### IN THE UNI TED STAT ES COURT OFAPPEALS FOR THE FIF TH CIRCU IT

No. 11-50509

JEFFREY H. REED, Plaintiff–Appellee
v. FLORIDA METROPOLITAN UNIVERSITY, INCORPORATED; CORINTHIAN COLLEGES, INCORPORATED, Defendants–Appellants

Appeal from the United States District Court for the Western District of Texas

Before KING, BENAVIDES, and DENNIS, Circuit Judges. KING, Circuit Judge: Defendants–Appellants Florida Metropolitan University and Corinthian Colleges appeal the district c o u r t ’ s confirmation of an arbitral award that requires them to submit to class arbitration. They contend that the district court, not the arbitrator, should have decided wheth e r t h e parties’ agreement provided for class arbitration, and that the district court should have vac ated the arbitrator’s class arbitration award. Because the partie s a gr e e d that the arbitrator should decide the class arbitration issue, we conclude that the district court correctly referred that issue to the arbitrator. The d i s t r ict court erred, however, in confirming the award because the arbitrator exceeded his powers. U n i te d S ta te s C o u rt o f A p p ea l s

F i ft h C i rc u i t 

### F I L E D May18 , 20 12 Lyle W . Cayce Clerk Case: 11-50509 Document: 00511860596 Page: 1 Date Filed: 05/18/2012No. 11-50509

W e therefore REVERSE the district court’s order and REMAND for fur t h e r proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND In 2008, Plaintiff–Appellee Jeffrey Reed (“R eed”) enrolled in Everest University Online’s (“Everest”) distance learnin g p rogram, and subsequently 1 obtained a bachelor’s degree in paralegal studies. Reed planned to attend law school upon graduation, and enrolled in Everest after receiving assurances from school officials that the college’s degree would be acc e p t e d by educational institutions and employers. Reed soon discovered, however, th a t law schools would not recognize his bachelor’s degree, nor would the local police department, where he sought employment. Reed accrued more than $51,000 in student loan debt while attending Everest. Dissatisfied with his experience at Everest, Ree d f i l e d a putative class action in Texas s t a t e court, alleging that Defendants–Appellants Corinthian Colleges and Florida M e t r opolitan University (together, the “School”) had violated certain provisions of the Texas Education Code by soliciting students in Texas without the appropriate certifications. Reed sought approximately 2 $51,000 in damages, plus attorney’s fees. Reed defined the putative cla s s as “[a]ny person who contracted to receive distance edu c a t i o n from Everest University Online while residing in Texas.”

Everes t is a brand of De fen dant

– App ellant Corint hian Col l e ges, Inc. 1 De fen dant

–

App ell a n t F l orid a Me tro pol itan Univer sit y, Inc. is a sub sid iary of Corint hian College s.Sp ecif

ical ly, Reed allege d violat ions of Texas Educ atio n Code § 132. 051( a), wh ich 2 requ ires that sc hools not adver tis e or so lici t in Texas until they rec e iv e t h e app rop riat e cer tif icat e of app roval fr om the Texas Wo rk for ce Com mi ss ion, and Texas Educ atio n Code § 132. 059( a), wh ich requ ires em plo yees of car eer sc hools or coll ege s t o r e gi s ter wi th the Com mi ss ion. 2 Case: 11-50509 Document: 00511860596 Page: 2 Date Filed: 05/18/2012No. 11-50509

T h e School removed the action to the district court, and then move d t o compel individual arbitration pursuant t o the arbitration provision of the Enrollment Agreement. The arbitration provision provides, in relevant part: The student agrees that any dispute arising from my enrollment at Everes t U n iversity, no matter how described, pleaded or styled, shall be resolved by binding arbitration under the Federal Arbitration Act conducted by the American Arbitration Association (“AAA”) under its Commercial Rules. The award rendered by the arbitrator may be enforced in any court having jurisdiction.
Terms of Arbitration 1. Both student and Everest University irrevocably agree that any dispute between them shall be submitted to Arbitration.

2. Neither the student nor Everest University shall file or maintain any lawsuit in any court against the other, and agree that any suit filed in violation of this Agreement shall be dismissed by the court in favor of an arbitration conducted pursuant to this Agreement.

. . . 4. The arbitrator’s decision shall be set forth in writing and shall set forth the essential findings and conclusions upon which the decision is based.

5. Any remedy available fr o m a c o u rt under the law shall be available in the arbitration.

. . . Acknowledgment of Waiver of Jury Trial and Availability of AAA Rules By my signature on the reverse, I acknowledge tha t I understand that both I and Everest University are irrevocably waiving rights to a tri a l by jury, and are selecting instead to submit any and all claims to the decision of an arbitrator instead of a court. I understand that the award of the arbitrator will be binding, and not merely advisory.

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The district court granted the S c h o ol’s motion to compel arbitration and stayed the action pending arbitration. It found that a val i d a rb i t r ation agreement existed, that the parties’ dispute was within th e s c o p e of the agreement, and that the arbitration clause was not unconscionable. The district court declined, however, to address whether the parties’ agreement provided for class arbitration, concluding that the issue is “more appropriately decided by the arbitrator.” The case then proceeded before an Americ a n Arbitration Association (“AAA”) arbitrator. Reed m o v e d for a Clause Construction Award under the AAA Supplementary Rules for Class Arbitration, seeking class arbitration. The arbitrator determined that the parties implicitly agreed to class arbitration and entered an award to that effect. Reed then sought to confirm the a rb i t ration

a w a r d i n t h e district court, and the School moved to vacate the award on the basis that the arbitrator exceeded his powers. The School argued that the award conflicted with the recent Supreme Court decisions in Stolt-N i e ls e n S.A. v. AnimalFeeds International Corp ., 130 S. Ct. 1758 (2010), and AT&T Mobility LLC v. Concepcion , 131 S. Ct. 1740 (2011). The district court confirmed the award, finding it to be consistent with recent precedent and a “reasonable interpretation of the contract in light of the [Federal Arbitration Act] and Texas law.” The School appealed. II. DISCUSSION This appeal requires u s to address two issues. Our first task is to determine whether the district court err e d w h e n it allowed the arbitrator to decide whether the parties agreed to class arbitration. Second, we must decide whether the district court properly denied the S c h o o l ’s motion to vacate the arbitrator’s award.

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1. The District Court Properly Referred the Class Ar b i t ration Issue to the Arbitrator The School contends that the district court erred when it allowe d the arbitrator to determine whether the parties’ arbitration agreement allowed for class arbitration, instead of deciding the issue itself. We disagree. The Supreme Court has not definitively decided this issue. In Green Tree Financial Corp. v. Bazzle , 539 U.S. 444 (2003), four Justices concluded that the class arbitration issue did not constitute a “gateway” or arbitrability matter that is g e n e r a lly decided by a court, but was instead a procedural matter for the arbitrator. Id. at 452. In Stolt-Nielsen , the Court confirmed that Green Tree “did not yield a majority decision” on this issue. 130 S. Ct. at 1772. The Stolt-Nielsen Court declined to revisit the question because the parties in that case had agreed to submit the question to the a rb i t r a t o r r ather than the court. Id. At least at the Supreme Court level, therefore, the question remains open. 3 According to the School, the district court should have resolved the class arbitration issue because the parties expressly submitted that issue to the court for resolution. We disagree. Reed’s opposition to the School’s motion to compel arbitra t i o n was restricted largely to issues of the applicability and unconscionabil i t y o f t h e arbitration clause. Reed, in fact, requested that the court “find that no valid, enforceable arbitration agreement exists, and that Plaintiff may proceed with this cas e b e f ore [the district court].” Reed’s discussion of class arbitration came only when he argued that requiring

In Pedco r Ma nagem ent Co., Inc. Wel fa re Benefi t Plan v. Natio ns Pers onnelof Texas, 3 Inc. , 343 F.3d 355 (5t h Cir. 2003) , a pane l of this cour t held that the clas s arbit rat ion dec isi on sho uld be made by an arbit rat or rather than a cour t. The Pedco r pane l pr em ise d its dec isi on upon Green Tre e , wh ich it inte rp ret ed to hold that clas s arbit rat ion det erm inati ons “s hould be for the arbit rat or, not the cour ts , to dec ide .” Id. at 359. The Sup rem e Court in Stolt- Ni elsen , how ever, em phas ized that , on this poi nt, Green Tre e wa s only a plur alit y dec isi on. 130 S. Ct. at 1772. Becaus e the par tie s here cons ente d to the Sup ple me ntar y Rules , and ther efo re agree d to sub mi t the clas s arbit rat ion iss ue to the arbit rat or, we nee d n ot and do not revis it this iss ue. 5 Case: 11-50509 Document: 00511860596 Page: 5 Date Filed: 05/18/2012No. 11-50509

individual arbitration would render the arbitration agreement unconscionable. Al th o u gh Reed argued that the case should proceed as a class even if it wer e referred to arbitra t i o n , h e did so only in response to the School’s motion to compel arbitration. Nor did the district court understand Reed to make a class arbitration argument. It summarized, “Reed

. . . argues that his claims are not within the scope of the arbitration agreement, that Defendants are not parties to the arbitration agreement, that Texas law makes the arbitration agreement unenforceable, and that the arbitration agreement is illusory and unconscionable, and thus un e n f o r ceable.” Indeed, as Reed sought to avoid arbitration altogether and to proceed as a class action, we cannot conclude that he intended to submit the class arbitration issue to the district court. We now turn to the arbitration rules to which the parties agreed. As noted above, the parties explicitly agreed to adopt the AAA’s Commercial Rules when they entered int o t heir agreement in 2008. These rules do not contain class arbitra t i o n procedures; rather, such procedures are provided in the separate Supplementary Rules for Class Arbitration, which were enacted in October 2003

a fter the Supreme Court’s Green Tree decision. See Stolt-Nielsen , 130 S. Ct. a t 1765 (discussing development of Supplementary Rules). Shortly before it issued the Supplementary Rules, the AAA explained, “[t]he Association’s various rules

a r e s i lent on the issue of class arbitration and the Association has taken n o position on the availability of class arbitrations. To accommodate these types of
cases, the Association has commenced drafting supplementary rules that will govern the Association’s administr a tion of class arbitrations.” AAA Policy Statement, available at http://www.adr.or g/index2.1.jsp?JSPssid=1575 3& JSPaid=43425

. By their terms, these Suppleme nt ary Rul e s ap p ly “to any dispute arising out of an agreement that provides for arbitration pursuant to any of the rules of the American Arbitration Association (‘AAA’) where a party submits a dispute to arbitration on behalf of or against a class or purported class, and shall

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supplement any other applicable AAA rules.” Suppl. R

. 1 ( a). They also apply “whenever a court refers a matter pleaded as a class action to the AAA for administration.” Id. Commentators and AAA arbitral tr ib unals have consistently concluded that consent to any of the AAA’s substantive rules also constitutes consent to the Supplementary Rules. A major arbitration treatise concludes that “[t]hese AAA 4 Suppleme nt ary Rules for Class Arbitrations

. . . supplement any other applicable AAA rules. For example, if a dispute that otherwise would be arbitrated under the Commercial Arbitration Rules involves a pu r p orted class, then the proceeding is governed by both the AAA Commercial Arbitration Rules and the A A A Supplementary Rules for Class Arbitrations.” Thomas H. Oehmke, 1 C O M M E R C IA L AR B I T RAT I O N § 16:16 (Apr. 2012). The few courts to have c o n s idered this issue have agreed. See Bergman v. Spruce Peak Realty, LLC, No. 2:11-CV127, 2011 WL 5523329, at * (D. Vt. Nov. 14, 2011) (relying upon Supplementary Rules when referring class arbitra t i o n i s sue to the arbitrator, where parties agreed to “the Commercial Arbitration Rules of the AAA”); S. Commc’ns Servs., Inc. v. Thomas , __ F

. Supp. 2d __, 2011 WL 5386428, at *10 (N.D. Ga. Nov. 3, 2011) (holding that AAA Wireless Industry Arbitration Rules “i n c orporate the AAA Supplementary Rules for Class Arbitrations, which gave the arbitrator the
power to decide whether the Arbitration Clause impli c i t l y authorized class

On e arbit ral tribunal conf ront ed wi th this iss ue conc lude d that the Sup ple me ntar y 4 Rules app lied to an arbit rat ion com me nced i n 2 0 0 4 , even thou gh the partie s’ arbit rat ion agree me nt—wh ich wa s governe d by “th e Rules of the Ame ric an Arbit ration Ass ocia tio n”—wa s signe d app roxim atel y five years bef ore the Sup ple me ntar y Rules we re enac ted

. See Pres ide nts and Fel low s of Ha rv ar d College v. JSC Surgutnef tegaz , 770 PLI/Lit. 127, 135 n.5 (200 8). The pane l, relyi ng upon Sup ple me ntar y Rule 1, expla ined , “[ s] ince t h e AAA rule s app ly here—s om ethi ng clea r on the fac e of the [p art ies ’] Agreem ent—the Sup ple me ntar y Rules als o ap p l y . ” Id. On e me mbe r of the pane l dis se nted fr om this conc lus ion, reas oning that the Supp lem enta ry Rules coul d not be inco rp orat ed into the par tie s’ arbit rat ion claus e beca use the Sup ple me ntar y Rules did not exis t at the tim e the par tie s ente red into thei r agree me nt. Id

. at 170 (Zyk in, d iss enti ng). 7 Case: 11-50509 Document: 00511860596 Page: 7 Date Filed: 05/18/2012No. 11-50509

proceedings”); Yahoo! Inc. v. Iversen , __ F. Supp. 2d __, 2011 WL 4802840, at *4 (N.D. Cal. Oct. 11, 2011) (holding that parties’ agreement to AAA National Rules for the Resolution of Employment Disputes also constituted agree m e n t t o the Supplementary Rules). Consistent with these authorities, we conclude that the parties’ agreement to the AAA’s Commercial Rules a l s o constitutes consent to the Supplementary Rules. 5 With this conclusion, we now turn to the substance of the Supplementary Rules. Under Supplementary Rule 3, “the arbitrator shall d e t e rmine as a threshold matter

. . . whether the applicable arbitration clause p e r m its the arbitration to proceed on beha l f o f o r against a class

. . . .” AAA Suppl. R. 3 (emphasis added). The parties’ consent to the Supplementary Rules, therefore, constit u t e s a clear agreement to allow the arbitrator to decide whether the party’ s a greement provides for class arbitration. As such, we need not determine whether, in the absence of such an agreement, the threshold matter of bilateral or class arbitration should be decided by a court or an arbitrator. 6 I n light of the foregoing, we conclude that the distric t c o u r t c o r r e c t l y

r e f e r r e d the class arbitration issue to the arbitrator. We now must decide whether the district court properly confirmed the arbitrator’s class arbitration award.

In so hold ing, we n o t e that the par tie s have never sp ecif ical ly dis put ed the 5 app licabilit y of the Sup ple me ntar y Rules

. The Scho ol, in its mo tio n to vacat e the claus e cons tru cti on aw ard , in fac t rep res ente d to the dis tri ct cour t that it had agree d to thos e Rules

. See R

. 3 41 (“ The AAA rule s to wh ic h these pa rtie s agre ed pr ovide that a claus e cons tru cti on aw ard wo uld be subject to a mo tio n to vacat e . . . .” ) (c itin g Sup ple me ntar y Rule 3) (em phas is add ed)

. The p a r t i e s ’ a dop tio n of the AAA Com me rci al Rules and the Sup ple me ntar y Rules

6
canno t, how ever, be cons ide red in dec idi ng wh ethe r they agree d to arbit rat e as a clas s. See AAA Sup pl. R. 3 (“ In c o n s t ruing the app licable arbit rat ion claus e, the arbit rat or sha ll not cons ide r the exis tenc e of thes e Sup ple me nt ary Rules , or any othe r AAA rule s, to be a fac tor eit her in favorof

oragai nstp erm itt ing t he arbit rat ion to pr oce ed on a c las s bas is. ”)

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2. The District Court Erred in Confirming the Arbitration Award After a hearing, the arbitrator issued an award in w h i c h h e determined that the parties’ arbitration provision allowed for class arbitration. The district court granted Reed’s motion to confirm the award and denied the School’s crossmotion to vacate the award. The School contends that the arbitration award is inconsistent with Stolt-Nielsen , and that the arbitrator exceeded his authority by ordering the parties into class arbitr a t i o n w ithout a sufficient contractual basis. Reed responds that the award is compatible with Stolt-Nielsen , and that the exceedingly deferential standard of review applicable to arbitration awards precludes us from vacating the award. For the reasons discussed below, we agree with the School and conclude that the district court erred in failing to vacate the award pursuant to the Federal Arbitration Ac t ( “ FAA”), 9 U.S.C. § 10(a)(4). A. Standard of Review Our review of the district court’s confirmati o n of an arbitral award is de

n o v o , “ u s ing the same standard as the district court.” DK Joint Venture 1 v. Weyand , 649 F.3d 310, 314 (5th Cir. 2011). Because we have concluded that the district court properly referred the class arbitration issue to the arbitrator, our review of the arbitration award itself is governed by the FAA. Under the FAA, 7

a party to an arbitration may apply to a court for an order confirming an arbitration award, and the court “must grant such an order unless the award is vacated, modified, or c o r r e c t e d

. . . .” 9 U.S.C. § 9. Section 10 of the FAA lists

The Scho ol cont ends that de novo revie w of the aw ard is pr ope r b ecau se the clas s 7 arbit rat ion iss ue is one of arbit rabil ity that sho uld have been cons ide red by the dis tri ct cour t. Becaus e w e h ave c oncl udedt hat the pa rti es agreedto s ubm it the iss ue to the arbit rat or, w e need not cons ide r wh ethe r clas s arbitra tio n cons tit utes an arbit rabil ity iss ue. Nor wo uld the arbit rabil ity det erm inati on nece ss aril y be conc lus ive, as par tie s may agree to sub mi t arbit rabil ity ques tio ns to an a rbit rat or. Se e Rent-A- Center, Wes t, Inc. v. Jac kson , 130 S. Ct

. 2772, 2777 (201 0) (“We have rec ognized that par tie s can agree to arbit rat e ‘gate wa y’ ques tio ns of ‘arbitr abilit y ’

. . . .” ) (c itin g Ho ws am v. De an Witters Reyn olds, Inc. , 537 U. S. 79, 83-8 5 (200 2))

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four grounds upon which to vac a t e an award, the last of which allows for vacateu r “w h ere the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C. § 10(a)(4). Of the various grounds for vacating an arbitral award provided in Section 10, this fourth ground has received the most attention. In Wilko v. Swan , 346 U.S. 4 2 7 (1953), overruled on other grounds by Rodriguez de Quijas v. Shearson/American Express, Inc. , 490 U.S. 477 (1989) , the S u preme Court explained that the “[p]ower to vacate an award is limited,” but an arbitrator’s failure to decide a case in accordance with the applicable law may co n s t i t u t e grounds for vacating the award if that failure is “made clearly to appear.” Id

. at 436. On several occasions, the Court has considered whe t h e r a lower court proper l y s e t aside an arbitrator’s interpretation of a collective bargaining agreement or other contract. The Court has consistently made clear that a court may not d e c l ine to enforce an award simply because it disagrees with the arbitrator’s legal reas o n i n g
. See, e.g. , Major League Baseball Players Ass’n v. Garvey , 532 U.S. 504, 509 (2001); E. Associated Coal Corp. v. United Mine Workers of Am. , 531 U.S

. 5 7 , 62 (2000). Nevertheless, an arbitrator’s award is not entirely beyond reproach: [A]n arbitrator is confined to interpretation and a p p l i cation of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice. He may of course look for guidance from many sources, yet his award is legitimate only as long as it draws its essence from the collective bargaining agreement

. Wh en the arbitrator’s words manifest an infidelity to t h i s obligation, courts have no choice but to refuse enforcement of the award. United Steelworkers of Am. v. Enter. Wheel & Car Corp. , 363 U.S. 593, 5 9 7 (1960) (emphasis added). In United Steelworkers , the Court explained that “[i]t 8

Wehaveexplaine d thatan arbitr ator ’sawar d “d raw s its es se nce” f romt he cont rac t 8 wh ere the a w a r d “ha[ s] a bas is that is at leas t rat ionall y infe rable , if not obvious ly dr aw n, 10 Case: 11-50509 Document: 00511860596 Page: 10 Date Filed: 05/18/2012No. 11-50509

is the arbitrator’s construction [of the contract] which was bargained for; and so far as the arbitrator’s decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from hi s . ” I d

. a t 599. This principle was echoed in United Paperworkers International Union v. Misco, Inc. , 484 U.S. 29 (1987), where the Supreme Court again discussed the limited role of a court in reviewing an arbitrator’s in t e r p r e t ation of a contract. The Court explained that “[t]he arbitrator may not ignore the plain language of the contract; but the parties having authorized the arbitrator to give meaning to the language of the agreement, a court should not reject an award on the ground that the arbitrator

m i s r e a d the contract.” Id. at 38. Thus, “as long as the arbitrator is e v e n arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision.” Id. The Supreme Court’s recent decision in StoltNielsen , 130 S. Ct. 1758 (2011), which we discuss further below, reaffirmed this exceptionally deferential standard of review. See id. at 1767-68. Consistent with this precedent, we have recognized that “judicial review of an arb itr atio n award is extraordinarily narrow” and “exceedingly deferential.” Rain CII Carbon, LLC v. ConocoPhillips Co. , __ F.3d __, 2012 WL 753263, at *2 (5th Cir. Mar. 9, 2012) (citation and internal quotation marks omitted). We will therefore not set aside an award for “a mere mistake of fact or law.” Id. (citation

a n d i nternal quotation marks omitted); see also Apache Bohai Corp. LDC v. Texaco China BV

, 480 F.3d 397, 401 (5th Cir. 200 7).

fr omt he let terorp urp os e o f the

. . . agree me nt.

. . . [T] he aw ardm ust , in so melo gical wa y, be der ived f

romthe wo rd ing or purp os e of the cont rac t. ” Ande rm an/ Smi th Op era ting Co. v. Tenn

. Gas Pip el ine Co. , 918 F.2d 1215, 1218 (5t h Cir. 1990) (c itat ions and inte rnal quot atio n mar ks om itt ed) (a l t e r a t i o n i n origi nal) ; see also Exec utone Info. Sys. , Inc. v. Da vi s , 26 F.3d 1314, 132 0 ( 5th Cir. 199 4). 11 Case: 11-50509 Document: 00511860596 Page: 11 Date Filed: 05/18/2012No. 11-50509

B. The Arbitrator Exceeded his Powers With this understanding of our limited review, we now consider whether the arbitrat o r i n this case exceeded his powers when he concluded that the parties’ a gr e ement permitted class arbitration. Because we find that the

arbitrator forced the parties into class arbitration without a contractual basis for d o i n g so, we conclude that the arbitrator exceeded his powers and that the award must be vacated.

i. Stolt-Nielsen This appeal comes before us in the wake of the S u p r e m e Court’s recent decision in Stolt-Nielsen , 130 S. Ct. 1758 (2010). In that case, Stolt-Nielsen and AnimalFeeds had entered into an agreement for the shi p ment of goods. The parties’ agreement contained an arbitra t i on provision that provided in part: “[a]ny dispute arising fro m the making, performance or termination of this C h a r t e r P a rty shall be settled in New York

. . . . Such arbitration shal l b e conducted in conformity with the provisions and procedure of the United States Arb itration Act [ i.e. , the FAA], and a judgment of the Court shall be entere d upon any award made by said arbitrator.” Id. at 1765. After a Department of Justice criminal investigation revealed that Stolt-Nielsen was engaged in an illegal price-fixing conspiracy, AnimalFeeds brought a putative class action in federal court. Id

. AnimalFeeds subsequently s e rv e d Stolt-Nielsen with a demand for class arbi t r a t i o n , and the parties agreed to submit the class arb i t r a t i o n question to a panel of three arbitrators. Id. The parties also stipulated that their agreement was “silent” with respect to class arbitration, meaning that they had reached “no agreement” on the issue. Id. at 1766. The arbitrators concluded that the parties’ agreement provided for class arbitration. On Stolt-Nielsen’s motion, the district court vacated the award, but the Second Circuit reversed. Id.

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O n ap p e al , th e Supreme Court held that the district court properly v ac at e d the award. The Cou r t f i rst reemphasized that a party seeking vacateur must “clear a high hurdle,” as it is “not enough for petitioners to show that the panel committed an error—or even a seriou s e r r o r .” Id. at 1767. As the Court explained, “[i]t is on l y where [an] arbitrator strays from interpretation and application of the agreement and effectively dispense[s] his own brand of industrial justice that his decision may b e unenforceable.” Id. (citations and internal quotation marks omitted). Where that happens, an arbitration award may be vacated on the basis t h a t t h e arbitrator exceeded his powers, “for the task of an arbitrator is to in t e r p r e t a n d enforce a contract, not to make public policy.” Id. The Court explained that, because the part ies stipulated that their agreement was sile n t o n class arbitration, the arbitrators’ “proper task was to identify the rule of law that governs,” presumably “the FAA itself or to one of the two bodies o f l a w t h at the parties claimed were governing, i.e. , either federal maritime law or New York law.” Id. at 1768. However, i n s t e a d o f “inquiring whether the FAA, maritime law, or New York law contains a ‘default rule’ under whi c h a n arbitration clause is construed as allowing class arbitration in the

ab s e n ce of express consent, the panel proceeded as if it had the authority o f a common-law court to develop what it viewed as the best rule to be appl i e d in such a situation.” Id. a t 1 7 6 8

- 6 9. The arbitrators perceived a consensus favoring class arbitration, and considered only whether there was a “good reason not to follow that consensus.” Id. at 176 9

. Finding no such reason, the 9 arbitration panel determine d t hat the parties’ agreement permitted class

In this res pec t, the Court faul ted the arbit rat ors for dis count ing expe rt evide nce that 9 bilat eral rat her than clas s arbit rat ion wa s cus tom ary in mar itim e agree me nts

. The Court als o expla ined that , “[u]nd er both New Yo rk law and genera l mar itim e law , evide nce of ‘cus tom and usa ge’ is rele vant to de t e r m i n i n g the par tie s’ inte nt wh en an expr es s agree me nt is amb iguous .” Stolt- Ni elsen , 130 S. Ct

. at 1769 n.6. 13 Case: 11-50509 Document: 00511860596 Page: 13 Date Filed: 05/18/2012No. 11-50509

arbitration. The Court conclu d e d t h a t “the panel simply imposed its own conception of sound policy,” and thereby exceeded its powers. Id. Finding that there was only one possible outcome—bilateral arbitration—the Court vacated the award and declined to direct a rehearing by the arbitrators. Id. at 1770. The Court then addressed the “standard to be applied by a decision maker in determining whether a contract may permissibly be interpreted to allow class arbitration,” a question left undecided by G re e n Tree

. Id. at 1772. The Court based its analysis on the FAA’s b a sic precept that arbitration “is a matter of consent, not coercion.” Id. at 1773. In this respect, p a rties are “generally free to structure their arbitration agr e e m e n ts as they see fit,” and to “specify with whom they choose to arbitrate their disputes.” Id. at 1774 (emphasis in original) (citations and internal quotation marks omitted). As such, the Court held that “a party may not be compelled u n d e r the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Id. at 1775 (emphasis in original). The a rb i t r a t o r s had erred by “impos[ing] class a rb itration even though the parties concurred that they had reached ‘no agreement’ o n t h a t issue.” Id. In fact, the panel had faulted the parties for failing to preclude class arbitration, and “reg a rded the agreement’s silence on the question of class arbitration as dispositive.” Id

. This conclusion, the Court found, was “fundamentally at war with the foundational FAA principle that arbitration is a matter of consent.” Id. In so deciding, the Court explained that arbitrators may properly presume authorization to impose certain procedural requir e ments, but “[a]n implicit agreement to auth o r i z e c lass-action arbitration

. . . is not a term that the arbitrator may infer solely from the fact of the parties’ agreement to arbitrate.” Id. This is so, the Court explained, “because class-action arbitration changes the nature of the arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator.” Id

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Th e C o urt th e n described several fundamental differences between bilateral and

c l a s s a rbitration. For example, in class arbitration, the arbitrator “no longe r resolves a single dispute between the parties to a single agreement, but instead

re solves many disputes between hundreds or perhaps even thousands of
p arti e s , ” an d th e presumption of privacy and confidentiality that applies in m any bilateral arbitrations would not apply in cl a s s a rbitrations. Id. at 1776. Further, “[t]he arbitrator’s award no longer purports to bind just the parties to

a single arbitration agreement, but adjudicates the rights of absent partie s as well.” Id. Additionally, although the stakes are similar to those in class action litigation, “the scope of judic i a l r e vi e w is much more limited.” Id

. The Court

e xplained that these differences and disadvantages “give reason to doubt th e parties’ mutual consent to resolve disputes through class-wide arbitration.” Id. at 1775-76. The Court therefore concluded that “the d i fferences between bilater a l and class-action arbitration are too great for arbitrators to presume, consistent with their limited powers under th e FA A , t hat the parties’ mere

s ilence on the issue of class-action arbitration constitutes consent to r e s o lve th e ir disputes in class proceedings.” Id

. at 1776. In light of these “crucial differences,” the majority saw the question as “being whether the parties agreed to authorize class arbitration.” I

d

. (emphasis in original). Because the parties had agreed that their contract w a s s i l e n t on the subject, they could not be “compelled to submit their dispute to class arbitration.” Id. The Court, however, declined to “decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration,” in light of the parties’ stipulation of silence. Id. at 1776 n.10. Justice Ginsburg, joined by Justices Stevens and Breyer, dissented. The dissent criticized the majority for not affording the arbitration award the proper deference. Because the parties had agreed to submit the class arbitration issue to the arbitrators, the arbitrators did not exceed their authority in resolving the

15 Case: 11-50509 Document: 00511860596 Page: 15 Date Filed: 05/18/2012No. 11-50509

dispute. Id. at 1780 (Ginsburg, J., dissenting). Rather, they properly addressed the “procedural mode available for presentation of AnimalFeeds’ antitrust claims.” Id. at 1781. The Supreme Court reiterated many of the same concerns regarding class arbitration a year later in Concepcion , 131 S. Ct. 1 7 4 0 (2011), wherein it held that a state law prohibiting class action waivers in arbitration agreements was preempted by the FAA. Id. at 1753. In so h o lding, the Concepcion Court explained that class a rbitration “includes absent parties, necessitating additional and different procedures and involvin g hi gh e r s t ak e s. Confidentiality becomes more difficult. And whil e i t is theoretically possible to select an

a rb itrator with some expertise relevant to the class-certification question , arbitrators are not generally knowledgeab l e in the often-dominant procedural aspects of certificat i o n . . . .” Id. at 1750. The Court also emphasized that arbitral awards are subject to limited appellate review, and raised concerns that defendants might feel increased pressure to settle questionable cla i m s w h e n confronted with class arbitration. Id. at 1752. Given these disadvantages, the Court found “it hard to believe that defendants” would agree to class arbitration and thereby “bet the company with no effective means of review.” Id. As such, Concep c io n held that “class arbitration, to the extent it is manufactured by [state law] rather than consensual, is inconsistent with the FAA.” Id. at 1751-52. Therefore, in light of the significant disadvantages of class arbitration as discussed in both Stolt-Nielsen and Concepcion , an arbitrator (or a court) should not conclude that parties—and defendants in particular—consented to such a proceeding absent a contractual basis for doing so. Although the agreement to submit to class arbitration may be implicit, it should not be lightly in f erred. 1 0

This unde rs tan d i n g i s cons ist ent wi th Texas law , wh ich pr ovide s: “[ F]or a cour t to 1 0 read a dd itio nal pr ovis ions into [a] cont rac t, the im pli cat ion mus t clea rly aris e fr om the language use d, or be indi sp ens able to eff ect uate the inte nt of the par tie s. It mus t app ear that 16 Case: 11-50509 Document: 00511860596 Page: 16 Date Filed: 05/18/2012No. 11-50509

See 130 S. Ct. at 1775; id. at 1782 (Ginsburg, J. dissenting) (“The breadth of the arbitration clause, and the absence of any provision waivi ng or banning class proceedings, will not [support class arbitration].”) (footnote omitted); id. at 1783 (“[T]he Court does not insist on express consent to class arbitration.”); see also Christopher R. Drahozal & P e t e r B

. Rutledge, Contract and Procedure , 94 MAR Q

. L. R E V

. 1103, 1151 (2011) (“[In Stolt-Nielsen], [t]he Supreme Court held that the d e f a ult rule is that class arbitration is not permitted, explaining that cla s s arbitration is sufficiently different from individual arbitration that the parties must agree as a contractual matt e r t o override that default rule.”); Terry F. Moritz & Brandon J. Fitch, The Future of Consumer Arbitration in Light of StoltNielsen, 23 L O Y

. C O N S U M E R L. R E V

. 265, 270 (2010) (“ Stolt-Nielsen seems to signal the end of inferre d c l ass arbitration

. . . . A court cannot compel class arbitration without a contractual basis for concluding that the parties agreed to it; and presumably no potential defendant would agree to it.”). In the absence of a contractual agreement, an arbitrator should inquire into “whether the FAA, [or s t a te law] contains a ‘default rule’ under which an arbitration clause is construed as allowing class arbitration,” instead of simply “dev e l o p [ing] what [he] view[s] as the best rule to be applied in such a situation.” Stolt-Nielsen , 130 S. Ct. at 1768-69. Without a contractual or other legal basis for class arbitration,

an arbitrator has no authority to order the parties to submit to class arbitration. See Concepcion , 131 S. Ct. a t 1 7 5 0 ( “In [ Stolt-Nielsen] we held that an arbitration panel exceeded its powers under § 10(a)(4) of the FAA by imposing

c l a s s procedures based on policy judgments rather than the arbitrati o n agreement itself or some background principle of contract law that would affect its interpretation.”); see also United Steelworkers ofAm. v. Enter. Wheel and Car

the im pli cat ion wa s soc lear ly c onte mp late d by the par tie s thatt hey d eemitunn ece ss ary to expr es s it. ” Fuller v. Phi ll ip s Petroleum Co. , 872 F.2d655, 658 (5t h Cir. 1989) ; seeDanc iger Oi l & Ref. Co. of

T ex. v . Pow el l , 154 S. W.2 d 632, 635 (Tex. 1941)

. 17 Case: 11-50509 Document: 00511860596 Page: 17 Date Filed: 05/18/2012No. 11-50509

Corp. , 363 U.S. 593, 597 (1960) (stating that an arbitrator’s award is “legitimate only as long as it draws its essence” from the contract). With this under s t a n d ing of Stolt-Nielsen , we now turn to whether the arbitrator in this case exceeded his powers by ordering the parties to submit to class arbitration. ii. Arbitrator’s Award In his award, the arbitrator began by acknowledgi n g t h at the class arbitration issue presented a “close case,” and was primarily governed by StoltNielsen

. After determining that t h e FA A a n d Texas law applied, he then 1 1 focused on two provisions of the parties’ arbitration agreement: (1) the “ a ny di s p ut e” p rovi s io n , which provides, “[t]he student agrees that any dis p ut e ari s in g from my enrollment at Everest University, no matter how described, pleaded or styled, shall be resolved by binding arbitration under the Federal Arb itration Act conducted by the American Arbitration Association

. . . under its Commercial Rules;” and (2) the “any re m e dy” provision, which provides, “[a]ny remedy available from a court under the law shall be available in the arbitration.” The arbitrator concluded that, “[w]hen these two provision[s] are read in the context of the entire Agreement, the [School] implicitly agreed to class arbitration,” and there was a sufficient “‘contractual basis’ for class arbitration.” The arbitrator based his conclusion in part upon Section 132.121(a) of the Texas Education Code, which provides f o r c l a s s action litigation to address certain violations of the Education Code. He reasoned that, if the arbitration clause had not been included in the contract, then the School “would have c l e arly been required to submit to a class action lawsuit.” While he acknowledged that this provision of Texas law was not controlling, he explained that it is “not inconsistent with the FAA,” and it “provides guidance in interpreting the contract language agreed to

Thep art iesagr eedt hat Texasla w governe d. 1 1 18 Case: 11-50509 Document: 00511860596 Page: 18 Date Filed: 05/18/2012No. 11-50509

by the Parties.” The arbitrator also relied upon the School’s failure to expressly ban class arbitration, reasoning that the School “drafted the Agreement in question,” and they “could have clearly set forth that class arbitration was barred if they so chose,” but they “chose not to do so.” Upon our deferential review of the award, we conclude that the arbitrator

ex c e e d ed his authority by ordering the parties into class arbitration without a sufficient basis for concluding that the parties agreed to resolve their dispute in t h i s manner. Stolt-Nielsen , 130 S. Ct. at 1775. Although the parties her e d i d not stipulate that their agreement was silent on class arbitration, u n l i k e the parties in Stolt-Nielsen , Reed admitted before the arbitrator that “t h e p a r ties clearly did not discuss whether class arbitration was authorized,” and that “[t]he arbitration agreement at issue here fails to address class arbitration.” In light of these concessions, the arbitrator should have consulted state or federal law to determine if a certain “default” clas s a rb i t ration rule existed in the absence of

an agreement. Id. at 1770. Instead, the arbitrator focused upon the terms of 1 2 the parties’ contract. None of the provisions the arbitrator identified, however, even remotely relates to or authorizes class arbitration. First, the arbitrator improperly relied upon the “any dispute” clause of the arbitration agreement. The “any disput e ” c l a u s e is a standard provision that
may be found, in one form or another, in many arbitration agreements. See Stolt-Nielsen , 130 S. Ct. at 1765 (arbitration agreement provided: “[a]ny dispute arising from the making, performance or termination of this Charter Party shall be settled [by arbitration]”); Jock v. Sterling Jewelers Inc. , 646 F.3d 113, 116 (2d Cir. 2011) (a rb i t r ation agreement provided: “I hereby utilize the Sterling

The par tie s do not pr ovide any suc h “d efa ult rule” unde r fed eral or Texas law , nor are 1 2
we aw are of suc h a rule

. Th e Texas Ge nera l Arbit rat ion Act mak es no ref ere nce to clas s arbit rat ion. See T EX

. C IV

. P R AC

. & R E M

. C ODE ANN

. § 171. 001 et seq . The FAA als o has no suc h def ault rule

. 19 Case: 11-50509 Document: 00511860596 Page: 19 Date Filed: 05/18/2012No. 11-50509

RESOLVE [arbitration] program to pursue any dispute, claim, or contr o versy

. . . against Sterl i ng”); Complaint of Hornbeck Offshore (1984) Corp. , 981 F.2d 752, 755 (5th Cir. 1993) ( explaining that “any dispute” clauses are very broad, and collecting cases involving suc h c l auses); see also American Arbitration Association, Drafting Dispute Resolution Clauses: A Practical Guide 7 (Sept. 1, 2007) (suggesting following clause: “[a]ny controversy or claim arising out of or relating to this contract

. . . shall be settled by arbitration”); JAMS ADR Clauses, available at www.jam sadr.com/clauses/#Standard (suggesting the following clause: “[a]ny dispute, claim or controversy arising out of or related t o t h i s Agreement . . . shall be determined by arbitration . . . .”). On its face, the “any dispute” clause merely reflects a n a gr eement between the parties to arbitrate their disputes. Stolt-Nielsen makes clear, however, that an “implicit agreement to authorize class-arbitration

. . . is not a term that t h e arbitrator may infer solely from the fact of the parties’ agreem e n t t o a r b i t rate .” 130 S. Ct. at 1775 (emphasis added). This clause is therefore not a valid contractua l b asis upon which to conclude that the parties agreed to submit t o class arbitration. See, e.g. , Christopher R. Drahozal & Peter B. Rutledge, Contract and Procedure , 94 MAR Q

. L. R E V

. 1103, 1155 (2011) (arguing that a class arbitration award based
upon an “any dispute” clause would be “insuffici e n t” under Stolt-Nielsen , and stating that “[a] general arbitration clause, according to the Stolt-Nielsen Court, d oes not authorize class arbitration because class arbitration differs too m u c h from individual arbitration”). Second, the arbitrator’s reliance upon the “any remedy” clau s e w a s also improper. The “any remedy” clause, which merely allows the arbitrator to grant any “remedy available from a court under the law,” says nothing w h a t s o e ver about class arbitr a t i o n , and does not constitute an “agree[ment] to authorize class arbitration.” Stolt-Nielsen , 130 S. Ct. at 1776 (emp h a s i s omitted). A “remedy” is “an ything a court can do for a litigant who has been wronged or is

20 Case: 11-50509 Document: 00511860596 Page: 20 Date Filed: 05/18/2012No. 11-50509

about to be wronged.” B LA C K’ S LAW D I C T I O NARY 1320 ( 8 t h e d

. 2 0 0 4); see also Knapp, Stout & Co. v. McCaffrey , 177 U.S. 638, 644 (1900) (“A remedy is defined

. . . as the me a n s employed to enforce a right, or redress an injury.”) (internal quotation marks omitted). Remedies may include, for example, equitable relief such as an injunction or restitution, or legal relief such as monetary damages. See Mertens v. Hewitt Assocs. , 508 U .S. 248, 255 (1993). In contrast, we have characterize d a c lass action as “a procedural device.” Blaz v. Belfer , 368 F.3d 501, 505 (5th Cir. 2004); see also Sw. Refining Co. v. Bernal , 22 S.W.3d 425, 437 (Tex. 2000) (“The class action [under Texas Rule of Civil Procedure 4 2 ] i s a procedural device inte n d e d to advance judicial economy by trying claims together that lend themselves to collective treatment.”). Thus, while a class action may lead to certain types of remedies or relief, a class action is not itself

a remedy. See Jock , 646 F.3d at 132 (Winter, J., dissenting) (“My colleagues also rely upon the provision in the present agreement that the arbitrator may award any legal or equitable relief generally available in courts. Clearly, this provision refers only to relief in the form of an award based on a vi o l a t i o n of law or contract —damages, injunctions, etc.—and not to the availability of procedures used to pursue such relief. A class can be certified and yet not get ‘relief,’ i.e. it may lose.”). The arbitrator concluded that class arbitra t ion was a potential remedy here because Section 132.121(a) of the Texas Education Code allows for class action lawsuits to address violations of the Code. Even aside from the fact that

a class action cannot properly be considered a “remedy” u n d e r s t ate or federal law, Section 132.121(a) addresses only class action litigation in state court, and does not support the conclusion that the parties agr e e d to class arbitration. Indeed, the central purpose of the arbitrat i o n a gr eement is to avoid such provisions of state law, not to incorporate them into the arbitration agreement. In other words, the mere fact that the parties would otherwise be subject to class

21 Case: 11-50509 Document: 00511860596 Page: 21 Date Filed: 05/18/2012No. 11-50509

a c t ion in the absence of an arbitration agreement is not a sufficient basis to conclude th a t t hey agreed to class arbitration when they entered into an arbitration agreement. Nor can the Texas Education Code class action provision be considered “a ‘default rule’ under which an arbitration clause is construed as allowing class arbitration in the absence of express consent.” Stolt-Nielsen , 130 S. Ct. at 1768-69. Finally, the arb itr ato r e rro n e o u s ly b a s e d hi s c o nclu s io n on the agreement’s silence with respect to class arbitration. The arbitrator suggested that the School, as the drafter of the agreement, had an obligation to affirmatively state that the agreement precluded class arbitration. This rationale, however, is directly contrary to Stolt-Nielsen ’s holding that arbitrators should no t “presume, consistent with their limited powers under the FAA, that t h e p a r ties’ mere silence

. . . constitutes consent” to class arbitration. Id. at 1776. Stolt-Nielsen requires that the parties “agree[] to authorize” class arbitration, not merely that they fail to bar such a proceeding. Id. (emphasis omitted). We conclude, therefore, that the arbitr ato r l acked a contractual basis upon which to conclude that the parties agreed to authorize class arbitration. At most, the agreement in this case could support a finding that the parties did not preclude class arbitration, but u nder Stolt-Nielsen this is not enough. The arbitrator therefore exceeded his authority in ordering the parties to submit to

a class arbitration proceeding, and the district court should have vacated the award. 9 U.S.C. § 10(a)(4); see Stolt-Nielsen , 130 S. Ct. at 1776. The Second Circuit, applying Stolt- N i elsen , has come to a different conclusion. In Jock v. Sterling Jewelers Inc. , 646 F.3d 113 (2d Cir. 2011), cert.

1 3

The Third Circ uit has als o rec entl y add res se d this iss ue. See Sutter v. Ox for d He al th 1 3 Pla ns LLC, 675 F.3d215 ( 3d Cir. 2012). Like theS eco nd Circ uit, t he ThirdCir cuitin Sutter conf irm ed an arbit rat or’ s clas s arbit rat ion aw ard , find ing it cons ist ent wi th Stolt- Ni elsen . Id. at 223- 25. We dis agree wi th Sutter for es se ntial ly the reas ons st ated here in wi th res pec t to the Sec ond Circ uit’ s Jock dec isi on. 22 Case: 11-50509 Document: 00511860596 Page: 22 Date Filed: 05/18/2012No. 11-50509

denied Mar. 19, 2012, a group of female employees fi l ed both a class action lawsuit and a class arbitration complaint, alleging that their employer, Sterling Jewelers, engaged in gender discrimination. Id. at 115- 1 6

. The district court referred the class action lawsuit to arbitration and the parties submitted to the arbitrator the question of whether their agreement permitted class arbitration. Id. at 116. The arbitrator found that the agreement permitted class arbitration because it “cannot be construed to prohibit class arbitration,” and there was “no mention of class claims.” Id. at 117. The arbitrator interpreted the agreement under applicable state law, and “construed the absence of an express prohibition

on class claims against the contract’s drafter, Sterling.” Id. The arbitrator also reasoned that Sterling had declined to revi s e the contract “despite several arbitral decisions permitting class claims in the abse n c e o f an express prohibition.” Id. The district court denied Sterling’s motion to vacate the award, and Sterling appealed. In the interim, the Supreme Court issued Stolt-Nielsen , and Jock moved the district court for relief from its order. The district court then vacated the award based upon Stolt-Nielsen

. The plaintiffs appealed. Id. at 118. On appeal, a panel of the Second Circuit, with one judge dissenting, reversed the district court’s order and remanded with instructions to confirm the award. The majority explained that the district court erroneously “focused

. . . on whether the arbitrator had correctly interpreted the arbitration agreement itself.” Id. at 123. Instead, it should have restricted its analysis to whether the parties had submitted the class arbitration issue to the arbitrator and “whether the agreement or the law categorically prohibited the arbitrator from reaching that issue.” Id. at 123. The majority distin gui s h e d th e c a s e b efore it from the stipulation of silence in Sto l t

- Nielsen , explaining “[t]he plaintiffs’ concession that there was no explicit agreeme n t to permit class arbitration

. . . is not the same thing as stipulating

23 Case: 11-50509 Document: 00511860596 Page: 23 Date Filed: 05/18/2012No. 11-50509

that the parties had reached no agreement on the issue.” Id. The district court erred when it substituted its own judgmen t f or the arbitator’s in deciding whether the record de m o n s t r a ted an implicit class arbitration agreement. Id. at 124. The majority reasoned that, because the class arbitration issue was submitted to the arbitrator, and neither the law nor the agreement barred the arbit r a t o r from deciding the issue, the arbitrator did not exceed her powers in resolving the issue. Id. In so holding, the majority “reemphasiz[ed] that the primary thrust of [its] decision is whether the district court applied the appropriate level of deference when reviewing the arbitration award.” Id. The majority criticized the dissent for focusing on the “correct” interpretation of Stolt-Nielsen rather than whether the arbitrator exceeded her powers. Id. at 125. Ultimately, the majority concluded, regardless of “wheth e r the arbitrator was right or wrong in her analysis, she had the authority to make the decision, and the parties to the arbitration agreement are bound by it.” Id. at 127 (footnote omitted). Judge Winter dissented. He first noted that the same “silence” at issue in Stolt-Nielsen was present in Jock , as neither party claimed that the arbitration clauses at issue either “specifically authorize[d] or specifically preclude[d] class arbitration.” Id. at 128 (Winter, J

. , d i ssenting). He acknowledged that an implicit agreement to arb i t r a t e is permissible under Stolt-Nielsen , but argued that an implicit agreement cannot be inferred from an arbitration agreement’s silence or failure to preclude class arbitrations, “much less from thin air.” Id. at 129. Nowhere in the arbitrator’s opinion, Judge Wi n t er reasoned, did the arbitrator “purpor t t o identify any provision of the agreement supporting the existence of an implied agreement”; in fact, many provisi o ns of the agreement supported the conclusion that only bilateral arbitration was permissible. Id

. In this regard, Judge Winter discounted the arbitrator’s reliance on the “any relief” provision of the arbitration agreements, concluding that it could not support an
24 Case: 11-50509 Document: 00511860596 Page: 24 Date Filed: 05/18/2012No. 11-50509

implicit agreement to submit to cl a s s a rb itration, as class arbitration is a “procedu r e [] u s e d t o pursue . . . relief,” not relief itself. Id. at 132. Finally, Judge Winter rejected the majority’s relia n c e on the deferential standard of review, noting that the same standard of review was applicable in Stolt-Nielsen , but it did not prevent the Court from vacating the award. Id. at 133. We respectfully disagree wi t h the Second Circuit’s decision in Jock

. We read Stolt-Nielsen as requiring courts to ens u r e t h a t an arbitrator has a legal basis for his class arbitrat i o n d etermination, even while applying the appropriately deferential stand a r d of review. 130 S. Ct. at 1775. Such an analysis necessarily requires some consideration of the arbitrator’s award and rationale. I n s t e a d of examining the arbitrator’s award, the Jock majority confirmed the award even though the award based its conclusion in part upon the agreement’s failure to expressly prohibit class arbitration, a rationale that is incompatible with Stolt-Nielsen

. To the exten t t h at the Second Circuit 1 4 d e ci ded not to undertake an inquiry into the arbitrator’s reasoning, we must p art ways. Nor can we agree that t h e deferential standard of review applicable to arbitration awards precludes such an inquiry. Inde e d , t he same standard of review was at issue in Stolt-Nielsen , but it did not prevent the Court from examining and vacating the arbitrator’s award. Furthermore, we are persuaded by the Supreme Court’s lengthy discussion of the s i g nificant disadvantages of cl a s s arbitration, id. at 1776, a discussion that the Jock majority largely

We note that the arbit ral aw ard in Jock wa s iss ued bef ore the Sup rem e Court ’s Stolt- 1 4 Ni elsen dec isi on. This led the Jock majo rit y to expla in that the “arbitr ator fai thf ully fol low ed the law as it exis ted at the tim e of her dec isi on, ” and an “int erveni ng change of law , st andi ng alone , [d oes not] pr ovide [] ground s for vacat ing an othe rw ise pr ope r arbit ral aw ard .” 646 F.3d at 125. It is not clea r, howe ver, whet her the cour t wo uld have re ache d the s ameresu lt if the arbit rat or’ s aw ardhadbe en iss ued aft er Stolt- Ni elsen . 25 Case: 11-50509 Document: 00511860596 Page: 25 Date Filed: 05/18/2012No. 11-50509

ignored. Together, Stolt-Nielsen a n d Concepcion indicate that arbitrators

1 5 should not find implied agreements to submit to class arbi t r a t i o n , and courts should not confirm a rb i t r a l awards that order parties into such a proceeding, without a contractual or legal basis for doing so. While we cannot substitute our

own judgment for that of an arbitrator, we also c a n n o t c o n firm an award that Supreme Court precedent requires us to vacate. To s u m m a r i z e, we conclude that the arbitrator in this case exceeded his
powers by ordering the parties to submit to class arbit ration without a contractual or legal basis. The district court thus erred in denying the School’s motion to vacate the award. 9 U.S.C. § 10(a)(4); see Stolt-Nielsen , 130 S. Ct. at 1775-76. Pursuant to Section 10(b) of the FAA, we m u st either “‘direct a rehearing by the arbitrators’ or decide the question that was originally referred to the panel.” Stolt-Nielsen , 130 S. Ct. at 1770 (i n ternal quotation marks omitted). Because we conclude, as did the Stolt-Nielsen Court, that “there can be only one possible outcome on the facts before us,” there is no need to direct a rehearing by the arbitrator . Id . This arbitration must proceed bilaterally. III. CONCLUSION For the reasons stated above, we REVERSE the order of the district court

a n d REMAND this case with instructions to refer the parties to b i l a t e r a l arbitration.

On ly the dis se nt in Jock d i s cus se d at length the Sup rem e Court ’s rec ent conc erns 1 5 aboutc las s arbit rat ion. 646F. 3d at 131 (Wi nter , J., d iss enti ng). 26 Case: 11-50509 Document: 00511860596 Page: 26 Date Filed: 05/18/2012No. 11-50509

DENNIS, Circuit Judge, specially concurring: I join the majority’s opinion, except Part II.1, and write separately to add

some observations regarding Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp. , 130 S. Ct. 1758 (2010), which might prove to be crucial in future cases. 1. I agree with the majority’ s c onclusion in Part II.1 of its opinion that the district court did not err in referring the issue of class arbitration vel non to the arbitrator, but I am not persuaded that “the parties’ agreement to the AAA’s Commercial Rules also constitutes consent to the Supplemen t a ry Rules.” Majority Op. 8. Instead, I believe that reference of the question to the arbitrator is required by our ci r c uit precedent in Pedcor Management Co., Inc. Welfare Benefit Plan v. Nations Personnel of Texas, Inc. , 343 F.3d 355 (5th Cir. 2003), which held that, “pursuant to Green Tree [Financial Corp. v. Bazzle , 539 U.S. 444 ( 2003)], arbitrators should decide whether class arbitration is available or forbidden.” Pedcor , 343 F.3d at 363. I n P e d c or , this court considered the upshot of the splintered decision in Green Tree Financial Corp. v. Bazzle , 539 U.S. 444 (2003). In Green Tree , Justice B reyer wrote a plurality opinion, joined by Justices Scalia, Souter, and Ginsburg, which concluded that the arbitrator, not the court, should decide the class arbitration question. Id. at 453. Justice Stevens cast the fifth vote for the 1 judgment to vacate and remand th e s t a t e c ourt’s decision; but he did not join Justice Breyer’s opinion. Id. at 454-55 (Stevens, J., concurring in the judgment and d i ssenting in part). Justice Stevens noted that “[a]rguably the interpretation of the parties’ agreement [to permit class arbitration or not]

Chief Jus tic e Rehnquis t, joined by Jus tic es O’ Connor and Ke nnedy, dis se nted on the 1 ground s that “th is det erm inati on is one for the cour ts , not for the arbit rat or, ” Green Tre e , 539 U. S. at 455 (Rehn quis t, C.J. , dis se nting) ; and Jus tic e Thom as dis se nted se par atel y on the bas is that he “bel ieve[ d] that the [FAA] doe s not app ly to pr oce edi ngs in st ate cour ts ,” 539 U. S. at 460 (Tho mas , J., d iss enti ng). 27 Case: 11-50509 Document: 00511860596 Page: 27 Date Filed: 05/18/2012No. 11-50509

should have been made in the first instance by the arbitrat o r , r a th er than the court.” Id. at 455

. H o w e v e r, because Justice Stevens believed that the state court’s “decision to conduct a class-action arbitration was correct as a matter of law, and because petitioner has merely ch a l l enged the merits of that decision without claiming that it was made by the wrong decisionmaker,” he did not think that remanding the case was necessary. Id. Nonetheless, Justice Stevens concurred in the plurality’s j u d g m ent “[i]n order to avoid [there being no

c o n t r olling judgment of the Court], and because Justice BREYER’s opinion expresses a view of the case close to my own.” Id. In analyzing Green Tree , the Pedcor panel ap p l i e d the well-established principle that “when we are confronted with a plurality opinion, we look to that position taken by those Members who concurred in the judgmen t s o n the narrowest grounds.” 343 F.3d at 358 (internal quotation marks omitted). The panel reasoned that Justice Stevens’ opinion “fails to constitute the most narrow grounds on which the case was decided.” Id. at 358. Instead, the Pedcor panel concluded that the narrowest grounds for the Green Treejudgment were those expressed by Justice Breyer’s plurality opinion. Id. at 358-59. Thus, the panel held that “pursuant t o G reen Tree , arbitrators should decide whether class arbitration is available or forbidden.” Id. at 363. Although t h e P edcor panel indic a t e d t hat Justice Stevens might have tacitly agreed with the plurality on this point, see 343 F.3d at 358-59, that view was not necessary to or part of the Pedcorpanel’s holding. In Stolt-Nielsen , the Court recognized that Justice Stevens’ opinion in G reen Tree did not decide the question of whether the arbitrator or the court should decide the class arbitration question, and “[t]hus, [ Green Tree] did not yie ld a majority decision on” that issue. 130 S. Ct. at 1771-72. However, the Stolt-Nielsen Court explicitly declined to addr e s s this issue: “[W]e need not revisit that question here because the parties’ supplemental agreement

28 Case: 11-50509 Document: 00511860596 Page: 28 Date Filed: 05/18/2012No. 11-50509

expressly assigned this issue to the arbitration panel, and no party argues that this assignment was impermissible.” Id. Thus, Stolt-Nielsen does not alter the status of the Green Tree plurality opinion, and does not a f f e c t our holding in Pedcor that the G re e n Tree plurality provided the narrowest grounds for the judgment in that case. Accordingly, in my view we are still bound to follow our precedent in Pedcor

. See Martin v. Medtronic, Inc. , 254 F.3d 573, 577 (5th Cir. 2001) (“[T]he Supreme Court deci s ion must be more than merely illuminating with respect to the case before us, because a panel of this court can only overrule

a prior panel decision if ‘such overruling is unequivocally directed by controlling Supreme Court precedent.’” (quoting United States v. Zuniga-Salinas , 945 F.2d 1302, 1306 (5th Cir. 1991)). Similarly, the Seventh Circuit recently concluded that Stolt-Nielsen did not upset that court’s post- Green Tre e holding in Employers Ins

. Co . of Wausau v. Century Indem. Co. , 443 F.3d 573 (7th Cir. 2006), that the arbitrator should dec ide whether an arbitration agreement allows for class arbitratio n . B l u e Cross Blue Shield of Mass., Inc. v. BCS Ins. Co. , 671 F.3d 635, 639 (7th Cir. 2011) (Easterbrook, C.J.) (“ Stolt–Nielsen did not [address whether an arbitra tor should decide the class arbitration question]. This leaves in place our post-[ Green Tree] decision in Wausau .”). 2 Theref o r e, I would follow Pedcor to uphold the district court’s referral of the class arbitration question to the arbitrator.

See also Qu il loi n v. Tene t He al thSystem Phila. , Inc. , 673 F.3d 221, 232 (3d Cir. 2012) 2 (“ Sile nce regar ding clas s arbit rat ion gener ally in dicate s a prohib itio n agains t clas s arbit rat ion, but the act ual det erm inati on as to wh ethe r clas s act ion is pr ohibit ed i s a q ues tio n of inte rp ret atio n and pr oce dur e for the arbit rat or. ” (c itin g Stolt- Ni elsen , 130 S. Ct. at 1775) ); Vi lc hesv. TheTrav elersComp ani es, Inc. , 413 F. App ’x 487, 492 (3d Cir. 2011) (unpublis hed) (f ollo wi ng Green Tre e plur ality a n d S to l t-Ni elsen in hold ing, “[w] here cont rac tual sil ence is im pli cat ed, ‘th e arbit rat or and not a cour t sho uld dec ide wh ethe r a cont rac t[ wa s] inde ed sil ent o n t h e i s s ue of clas s arbit rat ion, ’ and ‘w heth er a cont rac t wi th an arbit rat ion claus e forbid s clas s arbit rat ion. ’” (al ter atio n in origi nal) (quo ting Stolt- Ni e lsen , 130 S. Ct. at 1771- 72) (int erna l q uota tio n m arkom itt ed) ). 29 Case: 11-50509 Document: 00511860596 Page: 29 Date Filed: 05/18/2012No. 11-50509 2. I agree with the majority that under the p r i n c i ples of Stolt–Nielsen that

are clearly applicable to this case, we must reverse the district court’s affirmance of the arbitrator’s class arbitration award and remand the case with instructions to refer the parties to bilateral arbitration. However, a careful reading and assessment of Stolt-Nielsen reveals that it is distinguishable fr o m the present case in respects that may be significant in future cases. First, as the majority notes, Majority Op. 11, Sto l t-Nielsen fully reaffirmed the exceedingly deferential standard that federal c o u rts must apply when reviewing arbi t r a t i o n decisions. Indeed, the Court began its analysis in StoltNielsen by restating this deference in no uncertain terms: “Petitioners contend that the decision of the arbitration panel must be vacated, but in order to obtain that relief, they must clear a high hurdle.” 130 S. Ct. at 1767. T h e C o u r t expla i ned this exceptionally narrow standard of judicial review of arbitral decisions: “It is not enough for petitioners to show that the [arbitration] panel committed an error—or even a serious error.” Id. (citing E. Associated Coal Corp. v. Mine Workers , 531 U.S. 57, 62 (2000); United Paperworkers Int’l Union AFL-CIO v. Misco, Inc. , 484 U.S. 29, 38 (1987)). Instead, the Court stated, “[i]t is only when [an] arbitrator strays from interpretation and application of the agreement and effectively ‘dispense[s] his own brand of industrial justice’ that his decision may be unenforceable.’” Id. (alterations in original) (quoting Major League Baseball Players Ass’n v. Garvey , 532 U.S. 504, 509 (2001) (per curiam), in turn quoting United Steelwo rk e rs of Am. v. Enter. Wheel & Car Corp. , 363 U.S. 593 , 5 9 7 (1960)); see also United Paperworkers , 484 U.S. at 38 (“[A]s long

as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious

error does not suffice to overturn his decision.”); United Steelworkers , 363 U.S. at 597 (an arbitration award must be upheld “so long as it draws its essence”

30 Case: 11-50509 Document: 00511860596 Page: 30 Date Filed: 05/18/2012No. 11-50509

from the agreement). Thus, Stolt-Nielsen reaffirmed the Court’s longstanding precedent t hat courts must review arbitration decisions with the utmost deference. The Court’s decision to vacate the arbitrator’s class arbitration decision in Stolt-Nielsen did not alter this exceptionally deferent i a l s tandard of review. There, the Court, in deciding that the arbitration panel had exceeded its power, relied upon and repeatedly called atten t i o n to the fact that the parties had expressly stipulated that they had reached no agreement on the issue of class arbitrat i on. 130 S. Ct. at 1768 (“[T]he parties agreed their agreement was ‘silent’ in the sense that they had not reached a n y a gr eement on the issue of class arbitration.”); id. at 1766 (“The parties

. . . stipulated that the arbitration

cl au se was ‘silent’ with respect to class arbitration. Counsel for [the Respond e nt] explained to the arbitration panel that the term ‘silent’ did not simply mean that the clause made no express reference to class arbitration. Rather, he said, ‘[a]ll t h e parties agree that when a contract is silent on an issue there's b e e n n o agreement that has been reached on the issue.’”). Thus, “the [arbitration] panel had no occasion to ascertain the parties’ intention” regarding class arbitration “because [their stipulation stated that] the parties were in complete agreement regarding their intent.” Id. at 1770 (internal quotation marks omitted) (“Th[eir]

s tipulation left no room for an inquiry regarding the parties’ intent, and a n y inquiry into that settled question would have been outside the panel’s assigned task.”). The Court did not need to undertake a d e f e r e ntial review of the arbitration contract or the arbitration p a n e l ’ s class arbitration decision; but instead, merely “held that [the] arbitration panel exceeded its power under the FAA by imposing class arbitration procedures based on policy judgments rather than the arbitration agreement itself or some background principle of contract law.” AT&T Mobility LLC v. Concepcio n , 1 3 1 S

. Ct. 1740, 1750 (2011) (citing Stolt-Nielsen , 130 S. Ct. at 1773-76). Thus, the Court did n o t a l t e r t he usual,

31 Case: 11-50509 Document: 00511860596 Page: 31 Date Filed: 05/18/2012No. 11-50509

exceedingly deferential standard of judicial review that courts must apply to arbitrators’ contract interpretations b a s e d on the parties’ written agreement itself or on some background principle of contracts law. Second, Stolt-Nielsen does not require that there be an express agreement to class arbitration in order for arbitrators, within their powers, to find that the parties a gr eed to class arbitration. See Stolt-Nielsen , 130 S. Ct. at 1775 (“[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.”); id. at 1776 n.10 (“We have no occasion to decide what contractual basis may support

a finding that the parties agreed to authorize class-action arbitration.”); see also id. at 178 3 ( G i nsburg, J., dissenting) (“[T]he Court does not insist on express consent to class arbitration.”). There simply is no basis for the arbitrator to find such an implicit a gr e e m ent to class arbitration in the present case; however, there may be such a basis in the parties’ agreements in other cases. Third, Stolt-Nielsen did not address a case in which a p a r t y is unsophisticated and the arbitration agreement is part of a contract of adhesion; 3 and in which “adjudication is costly and individual claims are no more than modest in size, [in which case,] without [class proceedings], potential claimants will have little, if any, incentive to s e e k vindication of their rights.” See id. at 1783 (Ginsburg, J., dissenting) (citing Amchem Prods., Inc. v. Windsor , 521 U.S. 591, 617 (1997)); see also id. (“‘The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic

sues for $30.’” (quoting Carnegie v. Household Int’l, Inc. , 376 F.3d 656, 661 (7th Cir. 2004))). In other cases, the Court has “recognized [arbitration] as an

In Sto l t- N

i e ls en the arbit rat ion agree me nt wa s betw een “s ophi st icat ed bus ines s 3 enti tie s, ” wh ere the for m of the agree me nt wa s se lect ed by the enti ty se ek ing clas s arbit rat ion, and high-s tak es , inte rnat ional antit rus t clai ms we re involved

. 130 S. Ct. at 1775; id. at 1764- 65; Joint App endi x at 73a, Stolt- Ni elsen S.A

. v. Ani ma lFe eds Int’l Corp

. , 130 S. Ct. 1758 (201 0) (N o. 08-1 198) , 2009 WL 2 777896. 32 Case: 11-50509 Document: 00511860596 Page: 32 Date Filed: 05/18/2012No. 11-50509

effective vehic l e f

o r vindicating statutory rights, but only ‘so long as the prospective litigant may effectively vindicate its statutory cause of action in the arbitral forum.’” In re Am. Express Merchants’ Litig. , 667 F.3d 204, 214 (2d Cir. 2012) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, I n c . , 473 U.S. 614, 636-37 (1985)). That is, the Court has “noted that should clauses in a contract operate ‘as a prospective wa iv e r of a party’s right to pursue statutory remedies for antitrust violations, we would have little hesitation in condemning the agreement as against public policy.’” In re Am. Express Merchants’ Litig. , 667 F.3d at 214 (quoting Mitsubishi , 473 U.S. at 637 n.19). Such considerations led the Second Circuit recently to conclude that a cla s s a rbitration waiver provision was unenforceable, and that Stolt-Nielsen does not hold otherwise. Id. at 216-19. Although the instant case involves an adhesive consumer contract,

4 the stakes—roughly $51,000 in student loan debt—are high enough that we may not be justified in determining that “ p o t e n t ial claimants,” such as Reed, “will have little, if any, incentive to seek vindication of their rights.” Stolt- N ielsen , 130 S. C t

. at 1783 (Ginsburg, J., dissenting). However, in different kinds of future cases, courts may need to consider whether an arbitrator can properly find an implicit agreement to class arbitrati o n p rocedures because bilateral arbitration would otherwise offer claimants to modest amounts no practicable or realistic remedy.

Subject to my disagreement with the majority’s reasoning in Part II.1, and with the foregoing observations on the Court’s decision in Stolt-Nielsen , I concur in the remainder of the majority opinion.

Cf. Cruz v. Cingular Wireless , LLC, 648 F.3d 1205, 1215 (11t h Cir. 2011) (no ting “th e 4 pos sib ilit y t hat in so mec ase s, an arbit rat ion agree me nt ma y be invali dat ed on publ ic pol icy ground s wh ere it eff

ec tivel y pr event s the clai man t fr om vindic ating her st atut ory caus e of act ion” be caus e o f a c las s arbit rat ion wa iver (c itin g Mi tsubi shi , 473 U. S. at637 ))

. 33 Case: 11-50509 Document: 00511860596 Page: 33 Date Filed: 05/18/2012