against the unintended consequences of seemingly innocuous provisions within an arbitration agreement or clause. While this circuit split continues to grow, it seems only a matter of time before the Supreme Court of the United States fully considers and resolves this growing issue.