Source: https://www.mintz.com/insights-center/viewpoints/2196/2018-07-proposal-adopt-clear-and-unmistakable-standard-determine-if
Timestamp: 2019-04-20 05:03:13+00:00

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The U.S. Supreme Court has ruled that “class arbitration” may be permitted if an arbitration agreement authorizes it, Stolt-Nielsen v. AnimalFeeds Int’l Corp., 559 U.S. 662, 684 (2010), and that state contract law governs the interpretation of the parties’ arbitration agreement. A proposal: that an agreement to permit class arbitration must be “clear and unmistakable” to be enforceable.
This is analogous to the “clear and unmistakable” standard for determination of whether parties have agreed to delegate gateway arbitrability issues to an arbitrator; i.e., whether the presumption that courts are to adjudicate issues of arbitrability, cf. FAA § 4 (9 U.S.C. § 4), is rebutted.
“Concepcion’s essential insight remains: courts may not allow a contract defense to reshape traditional individualized arbitration by mandating class-wide arbitration procedures without the parties’ consent.” 2018 U.S. LEXIS 3086 at *17-18, citing Concepcion, 563 U.S. at 344-351.
Furthermore, the Court remarked that “even a statute’s express provision for collective legal actions does not necessarily mean that it precludes ‘individual attempts at conciliation’ through arbitration.” 2018 U.S. LEXIS 3086 at *29.
The question seems to be how clear must an arbitration agreement be in order for a court (or arbitrator) to determine that the presumption of bilateral arbitration is rebutted because the parties have agreed to authorize class arbitration? We propose “clear and unmistakable” as the standard for that purpose.
The Supreme Court will have its opportunity to adopt this standard next term when it considers the case of Lamps Plus, Inc. v. Varela (No. 17-988, U.S. Sup.), having granted certiorari with respect to a Ninth Circuit unpublished decision issued in August 2017. In Lamps Plus, Frank Varela brought a class action suit against his employer (Lamps Plus), alleging negligence, breach of implied contract, violations of California’s Consumer Records Act and its Unfair Competition Law, invasion of privacy, and negligent violation of the Fair Credit Reporting Act. The employer moved to compel arbitration with Varela individually based on an arbitration provision in his employment agreement. The District Court compelled arbitration, but it compelled class arbitration.
The Ninth Circuit Court of Appeals opined, however, in affirming the District Court’s ruling, that the “silence” described in Stolt-Nielsen was “more than the mere absence of language explicitly referring to class arbitration; instead it means absence of agreement.” Then, applying state contract law interpretation principles (including the contra proferentem rule), it eventually determined that the “ambiguous” arbitration agreement in question, although silent regarding class arbitration, nonetheless authorized it. But was that the parties’ mutual intention?
Regarding the delegation issue, the courts have determined that one of the ways by which parties may “clearly and unmistakably” manifest their agreement is implicit — by incorporation of institutional arbitration rules that expressly authorize arbitrators to adjudicate their own jurisdiction (i.e., to adjudicate issues of arbitrability). See, e.g., T.Co Metals v. Dempsey Pipe & Supply, 592 F.3d 329 (2d Cir. 2010); Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366 (Fed. Cir. 2006). However, there are no current institutional arbitration rules that, without more, authorize an arbitrator to conduct class arbitration proceedings. Hence, incorporation by reference of any institutional arbitration rules will not of its own constitute an agreed authorization of class arbitration.

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