Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-08-03837/USCOURTS-ca3-08-03837-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 08-3837

 

FRANCIS J. PULEO, TRISH C. PULEO, 

ON BEHALF OF THEMSELVES AND ALL OTHER 

PENNSYLVANIA RESIDENTS SIMILARLY SITUATED,

v.

CHASE BANK USA, N.A,

Francis J. Puleo; Trish C. Puleo,

 Appellants

 

On Appeal from the District Court

for the Eastern District of Pennsylvania

(D.C. No. 2-07-cv-04800)

District Judge: Honorable Lawrence F. Stengel

_____________

Argued February 17, 2010

Before: McKEE, Chief Judge, SLOVITER, SCIRICA,

RENDELL, AMBRO, FUENTES, SMITH, FISHER,

CHAGARES, and JORDAN, Circuit Judges

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(Opinion Filed: May 10, 2010)

Mark R. Cuker, Esq.

Michael J. Quirk, Esq. [ARGUED]

Williams, Cuker & Berezofsky

1515 Market Street, Suite 1300

Philadelphia, PA 19102

Counsel for Appellants

Robert S. Stern, Esq.

Nancy R. Thomas, Esq. [ARGUED]

Morrison & Foerster

555 West Fifth Street, Suite 3500

Los Angeles, CA 90013

Jeffrey S. Saltz, Esq.

1500 John F. Kennedy Boulevard, Suite 1930

Philadelphia, PA 19102

Counsel for Appellee

 

OPINION OF THE COURT

 

FUENTES, Circuit Judge, with whom McKEE, Chief Judge,

and SLOVITER, SCIRICA, SMITH, and JORDAN, Circuit

Judges, join. 

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This case focuses on the proper boundaries between the

decision-making responsibilities of courts and arbitrators.

Appellants Francis and Trish Puleo (“the Puleos”) brought suit

challenging retroactive interest-rate increases on the account

balances of their Chase Bank credit cards. Although the Chase

Bank Cardmember Agreement governing their credit cards

contains an Arbitration Agreement expressly barring class

actions, the Puleos brought their suit in a representative

capacity, arguing that the class action waiver was

unconscionable. After Chase moved to compel arbitration, the

Puleos urged the District Court to order the parties to arbitrate

their class claims, notwithstanding the Arbitration Agreement’s

ban on class actions, but argued that the question of whether the

class action waiver was unconscionable was a question for the

arbitrator, not the court. The District Court rejected their

arguments, concluding, first, that the Puleos’ challenge to the

enforceability of the class action waiver was a question of

arbitrability for the court to decide, and, second, that the entirety

of the Arbitration Agreement was enforceable.

In this appeal, the Puleos challenge only the first of these

conclusions. They argue that the District Court never should

have addressed the unconscionability of the class action waiver

and instead should have left that issue to be decided by an

arbitrator. Appellee Chase Bank takes the contrary position,

arguing that it was proper for the District Court to assess the

unconscionability of the class action ban because the Puleos’

unconscionability challenge to the class action waiver presented

a question of arbitrability for the court to decide. For the

reasons that follow, we hold that the District Court properly

exercised its responsibility to decide issues of arbitrability and

we thus will affirm.

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I. 

A.

 The facts in this case are straightforward and

uncontested. The Puleos use credit cards issued by Chase Bank.

 They argue that Chase Bank improperly increased the interest

rates on their account balances, and did so retroactively.

Specifically, Francis Puleo claims that in March 2006, Chase

retroactively increased his interest rate from 4.99% to 29.99%,

causing him to incur $267 in increased finance charges. Trish

Puleo claims that in November 2005, Chase retroactively

increased her interest rate from 14.74% to 25.99%, causing her

to incur $162 in increased finance charges. Trish Puleo also

claims that similar increases were imposed in January 2006 and

January 2007, causing her to incur increased finance charges of

$263 and $341, respectively.

Chase argues that such increases are permitted by the

Puleos’ Chase Bank Cardmember Agreements, as well as by

state and federal law. The lawfulness of the retroactive interest

rate increase, however, is not at issue in this appeal. Rather, this

appeal focuses on the forum in which the enforceability of the

class action waiver will be determined, not the substance of the

Puleos’ challenge to the retroactive interest rate increases. 

B.

The Chase Bank Cardmember Agreement addresses a

wide range of issues relative to the relationship between a bank

and its credit card holders. Included in this Cardmember

Agreement is a sweeping “Arbitration Agreement” that states in

block lettering that “ARBITRATION REPLACES THE RIGHT

TO GO TO COURT.” (App. 62.) In particular, the Arbitration

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Agreement provides:

Either you or we may, without the other’s

consent, elect mandatory binding arbitration of

any claim, dispute or controversy by either you or

us against the other . . . arising from or relating in

any way to the Cardmember Agreement . . . . This

Arbitration Agreement governs all Claims,

whether such Claims are based on law, statute,

contract, regulation, ordinance, tort, common law,

constitutional provision, or any legal theory of

law such as respondeat superior, or any other

legal or equitable ground and whether such

Claims seek as remedies money damages,

penalties, injunctions, or declaratory or equitable

relief. Claims subject to the Arbitration

Agreement include claims regarding the

applicability of this Arbitration Agreement or the

validity of the entire Cardmember agreement or

any prior Cardmember agreement. 

(Id. at 63.) The Arbitration Agreement also expressly bars class

actions, whether as part of litigation or arbitration: 

YOU WILL NOT BE ABLE TO BRING A

CLASS ACTION OR OTHER

REPRESENTATIVE ACTION IN COURT . . . ,

NOR WILL YOU BE ABLE TO BRING ANY

CLAIM IN ARBITRATION AS A CLASS

ACTION OR OTHER REPRESENTATIVE

ACTION. YOU WILL NOT BE ABLE TO BE

PART OF ANY CLASS ACTION OR OTHER

REPRESENTATIVE ACTION BROUGHT BY

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1

 We note that the Puleos could not have commenced this

matter as a class arbitration before the American Arbitration

Association (“AAA”). According to a policy announced in July

2005, the AAA does not accept demands for class arbitration

where, as here, “the underlying agreement prohibits class

claims,” unless the parties obtain a court order requiring the

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ANYONE ELSE, OR BE REPRESENTED IN A

CLASS ACTION OR OTHER

REPRESENTATIVE ACTION.

. . .

Neither you nor we agree to any arbitration on a

class or representative basis, and the arbitrator

shall have no authority to proceed on such basis.

This means that even if a class action lawsuit or

other representative action, such as that in the

form of a private attorney general action, is filed,

any Claim between us related to the issues raised

in such lawsuits will be subject to an individual

arbitration claim if either you or we so elect.

(Id. at 62-63.) Finally, the Arbitration Agreement features a

severability clause, which states that “if any portion of this

Arbitration Agreement is deemed invalid or unenforceable, the

remaining portions shall nevertheless remain in force.” (Id. at

63.) 

 Despite the express ban on class actions, the Puleos

initially brought this case as a putative class action in

Pennsylvania state court on behalf of themselves and other

similarly situated Chase credit card holders in Pennsylvania.1

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parties to submit class claims to arbitration. (App. 108.) In

other words, in order to pursue this matter as a class arbitration,

the Puleos first had to commence the proceedings in court in

order to obtain an order mandating the submission of class

claims to arbitration. 

2

 The District Court also upheld the validity of the class

action waiver, relying upon Gay v. CreditInform, 511 F.3d 369,

394-95 (3d Cir. 2007), and rejecting the Puleos’ argument that

the class ban was unconscionable. The Puleos do not appeal this

aspect of the District Court’s Opinion. The only question before

us, therefore, is who decides whether or not the class action

waiver is unconscionable. We do not address the District

Court’s substantive determination that the class action waiver is

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Chase removed the case to federal court on grounds of diversity.

Once in federal court, Chase filed a “Motion to Compel

Arbitration and Dismiss the Action,” in which it sought a court

order directing the Puleos “to submit their individual disputes to

arbitration in accordance with their agreement with Defendant.”

(Id. at 43.) The Puleos opposed Chase’s motion in part. They

argued that, instead of enforcing the Arbitration Agreement in

accordance with its express terms, the District Court should

compel the parties to submit their class claims to arbitration in

order for the arbitrator to determine whether or not the class

action waiver was unconscionable and, therefore, unenforceable.

The District Court granted Chase’s motion in its entirety.

In its ruling, the Court compelled arbitration but held that the

validity of the class action waiver was a “‘gateway dispute’” and

a “‘question of arbitrability’ for a court to decide.”2

 (Id. at 3

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not unconscionable. 

However, we are mindful of the possible tension between

Gay and our subsequent opinion in Homa v. Am. Express Co.,

558 F.3d 225 (3d Cir. 2009). In Gay, we explained that certain

Pennsylvania cases finding that class action waivers are

unconscionable were preempted by the FAA. See Gay, 511

F.3d at 395. In Homa, we explained that Gay’s discussion of

preemption “appears to be dicta,” and held that New Jersey

cases concerning the unconscionability of class action waivers

were not preempted by the FAA. See Homa, 558 F.3d at 229-

30. While perhaps dicta itself, it is worth noting our agreement

that Gay’s discussion of Pennsylvania law was indeed dicta,

since our holding in Gay was that Virginia law governed the

parties’ arbitration agreement. Gay, 511 F.3d at 390. In any

event, the New Jersey case law at issue in Homa did not evince

hostility toward arbitration clauses, which was the concern about

Pennsylvania law expressed in Gay. Compare Homa, 558 F.3d

at 230 with Gay, 511 F.3d at 394-95. 

-8-

(quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79,

84 (2002) (additional citations omitted).) The Puleos filed this

timely appeal. After the case had been argued before a panel of

the Court, we elected sua sponte to rehear the matter en banc.

II.

We have jurisdiction over this appeal pursuant to 9

U.S.C. § 16(a)(3) and 28 U.S.C. § 1291. We exercise plenary

review over questions regarding the validity and enforceability

of an agreement to arbitrate. See Edwards v. HOVENSA, LLC,

497 F.3d 355, 357 (3d Cir. 2007) (citing Lloyd v. HOVENSA,

LLC, 369 F.3d 263, 273 (3d Cir. 2004)).

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III.

A.

Congress enacted the Federal Arbitration Act (“FAA”)

“to reverse the longstanding judicial hostility to arbitration

agreements . . . and to place arbitration agreements upon the

same footing as other contracts.” Spinetti v. Serv. Corp. Intern.,

324 F.3d 212, 218 (3d Cir. 2003) (quoting Gilmer v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)). The

FAA ensures that arbitration agreements “are enforceable to the

same extent as other contracts” by establishing “a strong federal

policy in favor of the resolution of disputes through arbitration.”

Alexander v. Anthony Int’l, L.P., 341 F.3d 256, 263 (3d Cir.

2003) (quotation marks and citations omitted). To this end, the

FAA provides that arbitration agreements are “valid,

irrevocable, and enforceable, save upon such grounds as exist at

law or in equity for the revocation of any contract,” 9 U.S.C. §

2, and it entitles any “party aggrieved by the alleged failure,

neglect, or refusal of another to arbitrate under a written

agreement for arbitration” to obtain a “[court] order directing

that such arbitration proceed in the manner provided for in such

agreement.” 9 U.S.C. § 4; see also Parilla v. IAP Worldwide

Servs., VI, Inc., 368 F.3d 269, 275-76 (3d Cir. 2004). 

Although the Supreme Court has continuously reinforced

the “liberal federal policy favoring arbitration agreements,”

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460

U.S. 1, 24 (1983), it has at the same time recognized that courts

applying the FAA have a limited but important threshold role to

play when a litigant moves to compel arbitration. In particular,

the Court has held that “[t]he question whether the parties have

submitted a particular dispute to arbitration, i.e., the question of

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arbitrability, is an issue for judicial determination unless the

parties clearly and unmistakably provide otherwise.” Howsam,

537 U.S. at 83 (quoting AT&T Techs., Inc. v. Commc’ns

Workers, 475 U.S. 643, 649 (1986)) (alteration in original,

internal quotations removed); see also First Options of Chicago,

Inc. v. Kaplan, 514 U.S. 938, 943-44 (1995). 

The types of issues that present questions of arbitrability

are, as the Supreme Court has explained, limited. In Howsam,

the Court noted that,

[l]inguistically speaking, one might call any

potentially dispositive gateway question a

“question of arbitrability,” for its answer will

determine whether the underlying controversy

will proceed to arbitration on the merits. The

Court’s case law, however, makes clear that, for

purposes of applying the interpretive rule, the

phrase “question of arbitrability” has a far more

limited scope.

537 U.S. at 83. 

Specifically, as the Supreme Court discussed in Howsam

and elaborated in Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444

(2003), a question of arbitrability arises only in two

circumstances—first, when there is a threshold dispute over

“whether the parties have a valid arbitration agreement at all,”

and, second, when the parties are in dispute as to “whether a

concededly binding arbitration clause applies to a certain type

of controversy.” Bazzle, 539 U.S. at 452; see also Howsam, 537

U.S. at 84; Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529,

532 (3d Cir. 2005); cf. Certain Underwriters at Lloyd’s London

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v. Westchester Fire Ins. Co., 489 F.3d 580, 585 (3d Cir. 2007)

(“[O]nly when there is a question regarding whether the parties

should be arbitrating at all is a question of arbitrability raised for

the court to resolve.”) (internal quotation marks and citation

omitted). Such questions of arbitrability are presumptively

committed to the court unless the parties have “clearly and

unmistakably” agreed that the arbitrator should decide the issue

of arbitrability. AT&T Techs., 475 U.S. at 649; see also First

Options, 514 U.S. at 944. 

The Supreme Court has contrasted questions of

arbitrability with disputes over arbitration procedure, which do

not bear upon the validity of an agreement to arbitrate.

“[P]rocedural questions which grow out of the dispute and bear

on its final disposition are presumptively not for the judge, but

for an arbitrator, to decide,” as are “allegation[s] of waiver,

delay, or a like defense to arbitrability.” Howsam, 537 U.S. at

84 (citations omitted). Likewise, the Supreme Court has made

clear that questions of “contract interpretation” aimed at

discerning whether a particular procedural mechanism is

authorized by a given arbitration agreement are matters for the

arbitrator to decide. Bazzle, 539 U.S. at 453; see also PacifiCare

Health Sys., Inc. v. Book, 538 U.S. 401, 407 (2003) (where an

arbitration agreement is ambiguous, “the antecedent question of

how the ambiguity is to be resolved” is one for the arbitrator);

Certain Underwriters, 489 F.3d at 587-88 (whether an

arbitration agreement foreclosed consolidated arbitration is a

question of contract interpretation for the arbitrator). 

Hence, in Howsam, the Court concluded that the parties’

dispute over whether the plaintiff had commenced the

proceedings within the National Association of Securities

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3

 Our dissenting colleagues appear to suggest that an

unconscionability challenge to “a single provision of an

arbitration agreement” does not necessarily raise a question of

arbitrability. Dissenting Op. at p. 14 (emphasis in original). As

recently as last year, we recognized that an unconscionability

challenge to a single provision of an arbitration agreement—also

a class action waiver provision—does in fact present a question

of arbitrability. See Homa v. Am. Express Co., 558 F.3d 225,

226 (3d Cir. 2009); see also In re Am. Express Merchs.’ Litig.,

554 F.3d 300 (2d Cir. 2009) (addressing the alleged

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Dealers’ six-year filing period was a matter for the arbitrator,

not the court, to decide. 537 U.S. at 83-84. The Court likened

the issue to matters like “waiver, delay, or a like defense,”

which are presumptively for the arbitrator, explaining that the

issue was an “aspec[t] of the [controversy] which called the

grievance procedures into play.” Id. at 85 (citations omitted).

And in PacifiCare, where the parties’ contracts were ambiguous

as to whether an arbitrator would be authorized to award treble

damages on the claims that the plaintiffs brought pursuant to the

Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.

§ 1961 et seq., the Court held that it fell to the arbitrator, not the

court, to resolve the contractual ambiguity. 538 U.S. at 407.

In stark contrast with the question of arbitration

procedure at issue in Howsam and the question of contractual

interpretation discussed in PacifiCare, when a party challenges

the validity of an arbitration agreement by contending that one

or more of its terms is unconscionable under generally

applicable state contract law, a question of arbitrability is

presented.3

 See Doctor’s Assocs., Inc. v. Casarotto, 517 U.S.

Case: 08-3837 Document: 003110136529 Page: 12 Date Filed: 05/10/2010
unconscionability of a single provision). 

4

 An attack on the validity of the contract as a whole, as

opposed to the arbitration clause in particular, does not present

a question of arbitrability. See Buckeye Check Cashing, Inc. v.

Cardegna, 546 U.S. 440, 445-46 (2006) (“[U]nless the challenge

is to the arbitration clause itself, the issue of the contract’s

validity is considered by the arbitrator in the first instance.”). In

Buckeye, for example, where the plaintiffs alleged that the

contract as a whole was illegal on account of its imposition of

usurious interest rates, the issue was one for the arbitrator, not

the court. As the Supreme Court explained in that case,

“because respondents challenge the Agreement, but not

specifically its arbitration provisions, those provisions are

enforceable apart from the remainder of the contract.” Id. at

446. “The flip side of this rule, however, is that when a party

specifically challenges the validity of arbitration provisions

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681, 687 (1996) (“[G]enerally applicable contract defenses, such

as . . . unconscionability, may be applied to invalidate arbitration

agreements without contravening § 2 [of the FAA].”) (emphasis

added); see also Homa v. Am. Express Co., 558 F.3d 225, 226

(3d Cir. 2009) (same); cf. Green Tree Fin. Corp.-Alabama v.

Randolph, 531 U.S. 79, 92 (2000) (addressing the burden of “a

party [who] seeks to invalidate an arbitration agreement on the

ground that arbitration would be prohibitively expensive”). 

The Courts of Appeals are unanimous in recognizing that

an unconscionability challenge to the provisions of an

arbitration agreement is a question of arbitrability that is

presumptively for the court, not the arbitrator, to decide.4

 See

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within a larger contract, apart from the validity of the contract

as a whole, a court decides the threshold question of the

enforceability of the arbitration provisions.” Jackson v.

Rent-A-Center West, Inc., 581 F.3d 912, 915 (9th Cir. 2009).

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Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115, 121 (2d

Cir. 2010) (“[I]t is clear that questions of contractual validity

relating to the unconscionability of [an] arbitration agreement

must be resolved first, as a matter of state law, before

compelling arbitration pursuant to the FAA.”) (citation omitted);

Cicle v. Chase Bank USA, 583 F.3d 549, 554 (8th Cir. 2009);

Dale v. Comcast Corp., 498 F.3d 1216, 1219 (11th Cir. 2007);

Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 975-77

(6th Cir. 2007); Kristian v. Comcast Corp., 446 F.3d 25, 52-53

(1st Cir. 2006); Parilla, 368 F.3d at 276; Spahr v. Secco, 330

F.3d 1266, 1270-71 (10th Cir. 2003); Ingle v. Circuit City

Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003); Snowden v.

CheckPoint Check Cashing, 290 F.3d 631, 638 (4th Cir. 2002);

We Care Hair Dev., Inc. v. Engen, 180 F.3d 838, 842-43 (7th

Cir. 1999); Webb v. Investacorp, Inc., 89 F.3d 252, 259 (5th Cir.

1996). The logic underpinning this consensus is readily

apparent—an unconscionability challenge to an arbitration

agreement presents a question of arbitrability because such a

challenge calls the “valid[ity]” of the arbitration agreement itself

into question. Bazzle, 539 U.S. at 452.

It is against this backdrop that we review the Puleos’

contention that the District Court impermissibly intruded upon

the province of the arbitrator when it addressed their argument

that the Arbitration Agreement’s class action waiver is

unconscionable.

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B.

As our discussion thus far makes plain, under the law of

this Circuit and others, the well-settled general rule is that when

a contractual party challenges the validity of an arbitration

agreement by contending that one or more of its terms is

unconscionable and unenforceable, a question of arbitrability is

presented. As Chase correctly argues, we have consistently

employed this approach, holding that a party’s unconscionability

challenge to the enforcement of one or more terms of an

arbitration agreement presents a gateway matter for judicial

determination. See, e.g., Parilla, 368 F.3d at 276 (“Applying the

relevant state contract law, a court may . . . hold that an

agreement to arbitrate is unenforceable based on a generally

applicable contractual defense, such as unconscionability.”)

(emphasis added, quotation marks and citations omitted);

Alexander, 341 F.3d at 264; Spinetti, 324 F.3d at 214. 

In the Puleos’ argument that this general rule should not

apply to their case, we discern four principal contentions. The

Puleos argue: (1) that because they are “willing” to arbitrate

(albeit not under the express terms of their Arbitration

Agreement), no question of arbitrability is presented here; (2)

that under the Supreme Court’s decision in Green Tree v.

Bazzle, the arbitrator should determine whether an otherwise

binding arbitration agreement bars class actions; (3) that because

the parties’ Arbitration Agreement contains a severability

clause, the District Court erred in considering the

unconscionability of any of its terms; and (4) that, even if their

challenge to the class action waiver raised a question of

arbitrability, the Arbitration Agreement demonstrates that the

parties clearly and unmistakably intended to arbitrate questions

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of arbitrability. We are not persuaded by any of these

arguments, which we address in turn below. 

1.

The Puleos’ first contention as to why their challenge to

the class action waiver does not raise a question of arbitrability

stems from the fact that they are amenable to arbitration in the

abstract. That is, although the Puleos oppose the enforcement

of the express terms of their Arbitration Agreement—which

makes clear that arbitration is to occur on an individual basis

only, and that “the arbitrator shall have no authority to proceed”

on a class or representative basis, (App. 63)—they do not

oppose having their contractually proscribed class claims sent to

arbitration for the arbitrator to rule on the unconscionability of

the class action waiver. Because they oppose the enforcement

of the terms of their own Arbitration Agreement, but not the

requirement of arbitration in general, the Puleos argue that their

challenge to the class action waiver merely presents a question

of arbitration procedure, not a gateway question of arbitrability.

See Howsam, 537 U.S. at 84 (noting that “procedural questions

which grow out of the dispute and bear on its final disposition

are presumptively not for the judge, but for an arbitrator, to

decide”) (quotation marks and citation omitted). 

We do not agree. As an initial matter, under the FAA, a

district court does not issue an order compelling arbitration in

the abstract. Rather, as the Supreme Court has recognized, § 4

of the FAA “confers only the right to obtain an order directing

that ‘arbitration proceed in the manner provided for in [the

parties’] agreement.’” Volt Info. Sciences, Inc. v. Board of

Trustees of Leland Stanford Jr. Univ., 489 U.S. 468, 475 (1989)

(quoting 9 U.S.C. § 4) (alterations in original). In other words,

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5

 The Supreme Court recently reemphasized this point in

Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., in which the

Court stated that “the central or primary purpose of the FAA is

to ensure that private agreements to arbitrate are enforced

according to their terms.” --- S. Ct. ----, 2010 WL 1655826, at

*11 (Apr. 27, 2010) (quotation marks and citation omitted). 

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in the absence of a threshold question regarding the validity of

the arbitration agreement itself or the applicability of an

arbitration agreement to a given dispute, the FAA “requires

courts to enforce privately negotiated agreements to arbitrate .

. . in accordance with their terms.”5

 Id. at 478 (emphasis added);

cf. Allstate Settlement Corp. v. Rapid Settlements, Ltd., 559

F.3d 164, 169 (3d Cir. 2009) (“Arbitration is fundamentally a

creature of contract, and an arbitrator’s authority is derived from

an agreement to arbitrate.”) (quotation marks and citation

omitted). The terms of the parties’ Arbitration Agreement are

clear—the Agreement makes plain that an arbitrator has “no

authority to proceed” over a class arbitration. (App. 62-63.)

Enforcing the Agreement “in accordance with [its] terms” means

granting precisely the relief that Chase requested before the

District Court—an order compelling the parties to arbitrate their

claims on an individual basis. Volt, 489 U.S. at 478; see also

Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 559 (7th Cir.

2003) (“The Arbitration Agreement at issue here explicitly

precludes the Livingstons from bringing class claims or

pursuing class action arbitration, so we are therefore obliged to

enforce the type of arbitration to which these parties agreed,

which does not include arbitration on a class basis.”) (quotation

marks and citations omitted). Under the FAA and the terms of

the Arbitration Agreement, then, the District Court could not

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6

 Like the Puleos, the dissent overlooks the significance

of the parties’ Arbitration Agreement and the statutory text of §

4 of the FAA. The Puleos manifestly are not “willing to proceed

to arbitration according to the concrete terms of their arbitration

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have compelled class arbitration without first addressing

whether the class action waiver was unconscionable.

The Puleos’ argument regarding their class claims is selfcontradictory. In order to present their class claims to an

arbitrator, the Puleos needed to obtain a court order that

invalidated the Arbitration Agreement’s class action waiver and

that compelled class arbitration. This is because unless it

addressed the validity of the ban on class arbitration, the District

Court could not have ordered the parties to submit their dispute

to class arbitration without running afoul of the FAA’s directive

that arbitration agreements be enforced in accordance with their

terms. See 9 U.S.C. § 4; see also Volt, 489 U.S. at 478. And

without a court order compelling class arbitration, the Puleos

could not have presented their class claims to the arbitrator—the

rules of the American Arbitration Association (“AAA”) make

plain that where, as here, a contract bans class arbitration, the

AAA will not hear class claims “unless an order of a court

directs the parties to the underlying dispute to submit any aspect

of their dispute involving class claims, consolidation, joinder or

the enforceability of such provisions, to an arbitrator.” (App.

108.) By arguing that the District Court should have compelled

class arbitration without addressing the validity of the express

contractual ban on class arbitration, the Puleos would have us

ignore the plain language of both 9 U.S.C. § 4 and their own

Arbitration Agreement.6

 We decline to indulge the Puleos’

Case: 08-3837 Document: 003110136529 Page: 18 Date Filed: 05/10/2010
agreement.” Dissenting Op. at p. 2. The District Court could

not both order class arbitration and compel arbitration “in the

manner provided for in [the parties’] agreement,” without

considering whether the class arbitration waiver is

unconscionable. 9 U.S.C. § 4.

-19-

desire to have it both ways—i.e., to have the District Court

compel the parties to arbitrate class claims without first

addressing the validity of the class action waiver.

Moreover, notwithstanding the fact that they are

amenable to arbitration in the abstract, by challenging the

enforceability of the class action waiver, the Puleos are

necessarily challenging the validity of the agreement to arbitrate.

The provision targeted by the Puleos goes to the heart of the

arbitrator’s authority to hear claims arising under the

Cardmember Agreement, in that it provides unambiguously that

“the arbitrator shall have no authority to proceed” on a class or

representative basis. (App. 63 (emphasis added).) A challenge

to this provision, which designates a clear boundary of arbitral

authority, is a far cry from procedural questions over “whether

prerequisites such as time limits, notice, laches, estoppel, and

other conditions precedent to an obligation to arbitrate have

been met,” which are matters for the arbitrator. Howsam, 537

U.S. at 85 (citation and emphasis omitted). An arbitrator can

resolve these latter procedural issues, as well as the merits of the

underlying dispute, without deciding the existence and scope of

his or her own jurisdiction, which arbitrators are neither wellsuited, nor generally permitted, to assess. See, e.g., Sandvik AB

v. Advent Int’l Corp., 220 F.3d 99, 111 (3d Cir. 2000)

(“[A]llow[ing] the arbitrators to determine their own jurisdiction

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7

 The dissent’s suggestion that the class arbitration

waiver is not intertwined with the arbitrator’s jurisdiction is

incorrect. The Agreement clearly states that the arbitrator “shall

have no authority to proceed” over a class arbitration, and the

parties are bound by that language. See Allstate, 559 F.3d at

169 (“Arbitration is fundamentally a creature of contract[.]”)

(citation omitted).

-20-

. . . is not permitted in the federal jurisprudence of arbitration,

for the question whether a dispute is to be arbitrated belongs to

the courts unless the parties agree otherwise.”) (citing First

Options, 514 U.S. at 944). The same cannot be said for the class

arbitration ban—under the express terms of the Arbitration

Agreement, a challenge to this provision necessarily calls into

question the very authority of the arbitrator to preside over the

dispute, and, by extension, the validity of the Agreement itself.7

This is a question of arbitrability for the court to resolve,

irrespective of the Puleos’ amenability to arbitration in the

abstract.

In explaining the types of issues that present questions of

arbitrability, the Supreme Court has emphasized the significance

of the parties’ reasonable expectations. As the Court discussed

in Howsam, the term “question of arbitrability” is “applicable in

the kind of narrow circumstance where contracting parties

would likely have expected a court to have decided the gateway

matter, where they are not likely to have thought that they had

agreed that an arbitrator would do so, and, consequently, where

reference of the gateway dispute to the court avoids the risk of

forcing parties to arbitrate a matter that they may well not have

agreed to arbitrate.” Howsam, 537 U.S. at 83-84 (emphasis

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-21-

added). Given the Arbitration Agreement’s provision expressly

restricting the arbitrator’s authority to preside over a class

arbitration, we think it obvious that the “contracting parties

would likely have expected a court” to decide whether that very

provision is unconscionable. Id.

In concluding that the Puleos’ challenge to the class

action waiver is a challenge to the validity of the Arbitration

Agreement, we concur with the Court of Appeals for the Second

Circuit, which recently addressed a largely identical appeal. In

the case of In re Am. Express Merchs.’ Litig., 554 F.3d 300 (2d

Cir. 2009), the Second Circuit considered the enforceability of

an arbitration provision barring class actions within a very

similar cardmember agreement. The court addressed the same

question now before us—whether the court or arbitrator should

pass judgment on the enforceability of an explicit class action

waiver. In that case, as in ours, the plaintiffs were “amenable to

proceeding to arbitration,” id. at 321, although they sought to

arbitrate on a class-wide basis. The district court in that case

agreed with the position advocated by the Puleos; it referred the

decision concerning the enforceability of the class action waiver

to the arbitrator, holding that “enforceability of the collective

action waivers is a claim for the arbitrator to resolve. Issues

relating to the enforceability of the contract and its specific

provisions are for the arbitrator, once arbitrability is

established.” In re Am. Express Merchs.’ Litig., No. 03-CV9592, 2006 WL 662341, at *6 (S.D.N.Y. Mar. 16, 2006). The

Second Circuit, however, soundly rejected the decision of the

district court, noting that a challenge to the explicit class action

bar was, in essence, a challenge to the agreement to arbitrate:

The plaintiffs are plainly challenging the Card

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-22-

Acceptance Agreement’s arbitration clause

insofar as they dispute the enforceability of its

class action waiver and, by extension, the validity

of the parties’ agreement to arbitrate. Their

challenge is to the arbitration clause itself, rather

than to the entirety of the Card Acceptance

Agreement. This appeal therefore involves a

gateway dispute about whether the parties are

bound by a given arbitration clause, a dispute

which raises a question of [arbitrability] for a

court to decide. 

In re Am. Express Merchs.’ Litig., 554 F.3d at 311 (internal

quotation marks and citations omitted). We agree with the

Second Circuit that a challenge to the enforceability of an

explicit class action waiver within an arbitration agreement is a

challenge to the validity of the parties’ agreement to arbitrate,

and thus a question for the court to decide.

2.

Contrary to the Puleos’ contentions, the Supreme Court’s

plurality opinion in Bazzle does not compel a contrary

conclusion. The Puleos rely upon Bazzle in arguing that a

party’s “stand-alone challenge to [a] class action waiver does

not raise an issue of arbitrability” because it is merely a

procedural matter for the arbitrator to decide. (Appellants’ Br.

at 20.) But Bazzle does not stand for the broad proposition for

which the Puleos cite it. In Bazzle, the Supreme Court

confronted “a problem concerning the contracts’ silence. Are

the contracts in fact silent, or do they forbid class arbitration . .

. ?” 539 U.S. at 447. The Court explained that this matter of

contract interpretation in the face of contractual silence was for

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-23-

the arbitrator. Id. at 451. As the Bazzle plurality concluded,

“the question—whether the agreement forbids class

arbitration—is for the arbitrator to decide.” Id. 

The dispute in Bazzle, therefore, did not present a

question relating to the validity of the arbitration agreement—it

was a dispute about what the contract actually said. Here, by

contrast, there is no doubt over “what kind of arbitration

proceeding the parties agreed to.” Id. at 452 (noting that a

dispute overthe “kind of arbitration proceeding” agreed to could

properly be decided by an arbitrator, but a dispute over the

validity of an arbitration clause or its applicability to an

underlying dispute was not a proper question for the arbitrator)

(emphasis omitted). The question Bazzle confronted is thus

inapplicable to agreements like the one at issue herein, which

expressly and unmistakably proscribes class arbitration and

which leaves no question as to “whether the agreement forbids

class arbitration.” Bazzle, 539 U.S. at 451; see, e.g., Kristian v.

Comcast Corp., 446 F.3d 25, 54 (1st Cir. 2006) (“Bazzle does

not apply here because of the clarity of the prohibition against

class arbitration.”); In re Am. Express Merchs.’ Litig., 554 F.3d

at 311 n.10 (same). 

Moreover, Bazzle certainly did not hold that an

unconscionability challenge to a class action waiver provision

in an arbitration agreement is a matter for the arbitrator, not the

court, to decide. The issue in Bazzle was the existence, not the

validity, of a class action waiver, see Kristian, 446 F.3d at 54,

and, post-Bazzle, courts have consistently treated challenges to

the enforceability of class action waivers as matters for judicial,

not arbitral, resolution. See, e.g., Homa, 558 F.3d at 233; In re

Am. Express Merchs.’ Litig., 554 F.3d at 311-12; Gay v.

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CreditInform, 511 F.3d 369, 394-95 (3d Cir. 2007); Kristian,

446 F.3d at 54; Iberia Credit Bureau, Inc. v. Cingular Wireless

LLC, 379 F.3d 159, 174-75 (5th Cir. 2004). We therefore

conclude that the Puleos’ reliance upon Bazzle is misplaced.

3.

Nor can we agree with the Puleos’ contention that

because the parties’ Arbitration Agreement contains a

severability clause, the District Court erred in considering the

unconscionability of the class action waiver. The severability

clause provides that “if any portion of this Arbitration

Agreement is deemed invalid or unenforceable, the remaining

portions shall nevertheless remain in force.” (App. 63.) Relying

on this provision, the Puleos argue that the District Court, faced

with their contention that the class action waiver was

unconscionable, should have ignored the question of

unconscionability and instead directed its attention to the

question of whether the class action waiver, if found

unconscionable, could ultimately be severed from the remainder

of the Arbitration Agreement. Had the District Court done so,

say the Puleos, it would have concluded that their

unconscionability challenge to the class action waiver does not

call the validity of the Arbitration Agreement as a whole into

question, because whether or not the waiver is unconscionable,

it would not impact the requirement of arbitration. 

Once again, however, the plain language of the parties’

Arbitration Agreement undermines the force of the Puleos’

argument. The severability clause upon which the Puleos rely

is phrased in the conditional: “if any portion of this Arbitration

Agreement is deemed invalid or unenforceable, the remaining

portions shall nevertheless remain in force.” (App. 63

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-25-

(emphasis added).) The clause thus provides for a two-step

analysis—first, assess whether any provision of the Arbitration

Agreement is unenforceable, and if so, then assess the

severability of the unenforceable provision. The District Court

followed precisely this order of analysis in addressing the

Puleos’ challenge to the class action waiver, and, given the

express language of the parties’ Agreement, it can hardly be

faulted for having done so. Because it held, at the first step of

the analysis, that the waiver provision was not unconscionable,

the District Court did not reach (and indeed, should not have

reached) the secondary issue of severability. As the Court of

Appeals for the Second Circuit explained when confronted by

a litigant’s effort to invoke a severability clause under

comparable circumstances:

The severability clause . . . has no relevance to

this appeal. According to its terms, the

severability clause applies “[i]n the event that any

provision of this Agreement, or the application of

such provision shall be held by a court of

competent jurisdiction to be contrary to law . . . .”

The district court, however, did not hold any

provision of the arbitration agreement to be

contrary to law. . . . Thus, the district court did not

trigger any application of the severability clause

and, as a result, the question of whether or not the

clause can “save” the arbitration agreement is not

properly raised on this appeal.

Ragone, 595 F.3d at 123.

This analysis is in accord with the approach to the issue

of severability that we have consistently adopted when

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addressing unconscionability challenges to arbitration

agreements. That is, when confronted by a litigant’s claim that

a provision of an arbitration agreement is unconscionable, we

have always considered, first, whether the provision is in fact

unenforceable, and, if so (and only if so), whether the

unenforceable provision may be severed from the remainder of

the arbitration agreement. See, e.g., Parilla, 368 F.3d at 276

(“We set forth below the relevant principles of

unconscionability and will apply those principles to the

arbitration terms at issue in this case. We will then determine

whether it is appropriate to sever any unenforceable provisions

from the parties’ agreement to arbitrate.”) (emphasis added);

Alexander, 341 F.3d at 270 (applying unconscionability first,

severability second order of analysis); Spinetti, 324 F.3d at 221-

22 (same); cf. Delta Funding Corp. v. Harris, 426 F.3d 671, 675

(3d Cir. 2005) (“Is the arbitration agreement at issue in this case,

or any provision thereof, unconscionable under New Jersey law,

and if so, should such provision or provisions be severed.”)

(citation omitted, emphasis added). Other Circuits employ this

same two-step order of analysis, contrary to the Puleos’

contention that we should put the severability cart before the

unconscionability horse. See, e.g., In re Cotton Yarn Antitrust

Litig., 505 F.3d 274, 292 (4th Cir. 2007); Hadnot v. Bay, Ltd.,

344 F.3d 474, 478 (5th Cir. 2003); Gannon v. Circuit City

Stores, Inc., 262 F.3d 677, 683 (8th Cir. 2001). The two-step

nature of this inquiry—unconscionability first, severability

second—is likewise implicit in the language of the Restatement

(Second) of Contracts, which explains severability as an

“if/then” concept. See Restatement (Second) of Contracts §

184(1) (“If less than all of an agreement is unenforceable under

the rule stated in § 178, a court may nevertheless enforce the rest

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-27-

of the agreement in favor of a party who did not engage in

serious misconduct if the performance as to which the

agreement is unenforceable is not an essential part of the agreed

exchange.”) (emphasis added). 

The Puleos’ suggestion that a court intrudes upon the

province of the arbitrator any time it addresses the

unconscionability of a provision of an arbitration clause that it

subsequently finds is severable from the agreement runs

contrary to our precedent and that of our sister circuits. In

Spinetti, for example, we found two terms of an arbitration

agreement unconscionable, but determined that the

unenforceable terms could be severed from the remainder of the

contract. 324 F.3d at 219-20; accord Scovill v. WSYX/ABC,

425 F.3d 1012, 1017 (6th Cir. 2005) (finding provision of

arbitration agreement unconscionable and then severing

unconscionable term pursuant to severability clause); Hadnot,

344 F.3d at 478 (same); Gannon, 262 F.3d at 680-81 (same).

The Puleos would apparently have us hold that in each of these

cases, the court overstepped its bounds by addressing the issue

of unconscionability in the first instance, since in each case, the

provisions in question, whether or not unconscionable, were

ultimately severable from an otherwise enforceable arbitration

agreement. We see no basis in our cases, nor in the Supreme

Court’s arbitration jurisprudence, for such a holding.

Particularly in light of the conditional language of the

severability clause in the parties’ Arbitration Agreement, we

disagree with the Puleos’ suggestion that the District Court erred

in considering their unconscionability argument before

addressing the severability of the class action waiver. 

4.

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Finally, the Puleos argue that even if their

unconscionability challenge to the class action waiver presented

a question of arbitrability, the parties intended to present such

questions to the arbitrator, not the court. As we have noted,

under the Supreme Court’s arbitration jurisprudence, while the

general rule is that questions of arbitrability are for the court to

resolve, parties can contract around this rule if they desire to

arbitrate arbitrability. See First Options, 514 U.S. at 944-45.

The Supreme Court has made clear, however, that courts

“should not assume that the parties agreed to arbitrate

arbitrability unless there is ‘clea[r] and unmistakabl[e]’ evidence

that they did so.” Id. at 944 (quoting AT&T Techs., 475 U.S. at

649) (alterations in original). As First Options explains, “given

the principle that a party can be forced to arbitrate only those

issues it specifically has agreed to submit to arbitration, one can

understand why courts might hesitate to interpret silence or

ambiguity on the ‘who should decide arbitrability’ point as

giving the arbitrators that power, for doing so might too often

force unwilling parties to arbitrate a matter they reasonably

would have thought a judge, not an arbitrator, would decide.”

Id. at 945 (citation omitted). We have described the burden on

a litigant seeking to prove that the parties intended for the

arbitrator to decide questions of arbitrability as “onerous.”

Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 221 (3d Cir.

2007). 

We agree with Chase that the Puleos have not met this

burden. The provision of the Arbitration Agreement upon

which the Puleos rely states that “[c]laims subject to this

Arbitration Agreement include Claims regarding the

applicability of this Arbitration Agreement or the validity of the

entire Cardmember Agreement or any prior Cardmember

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8

 The Supreme Court set forth examples of claims

challenging the applicability of an arbitration clause in

Howsam—a dispute regarding “whether a labor-management

layoff controversy falls within the arbitration clause of a

collective-bargaining agreement” is a question concerning the

applicability of an arbitration agreement, as is a disagreement

over “whether a clause providing for arbitration of various

‘grievances’ covers claims for damages for breach of a no-strike

agreement.” Howsam, 537 U.S. at 84 (citations omitted). No

such question of applicability is presented in this case. 

-29-

Agreement,” and it further states that “the term ‘Claim’ is to be

given the broadest possible meaning.” (App. 63.) The first set

of claims described in this provision—claims “regarding the

applicability of this Arbitration Agreement,” (App. 63 (emphasis

added)—are certainly not at issue in this dispute. Claims

regarding “whether an arbitration clause in a concededly binding

contract applies to a particular type of controversy” are indeed

questions of arbitrability.8

 See Howsam, 537 U.S. at 84. Under

the terms of the parties’ contract, if any party in this case

actually questioned whether the Puleos’ complaint about

Chase’s retroactive interest rate increases fell within the scope

of the Arbitration Agreement, such a question would be for the

arbitrator. But there is no question in this case concerning the

scope or applicability of the Arbitration Agreement. That is,

Chase and the Puleos agree that the Puleos’ complaint about the

retroactive interest rate increase falls within the scope of the

Arbitration Agreement; they disagree only about whether the

class action waiver provision of the Arbitration Agreement is

valid. Because there is no dispute in this case “regarding the

applicability of this Arbitration Agreement” to the substantive

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-30-

dispute between the parties, (App. 63), the first clause of the

provision relied upon by the Puleos does not “clearly and

unmistakably” show that the parties intended to arbitrate the

validity of the class action waiver. Howsam, 537 U.S. at 83

(citation omitted); see also Ehleiter, 482 F.3d at 215, 222. 

Nor is there a dispute between Chase and the Puleos

concerning “the validity of the entire Cardmember Agreement

or any prior Cardmember Agreement.” (App. 63.) Arbitration

jurisprudence distinguishes between a “challenge . . . to the

arbitration clause itself,” and a challenge targeting the contract

as a whole. Buckeye, 546 U.S. at 445-46; see also Prima Paint

Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04

(1967). The parties’ Arbitration Agreement makes clear that the

latter category of challenges—disputes concerning “the validity

of the entire Cardmember Agreement,” (App. 63)—are for the

arbitrator. The Arbitration Agreement is silent, however, with

regard to who decides challenges “to the arbitration clause

itself,” Buckeye, 546 U.S. at 446, and the Supreme Court has

made clear that “silence or ambiguity on the ‘who should decide

arbitrability’ point” must be resolved in favor of judicial

resolution of questions of arbitrability. First Options, 514 U.S.

at 945. The Puleos do not contest “the validity of the entire

Cardmember Agreement,” (App. 63), by, e.g., alleging that the

entire contract is illegal and void. See Buckeye, 546 U.S. at

446. Instead, they challenge “the validity of arbitration

provisions within a larger contract, apart from the validity of the

contract as a whole,” a matter which the Arbitration Agreement

cannot be read to refer to the arbitrator. Jackson, 581 F.3d at

915. In sum, the Puleos have failed to adduce clear and

unmistakable evidence that the parties intended to arbitrate

questions concerning the validity of the arbitration agreement,

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which is fatal to their argument that the District Court should

have referred such a question of arbitrability to the arbitrator.

See First Options, 514 U.S. at 945. 

IV.

For the foregoing reasons, we conclude that the Puleos’

challenge to the Arbitration Agreement’s class action waiver

presents a question of arbitrability that the District Court

appropriately addressed. We will therefore affirm the District

Court’s order compelling the parties to arbitrate their claims on

an individual basis. 

Case: 08-3837 Document: 003110136529 Page: 31 Date Filed: 05/10/2010
RENDELL, Circuit Judge, with whom Circuit Judges AMBRO,

FISHER and CHAGARES join, dissenting.

Judge Fuentes writes persuasively for the majority in

concluding that when a party urges that the “unconscionability”

of a provision invalidates an arbitration agreement, the issue

should be decided in the first instance by a court, not an

arbitrator. I, too, might be persuaded were it not for the unique

features of the specific situation before us, not the least of which

is the fact that the arbitrability of the dispute between the parties

is not at issue, because the parties both agree that the case

should go to arbitration and they do not urge that the presence

of the class action waiver affected the formation of the

agreement to arbitrate, or its validity. The majority fails to

acknowledge this. 

I.

It is important to begin by focusing on the Supreme

Court’s opinion in Howsam v. Dean Witter Reynolds, Inc.,

which clearly limits the types of issues a court should decide. 

537 U.S. 79 (2002). There, the Supreme Court made it clear

that courts should only consider gateway issues of “arbitrability”

in a “limited” and “narrow” set of circumstances; namely, when

there is a dispute about whether the parties are bound by a given

arbitration clause at all, or when there is a disagreement about

whether an arbitration clause in a concededly binding contract

applies to a particular type of dispute. Id. at 83-84.

Accordingly, unless the pertinent question is (1) are the parties

bound to arbitrate, or (2) did the parties agree to arbitrate the

issue being raised, the matter must be referred to the arbitrator.

With that in mind, I turn to the specific fact pattern presented.

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2

The features of this case, from the standpoint of the

issues presented, and the fact pattern before the District Court,

are very unusual indeed. First and foremost, the parties both

agree that the plaintiffs’ case should be arbitrated. No one is

contending that the parties are not bound to arbitrate,

notwithstanding the majority’s view to the contrary. The

proceedings in the District Court confirm this. Chase filed a

motion to compel arbitration. The District Court’s Order of

August 12, 2008, explicitly noted that the Puleos “support

[Chase’s] motion [to compel arbitration] to the extent that it

seeks arbitration and dismissal of their claims in court” and that

the Puleos “are asking the court to grant [Chase’s] motion by

compelling the parties to arbitrate all of their claims, including

their claims challenging the validity of the contract provision

barring class action proceedings in arbitration.” Dist. Ct.

Order 1 n.1 (App. 2). This is not, as the majority suggests,

simply an expression of amenability to arbitration “in the

abstract.” Majority Op. at 16. The Puleos are willing to proceed

to arbitration according to the concrete terms of their arbitration

agreement – all twelve paragraphs of it. This makes a huge

difference. The significance of this fact and its bearing on who

the appropriate decisionmaker is cannot be overstated. 

Since it is clear that the parties agree that the case will go

to arbitration – whether as a class action or as plaintiffs’

individual suit – there is no issue of “arbitrability,” and there is

no issue as to the arbitrator’s jurisdiction. No one – neither the

court nor the arbitrator – needs to decide the “jurisdiction” of the

arbitrator. The arbitrator has jurisdiction over the case; the case

will be arbitrated – no ifs, ands, or buts. There remains only the

question of how the case will go forward – whether as a class

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 1

 The majority is correct that Bazzle involved a contract that

was arguably unclear as to whether or not it forbade class

actions. The contract here is not unclear on this point.

However, the majority dismisses Bazzle too quickly. In Bazzle,

as here, there was an issue as to whether an arbitration could

proceed as a class action or whether it must proceed as an

individual suit. The Supreme Court did not hesitate in allowing

the matter to go to an arbitrator, even given this uncertainty, and

even given the possibility that the arbitrator might find that,

indeed, the contract did bar class actions. The important point

is not that the situation is identical to that in Bazzle; it is that the

basic question is the same: whether or not a particular

arbitration agreement, properly understood and enforced in

accordance with the relevant law, bars class actions. This

question is not a “question of arbitrability” that has to be

decided by a court – the Supreme Court explicitly held

otherwise. In Bazzle, this question was raised because the

contract was unclear; here, the question is raised because of an

unconscionability challenge to the class action waiver. But the

basic question – should the arbitration proceed on an individual

basis or as a class action – is the same. And, as the Supreme

Court makes clear in Bazzle, this question is not a question of

arbitrability. 539 U.S. at 452-53. 

3

action or an individual suit. But that question is akin to the

question in Bazzle, “what kind of arbitration proceeding the

parties agreed to,” and that question is one that an arbitrator is

perfectly “well situated to answer.” Green Tree Fin. Corp. v.

Bazzle, 539 U.S. 444, 452-53 (2003) (emphasis in original).1

 

The majority makes much of the language from the

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4

arbitration agreement that states that “the arbitrator shall have no

authority to proceed” with arbitration on a class basis, citing that

phrase four times, once with emphasis. Majority Op. at 16, 18,

19, 20 n.7. This language is, of course, part of the arbitration

agreement’s bar on class actions, which, if found by the

arbitrator to be unconscionable, will be irrelevant. The majority

interprets this phrase as suggesting that the arbitrator will be in

the position to decide “the existence and scope of his or her own

jurisdiction” if the arbitrator is allowed to decide whether the

class action waiver is unconscionable. Majority Op. at 20.

However, the concern over an arbitrator’s deciding “his own

jurisdiction” arises when there is uncertainty as to whether a

particular dispute is one that the parties agreed to arbitrate. See,

e.g., First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,

943-45 (1995). That determination is uniquely reserved for a

court, as the Supreme Court has made clear in Howsam. 537

U.S. at 84. A court should decide whether the arbitrator has

jurisdiction over a certain matter, i.e., did the parties agree to

arbitrate it? A challenge to a class action waiver in the

arbitration agreement does not implicate the arbitrator’s

jurisdiction. The use of the word “authority” simply indicates

that the arbitrator is not to conduct an arbitration as a class

action. (Curiously, the sentence at issue is followed by a

sentence indicating that either party can elect not to proceed as

a class action; presumably, if neither so “elects,” the case would

in fact proceed as a class action.) 

Second, and a very close second in terms of significance:

the Puleos did not urge that the unconscionability of the class

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 2

 The majority’s repeated use of the phrase “validity of the

agreement” and related phrases (e.g. Majority Op. at 19, 20, 21,

31) to describe what the Puleos are challenging cannot convert

this case into one involving the validity of the arbitration

agreement: repetition does not make it so. This phrase, let

alone this concept, simply does not appear in the District Court’s

Order. Instead, the District Court properly characterizes the

Puleos as “challenging the validity of the contract provision

barring class action proceedings in arbitration” and as

“challenging the validity of the arbitration clause’s express class

action prohibition.” Dist. Ct. Order 2-3 n.1 (App. 2-3). The

issue presented is: how should the case proceed – individually,

or as a class action? The District Court decided that the waiver

was not unconscionable. That is the ruling that we are to

review. 

 3

 It is for this reason that the majority’s extended discussion

of “severability” largely misses the mark. The Puleos have

never challenged the validity of the arbitration agreement. And,

as noted above, Chase filed a motion to compel arbitration. The

issue of severability arises only because Chase now raises the

5

action waiver implicated the dispute’s arbitrability.2

 Nor did the

District Court consider, let alone decide, any issue bearing on

the validity of the arbitration agreement. Chase asked the

District Court to enforce both the class action waiver and the

rest of the arbitration agreement. The Puleos’ response urged

that the class action waiver was unconscionable, but did not

suggest that the arbitration agreement was invalid or

unenforceable. So there was no challenge presented to the

“validity” of the arbitration agreement.3

 They challenge only

Case: 08-3837 Document: 003110136529 Page: 36 Date Filed: 05/10/2010
specter that an attack on one part of the arbitration agreement

could invalidate the whole arbitration agreement. We need not

even reach this issue if we find, as we should, that the Puleos are

not challenging the validity of the arbitration agreement. Even

so, Chase’s argument that seeks to nullify – or revise – the very

severability provision that it included in the form agreement is

quite weak: if the class action waiver was so integral as to not

be severable, why did Chase include an explicit severability

clause in the arbitration provision that failed to except out the

class action waiver? Many contracts of this sort either explicitly

prohibit severance of the class action waiver, or except the class

action waiver from the severability clause. See, e.g., Homa v.

Am. Express Co., 558 F.3d 225, 234 (3d Cir. 2009) (Weis, J.,

concurring) (contract included a provision in the arbitration

clause that stated that if the class action waiver were deemed

invalid or unenforceable, then the entire arbitration provision

would not apply); Chalk v. T-Mobile USA, Inc., 560 F.3d 1087,

1098 (9th Cir. 2009) (arbitration agreement included a provision

prohibiting severance of the class action waiver); Dale v.

Comcast Corp., 498 F.3d 1216, 1219 n.3 (11th Cir. 2007)

(noting that “[t]he severability clause in the Arbitration

Provision states: ‘In [sic] the class action waiver clause is found

to be illegal or unenforceable, the entire Arbitration Provision

will be unenforceable.’”). Surely Chase should not be permitted

to rewrite the agreement that it prepared. 

6

one aspect of that agreement, and do not suggest that this

challenge has any bearing on the validity of the agreement as a

whole. Moreover, there is no allegation that the

unconscionability of the class action waiver affected the

formation of the agreement to arbitrate, or rendered either

Case: 08-3837 Document: 003110136529 Page: 37 Date Filed: 05/10/2010
 4

 There is no claim that the presence of the class action waiver

renders the parties’ promises illusory, or so one-sided, or so

overreaching as to nullify the agreement. Were that the case, a

bank’s inclusion of such a provision would always result in its

having to litigate in court rather than arbitrate. This cannot be.

 5

 The majority’s long list of Court of Appeals decisions that

are “unanimous” in “recognizing that an unconscionability

challenge to the provisions of an arbitration agreement is a

question of arbitrability that is presumptively for the court, not

the arbitrator, to decide,” Majority Op. at 13-15, are all factually

distinguishable. In particular, all of those cases either (1)

include an explicit challenge to the validity or applicability of

the entire arbitration agreement (not just one provision of it) or

(2) raise fundamental challenges to whether the parties were

bound by the agreement at all. Not a single one of them

presents a situation like the one before us in which both parties

concede the appropriateness of arbitration. See Ragone v. Atl.

Video at Manhattan Ctr., 595 F.3d 115, 123 (2d Cir. 2010)

(plaintiff specifically challenged arbitrability); Cicle v. Chase

Bank USA, 583 F.3d 549, 555 (8th Cir. 2009) (plaintiff

contended that the arbitration agreement was unconscionable);

Dale, 498 F.3d at 1218-19 & n.3 (plaintiffs “disputed having

7

party’s assent involuntary.4

 This makes this case unique; the

context in which the argument as to the “unconscionability” of

a class action waiver typically arises involves the plaintiff’s

claim that the waiver’s unconscionability renders the arbitration

provision invalid or unenforceable, thus implicating the

agreement to arbitrate. The cases that the majority relies on

involve that scenario.5

 That simply is not the case here. 

Case: 08-3837 Document: 003110136529 Page: 38 Date Filed: 05/10/2010
received” the contract and challenged the entire arbitration

agreement); Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d

967, 972 (6th Cir. 2007) (plaintiff contested the validity of the

entire arbitration agreement); Kristian v. Comcast Corp., 446

F.3d 25, 31, 37 (1st Cir. 2006) (numerous challenges to

formation and to provisions of the arbitration agreement);

Parilla v. IAP Worldwide Servs., VI, Inc., 368 F.3d 269, 274 (3d

Cir. 2004) (plaintiff urged that the entire agreement to arbitrate

was unenforceable); Spahr v. Secco, 330 F.3d 1266, 1268-69

(10th Cir. 2003) (challenge to the arbitration agreement on the

basis of mental capacity); Ingle v. Circuit City Stores, Inc., 328

F.3d 1165, 1180 (9th Cir. 2003) (the arbitration agreement was

“permeated with objectionable provisions”); Snowden v.

CheckPoint Check Cashing, 290 F.3d 631, 636, 639 (4th Cir.

2002) (challenge to the validity of the whole contract, including

the arbitration agreement, as void ab initio); We Care Hair Dev.,

Inc. v. Engen, 180 F.3d 838, 843 (7th Cir. 1999) (the entire

arbitration clause was unconscionable); Webb v. Investacorp,

Inc., 89 F.3d 252, 257 (5th Cir. 1996) (the arbitration clauses

were “not valid and enforceable”). 

8

Accordingly, since there is no issue as to whether the

parties are bound to arbitrate, the only remaining question is

whether the issue of the unconscionability of the class action

waiver is a dispute that the parties agreed to arbitrate. Howsam,

537 U.S. at 83. Here, no one is contending that this issue was

somehow reserved for the court by agreement, or was not one

that was agreed to be arbitrated. Indeed, it would be difficult to

do so, as the “Claims” subject to arbitration are as broad as can

Case: 08-3837 Document: 003110136529 Page: 39 Date Filed: 05/10/2010
 6 The arbitration agreement requires the parties to arbitrate 

all Claims, whether such Claims are

based on law, statute, contract,

regulation, ordinance, tort, common

law, constitutional provision, or

any legal theory of law such as

respondent superior, or any other

legal or equitable ground and

whether such Claims seek as

remedies money, damages,

penalties, injunctions, or

declaratory or equitable relief.

Claims subject to this Arbitration

Agreement include Claims

regarding the applicability of this

Arbitration Agreement or the

validity of the entire Cardmember

Agreement or any prior

Cardmember Agreement. This

Arbitration Agreement includes

Claims that arose in the past, or

arise in the present or the future.

As used in this Arbitration

Agreement, the term Claim is to be

given the broadest possible

meaning. 

App. 63 (emphasis added). 

9

be.6

Case: 08-3837 Document: 003110136529 Page: 40 Date Filed: 05/10/2010
 7

 The majority’s extended discussion (pp. 28-31) of First

Options is beside the point. The majority stresses both that

questions of arbitrability are for a court to decide, and that a

court “should not assume that the parties agreed to arbitrate

arbitrability unless there is ‘clea[r] and unmistakabl[e]’ evidence

that they did so.” First Options, 514 U.S. at 944 (quoting AT&T

Techs., Inc. v. Commc’ns Workers, 475 U.S. 643, 649 (1986)

(alterations in original)). However, whether to arbitrate

arbitrability is not before us; there is no issue of arbitrability. 

 

10

Moreover, whether the case will proceed as a class action

is clearly a “procedural question,” and the Supreme Court, and

we, have stated time and again that matters of procedure are to

be decided by the arbitrator. Howsam, 537 U.S. at 84; Certain

Underwriters at Lloyd’s London v. Westchester Fire Ins. Co.,

489 F.3d 580, 586-87 (3d Cir. 2007). One would thus expect an

arbitration provision to specify matters of procedure that are not

to be arbitrated. Since the issue of the class action waiver’s

unconscionability is not an issue of arbitrability, and is not

reserved for the court by agreement, it should have been referred

by the District Court to the arbitrator.7

II.

The majority opinion proceeds from the notion that issues

of unconscionability must always be decided by courts. Perhaps

if the unconscionability issue implicates the validity of the

Case: 08-3837 Document: 003110136529 Page: 41 Date Filed: 05/10/2010
 8

 However, I submit that even if there were a challenge to the

validity of the arbitration agreement based on unconscionability

of the class action waiver, this could be viewed as presenting an

issue of enforceability, rather than a threshold issue as to

whether the parties entered into a binding agreement. We have

routinely held that an unconscionability challenge is a defense

to the enforcement of a contract, see, e.g., Parilla, 368 F.3d at

275-76, and in Howsam, the Supreme Court stated that defenses

to enforcement are not matters of arbitrability. 537 U.S. at 84-

85 (“[T]he presumption is that the arbitrator should decide

allegations of waiver, delay, or a like defense to arbitrability.”

(internal quotation marks omitted)). 

 9

 Indeed, in Buckeye, the validity of the entire agreement –

which contained an arbitration agreement – was challenged, and,

in keeping with the parties’ arbitration agreement, the Supreme

Court held that the matter should be referred to the arbitrator. 

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440,

445-46 (2006). 

11

arbitration agreement, and, in turn, arbitrability, this is correct.8

However, where the issue is “arbitrable,” it violates the very

policy behind arbitration to have the court decide the issue

before referring it to arbitration.9

The majority correctly notes that the Supreme Court has

continuously reinforced a “liberal federal policy favoring

arbitration agreements.” Moses H. Cone Mem’l Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 24 (1983). The majority

also correctly emphasizes that the Supreme Court has made it

clear that courts have only a limited role to play – appropriately

Case: 08-3837 Document: 003110136529 Page: 42 Date Filed: 05/10/2010
12

resolving “[t]he question whether the parties have submitted a

particular dispute to arbitration,” Howsam, 537 U.S. at 83 –

when the agreement between two parties leaves the answer to

that question uncertain. Additionally, the majority appropriately

stresses that what counts as this kind of “question of

arbitrability” is to be construed in a limited fashion, quoting

Howsam:

Linguistically speaking, one might

call any potentially dispositive

gateway question a “question of

arbitrability,” for its answer will

determine whether the underlying

controversy will proceed to

arbitration on the merits. The

Court’s case law, however, makes

clear that, for purposes of applying

the interpretive rule, the phrase

“question of arbitrability” has a far

more limited scope.

537 U.S. at 83. Unfortunately, however, after this careful

presentation of much of the relevant Supreme Court

jurisprudence, the majority fails to appreciate the nuances in the

situation at hand, and, as a result, runs roughshod over the

parties’ agreement to arbitrate. The majority relies on the

Supreme Court’s decision in Doctor’s Associates, Inc. v.

Casarotto, 517 U.S. 681, 687 (1996), but, in doing so, it blurs a

vital distinction between (1) cases in which a party challenges

Case: 08-3837 Document: 003110136529 Page: 43 Date Filed: 05/10/2010
 10 The other two cases cited by the majority are similarly

inapposite. Homa did not discuss what might constitute a

question of arbitrability and simply repeats the language from

Doctor’s Associates. Homa, 558 F.3d at 226. And in Green

Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 89

(2000), the Supreme Court was considering a challenge that an

entire “agreement to arbitrate [was] unenforceable” because the

agreement said nothing about the costs of arbitration. 

13

one term (or a few terms) of an arbitration agreement, but does

not challenge the validity of the entire arbitration agreement and

indeed concedes arbitrability; and (2) cases in which a party

challenges the validity of the entire arbitration agreement. The

Supreme Court’s decision in Doctor’s Associates fits in the

latter category, as the relevant arbitration clause was challenged

in its entirety. Here, we are presented with the former.10

In a similarly problematic vein, the majority asserts that

“[t]he Courts of Appeals are unanimous in recognizing that an

unconscionability challenge to the provisions of an arbitration

agreement is a question of arbitrability that is presumptively for

the court, not the arbitrator, to decide.” Majority Op. at 13

(emphasis added). The majority’s formulation, however, elides

the same crucial distinction: whether the unconscionability

challenge is to a provision of an arbitration agreement or to all

the provisions of an arbitration agreement (i.e., to the arbitration

agreement itself). The majority’s formulation suggests that this

is a distinction without a difference, but the Supreme Court

jurisprudence regarding the appropriate role for courts in this

context tells us otherwise.

Case: 08-3837 Document: 003110136529 Page: 44 Date Filed: 05/10/2010
 11 See supra n.5. 

14

The Supreme Court has been very clear: courts should

not find “questions of arbitrability” except in those cases in

which such questions are clearly and definitely present. See,

e.g., Buckeye, 546 U.S. at 444 (there is a question of arbitrability

only where there is a challenge “specifically” to the validity of

the agreement to arbitrate). Only when a party challenges the

“validity of the arbitration agreement” in toto – whether on

grounds of unconscionability, or some other ground – is

a question of arbitrability presented. The cases cited by the

majority stand for this proposition. The Supreme Court’s

admonition in Howsam, however, makes it clear that courts

should not conclude that parties are challenging the validity of

the entire arbitration agreement unless that is unequivocally the

case. The majority runs afoul of this admonition in assuming

that the Puleos are challenging the “validity of the arbitration

agreement” in toto simply by virtue of challenging the class

action waiver. 

No case cited by the majority supports the proposition

that an unconscionability challenge to a single provision of an

arbitration agreement necessarily raises a question of

arbitrability, particularly where, as here, the party raising the

unconscionability challenge concedes the validity of the rest of

the arbitration agreement and has agreed to go to arbitration.11

As we have stressed, “[a]rbitration is fundamentally a

creature of contract, and an arbitrator’s authority is derived from

an agreement to arbitrate.” Allstate Settlement Corp. v. Rapid

Settlements, Ltd., 559 F.3d 164, 169 (3d Cir. 2009) (internal

Case: 08-3837 Document: 003110136529 Page: 45 Date Filed: 05/10/2010
15

quotation marks and citation omitted). The Supreme Court

recently reaffirmed that it is the parties’ expectations and

intentions that control, and that the parties are generally free to

structure their arbitration agreements as they see fit. StoltNielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. --- , No. 08-

1198, 2010 WL 1655826, at *11-12 (Apr. 27, 2010). Thus, it is

not for us to decide what should and should not be arbitrated.

Here, the parties agreed that “all Claims” should be submitted

to arbitration. The dispute over whether the class action waiver

should be enforced is a claim that the parties agreed to arbitrate.

The District Court should not have decided this issue. Doing so

violated the parties’ agreement. 

CONCLUSION

In order to follow the Supreme Court’s directives in

Howsam, and to give effect to the parties’ agreement to

arbitrate in this case, we should conclude that this challenge

to the class action waiver in the concededly valid arbitration

agreement entered into by the Puleos does not raise an issue

of arbitrability, and should have been referred by the District

Court to the arbitrator.

Case: 08-3837 Document: 003110136529 Page: 46 Date Filed: 05/10/2010