Court Opinion

ID: 8210347
Source: CourtListenerOpinion
Date Created: 2022-09-29 17:06:22.017126+00
Date Added: 2024-06-11T16:41:49.637319
License: Public Domain

138 Nev., Advance Opinion (06
                         IN THE SUPREME COURT OF THE STATE OF NEVADA

                AIRBNB, INC., A FOREIGN                               No. 81346
                CORPORATION,
                Appellant,
                vs.
                ERIC RICE, INDIVIDUALLY;
                                                                          Ft
                JEFFERSON TEMPLE, AS SPECIAL                              SEP 29 202
                ADMINISTRATOR OF THE ESTATE
                                                                                  A. BROWN
                OF RAHEEM RICE; AND BRYAN
                                                                     BY
                LOVETT,                                                   1EF   EPUTY CLERK
                Respondents.

                            Appeal from a district court order denying a motion to compel
                arbitration. Eighth Judicial District Court, Clark County; Gloria Sturman,
                Judge.
                            Reversed and remanded.

                O'Melveny & Myers LLP and Dawn Sestito, Los Angeles, California, and
                Damali A. Taylor, San Francisco, California; McDonald Carano LLP and
                Jeff Silvestri and Chelsea Latino, Las Vegas; P.K. Schrieffer LLP and David
                T. Hayek, West Covina, California,
                for Appellant.

                Lewis Roca Rothgerber Christie LLP and Joel D. Henriod, Daniel F.
                Polsenberg, Abraham G. Smith, and Erik J. Foley, Las Vegas; The702Firm
                and Michael C. Kane, Las Vegas,
                for Respondents Eric Rice and Jefferson Temple.

                The Schnitzer Law Firm and Jordan P. Schnitzer, Las Vegas,
                for Respondent Bryan Lovett.

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                BEFORE THE SUPREME COURT, EN BANC.

                                                 OPINION

                By the Court, HARDESTY, J.:
                            In this appeal, we must apply the United States Supreme
                Court's holding in Henry Schein, Inc. v. Archer & White Sales, Inc., that,
                under the Federal Arbitration Act (FAA), a court has no power to determine
                the arbitrability of a dispute where the contract delegates the arbitrability
                question to an arbitrator, even if the argument that the arbitration
                agreement applies to the dispute is "wholly groundless."       U.S.    ,
                139 S. Ct. 524, 528 (2019) (internal quotations omitted).      Because the
                agreement in this case is governed by the FAA and includes a delegation
                provision, Henry Schein requires that the arbitrability question be decided
                by the arbitrator. Accordingly, we conclude that the district court erred in
                denying the motion to compel arbitration and refusing to submit the
                arbitrability determination to an arbitrator.

                                                  FACTS

                            In the summer of 2018, Raheem Rice and Bryan Lovett were
                walking to a house party in Las Vegas and were on or near the premises
                when an unknown individual opened fire on the crowd, killing Raheem and
                injuring Bryan. Eric Rice, Raheem's father; Jefferson Temple, as special
                administrator of Raheem's estate (the Estate); and Bryan sued Airbnb, Inc.,
                and other defendants for wrongful death and personal injury. They alleged
                that Airbnb's services had been used by the party's host to rent the house
                where the shooting occurred.
                            In response, Airbnb filed a motion to compel arbitration.
                Airbnb asserted that Raheem, Bryan, and Eric all had Airbnb accounts at

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                the time of the shooting and had agreed to Airbnb's Terms of Service during
                the account registration process.       The Terms of Service included an
                arbitration agreement, which specified the following:
                           You and Airbnb mutually agree that any dispute,
                           claim or controversy arising out of or relating to
                           these Terms or the breach, termination,
                           enforcement or interpretation thereof, or to the use
                           of the Airbnb Platform, the Host Services, the
                           Group Payment Service, or the Collective Content
                           (collectively, "Disputes") will be settled by binding
                           arbitration (the "Arbitration Agreement"). If there
                           is a dispute about whether this Arbitration
                           Agreement can be enforced or applies to our
                           Dispute, you and Airbnb agree that the arbitrator
                           will decide that issue.

                           The Arbitration Agreement evidences a transaction
                           in interstate commerce and thus the Federal
                           Arbitration Agreement governs the interpretation
                           and enforcement of this provision.
                Airbnb argued that the Estate's, Bryan's, and Eric's claims were therefore
                subject to arbitration under the Terms of Service agreements and that any
                dispute about whether the arbitration agreement applied to those claims
                had to be submitted to an arbitrator.
                           The district court denied Airbnb's motion to compel arbitration
                in two separate orders. In its order concerning Bryan, the district court
                found that he was underage when he assented to Airbnb's Terms of Service.
                In its order concerning Eric and the Estate, the district court found that
                Airbnb could not compel arbitration under the Terms of Service agreements
                because the dispute did not arise from the agreements. Airbnb appeals only
                the order concerning Eric and the Estate.

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                                                DISCUSSION
                              Airbnb argues that the district court lacked discretion to
                determine whether the dispute was arbitrable because the arbitration
                agreement in the Terms of Service included a delegation provision requiring
                the issue of arbitrability to be submitted to an arbitrator. Airbnb asserts
                that the Supreme Court made clear in Henry Schein,          U.S. at    , 139 S.
                Ct. at 527-28, that when, as here, the parties clearly and unmistakably
                delegate the issue of arbitrability to an arbitrator, a court may not disregard
                that intent, even if the arguments in favor of arbitration are wholly
                groundless.
                              Eric and the Estate respond that the district court had
                discretion to decide that the dispute is not arbitrable because the dispute
                did not arise from the parties' contractual agreements but from duties owed
                under Nevada law. They allege that Raheem did not book the Airbnb rental
                where the shooting occurred, that nothing indicates Raheem knew the
                house was rented through Airbnb when he died, and that the record does
                not indicate that Raheem or Eric ever utilized Airbnb's services at all. For
                the above reasons, Eric and the Estate assert that the parties did not clearly
                and unmistakably agree to submit this dispute to arbitration and argue that
                holding such would create an absurd result.
                              The parties do not dispute that Raheem and Eric both assented
                to the arbitration agreement in Airbnb's Terms of Service, which delegates
                the matter of arbitrability to an arbitrator, nor do they dispute the validity
                of the arbitration agreement or delegation provision.       Rather, the issue
                before us is whether the district court erred in finding that the arbitration
                agreement did not apply to the claims at issue and in refusing to submit the
                question of arbitrability to an arbitrator.

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             The arbitration agreement specified that the FAA governs its
enforcement and interpretation. Under the FAA, "arbitration is a matter of
contract, and courts must enforce arbitration contracts according to their
terms." Henry Schein,       U.S. at       , 139 S. Ct. at 529. Generally, when
deciding whether to compel arbitration, a court must resolve two issues: (1)
whether the parties have a valid agreement to arbitrate and (2) whether the
agreement applies to the dispute. Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 84 (2002). However, the Supreme Court has recognized that
parties may agree to arbitrate "gateway questions of arbitrability, such as
whether the parties have agreed to arbitrate or whether their agreement
covers a particular controversy." Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S.
63, 68-69 (2010) (internal quotations omitted). Thus, when the parties
clearly and unmistakably agree to delegate these questions to an arbitrator,
the delegation agreement must be enforced like any other arbitration
agreement under the FAA. Id. at 70 (recognizing that the FAA operates on
an "additional" agreement to arbitrate a gateway issue); see also First
Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943 (1995) ("[T]he court's
standard for reviewing the arbitrator's decision [of who has the primary
power to decide arbitrability] should not differ from the standard that courts
apply when they review any other matter that parties have agreed to
arbitrate."). As the Supreme Court explained in Henry Schein,
             When the parties' contract delegates the
             arbitrability question to an arbitrator, a court may
             not override the contract. In those circumstances,
             a court possesses no power to decide the
             arbitrability issue. That is true even if the court
             thinks that the argument that the arbitration
             agreement applies to a particular dispute is wholly
             groundless.
   U.S. at     , 139 S. Ct. at 529 (emphasis added).

                                      5
                                       Here, the parties have a valid arbitration agreement with a
                          clear delegation clause requiring that an arbitrator decide any dispute as to
                          whether the agreement applies to the claims at issue. However, the district
                          court determined that the arbitration agreement did not apply to Eric's and
                          the Estate's claims because those claims arose from Nevada's wrongful
                          death statute, rather than the Terms of Service or Eric's or Raheem's
                          contractual relationships with Airbnb. Essentially, the district court found
                          that Airbnb's argument that the arbitration agreement applied to Eric's and
                          the Estate's claims was wholly groundless, a finding that Henry Schein
                          oddly, but explicitly, precludes the court from making when there is a
                          delegation agreement.
                                       Eric and the Estate attempt to distinguish Henry Schein by
                          focusing on its language requiring "clear and unmistakable evidence" that
                          the parties intended to delegate the arbitrability of a dispute between them.
                             U.S. at     , 139 S. Ct. at 530 (internal quotation marks omitted). They
                          argue that because their claims clearly do not relate to or arise from
                          Airbnb's Terms of Service, there is no arbitration agreement that applies to
                          those claims and thus no showing that the parties intended to arbitrate the
                          claims.
                                       The Supreme Court has held that "[c] ourts should not assume
                          that the parties agreed to arbitrate arbitrability unless there is 'clear and
                          unmistakable' evidence that they did so." First Options, 514 U.S. at 944
                          (alterations omitted) (quoting AT&T Techs., Inc. v. Commc'ns Workers of
                          Am., 475 U.S. 643, 649 (1986)). This reflects the principle that "a party
                          cannot be required to submit to arbitration any dispute which he has not
                          agreed so to submit." Howsam, 537 U.S. at 83 (internal quotation marks
                          omitted).    However, a valid arbitration agreement that delegates the
                          arbitrability issue to an arbitrator serves as "clear and unmistakable"
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                     .,
                evidence of an agreement to arbitrate arbitrability. See Henry Schein,
                U.S. at     , 139 S. Ct. at 530. While Eric and the Estate argue that their
                claims are unrelated to the Terms of Service agreement and thus there is
                no valid arbitration agreement, their argument about the validity of the
                arbitration agreement depends on a determination that the claims are not
                arbitrable—a determination that the arbitration agreement expressly
                delegates to an arbitrator.
                             We are cognizant that, unlike in Henry Schein, the dispute here
                did not arise out of a contract between the parties. The facts underlying
                Eric's and the Estate's wrongful death action have no relation to Erie's or
                Raheem's use of Airbnb's services or platform. They do not arise out of
                Airbnb's duties to Eric or Raheem by virtue of their agreements to Airbnb's
                Terms of Service. Further, the parties here do not agree that the contract
                containing the arbitration agreement generally governs the parties' dispute.
                             Nevertheless, we believe the rule from Henry Schein applies to
                this situation, particularly when we consider Henry Schein's abrogation of
                the Fifth Circuit's decision in Douglas v. Regions Bank, 757 F.3d 460, 464
                (5th Cir. 2014). In Douglas, an attorney in a bankruptcy matter embezzled
                money from a client, who then sued the bank where the attorney
                maintained his accounts, alleging negligence and conversion. Id. at 461.
                The bank moved to compel arbitration based on a delegation provision in an
                arbitration agreement that the client had signed when she briefly opened a
                checking account with the bank's predecessor years earlier. Id. The trial
                court denied the motion, and the Fifth Circuit Court of Appeals affirmed,
                concluding that the delegation provision in "the completely unrelated
                contract" could not "possibly bind [her] to arbitrate gateway questions of
                arbitrability in all future disputes with the other party, no matter their
                origin."   Id. at 462.   The court found that in signing the arbitration
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                agreement, the client intended "only to bind herself to arbitrate gateway
                questions of arbitrability if the argument that the dispute falls within the
                scope of the agreement is not wholly groundless." Id. at 464. The court thus
                adopted the "wholly groundless" exception used by other circuits and
                concluded that the client's claims, which had no connection to the
                arbitration agreement she had signed years earlier, were clearly not
                arbitrable. Id.
                            The Court in Henry Schein expressly rejected use of the "wholly
                groundless" exception to get around the delegation provision, concluding
                that it was not consistent with the FAA, thus abrogating Douglas.        U.S.
                at       139 S. Ct. at 528-29.    We can infer from this that the wholly
                groundless exception is improper even where the arbitration agreement
                clearly is unrelated to the dispute, and we thus feel constrained to apply the
                rule from Henry Schein when a valid arbitration agreement between the
                parties contains a delegation clause. If there is a delegation clause, the
                court has no authority to decide the arbitrability question but must instead
                grant the motion to compel arbitration.
                            The cases cited by Eric and the Estate do not alter our
                understanding of Henry Schein. The Tenth Circuit case on which they
                rely—Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir.
                1995)—pre-dates Schein and did not specifically address the issue of who
                should decide whether the dispute was arbitrable. Furthermore, the Tenth
                Circuit more recently has rejected the argument that courts may decide the
                arbitrability of a dispute despite a delegation provision and has disavowed
                reaching a contrary conclusion in earlier decisions such as Coors. Belnap v.
                Iasis Healthcare, 844 F.3d 1272, 1289-90 (10th Cir. 2017) (explaining that
                the issue was never briefed or expressly addressed in Coors).

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                                  The other case on which Eric and the Estate primarily rely—
                     Moritz v. Universal City Studios LLC, 268 Cal. Rptr. 3d 467 (Ct. App.
                     2020)—is distinguishable. There, the parties had multiple movie contracts
                     with arbitration agreements, and the contract at issue in the litigation did
                     not include a separate arbitration clause but instead included a provision
                     subjecting movies produced as sequels or remakes to an arbitration clause
                     contained in an earlier contract. Id. at 471. The district court determined
                     that the plaintiffs contract claims did not pertain to a movie that was a
                     remake or a sequel and thus were not subject to arbitration. Id. at 472-73.
                     The California Court of Appeal affirmed the district court's denial of the
                     motion to compel arbitration, concluding that the arbitration agreement
                     and delegation clause in the earlier contract did not apply to the dispute.
                     Id. at 474-75. Thus, in Moritz, the issue was not whether the claims were
                     governed by a contract, but whether the relevant contract actually required
                     the arbitrability of the claims to be delegated. Although Moritz states that
                     "Mlle FAA requires no enforcement of an arbitration provision with respect
                     to disputes unrelated to the contract in which the provision appears," id. at
                     476, we cannot countenance such a reading of Henry Schein and are bound
                     by the decisions of the Supreme Court on this matter.
                                                      CONCLUSION
                                 The Supreme Court has held that, when a contract delegates the
                     arbitrability question to the arbitrator, a court has no authority to decide
                     whether the arbitration agreement applies to the dispute, even where the
                     argument for arbitrability is wholly groundless. Henry Schein,           U.S. at
                        , 139 S. Ct. at 528-29. Because the FAA governs the enforcement of the
                     arbitration agreement at issue here, and the agreement delegates the
                     arbitrability question to an arbitrator, the district court erred in deciding the
                     arbitrability question itself.   Accordingly, we reverse the district court's
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                order denying Airbnb's motion to compel arbitration and remand for further
                proceedings consistent with this opinion.

                                                                              ,   J.
                                                    Hardesty

                W concur:

                Parraguirre

                Cadish

                                               J.
                Silver

                                               J.

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                 STIGLICH, J., with whom HERNDON, J., agrees, dissenting:
                             I respectfully dissent from the majority's opinion that both
                 misreads Henry Schein' and will lead to absurd consequences in the future.
                 As a California appellate court has demonstrated, there is a way to
                 harmonize Henry Schein with common sense. I would have elected to follow
                 this path tread by our neighboring colleagues.
                             In Moritz v. Universal City Studios LLC, the California Court
                 of Appeal explained that "lain arbitration agreement is tied to the
                 underlying contract containing it, and applies 'only where a dispute has its
                 real source in the contract.' 268 Cal. Rptr. 3d 467, 473 (Ct. App. 2020)
                 (quoting Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 205 (1991)).
                 Additionally, the court noted, InJo authority permits sending a matter to
                 arbitration simply because the same parties agreed to arbitrate a different
                 matter."   Id.   Henry Schein, the Moritz court concluded, is not to the
                 contrary, because that case "presupposes a dispute arising out of the
                 contract or transaction, i.e., some minimal connection between the contract
                 and the dispute." Id. at 475. Moritz observed that Henry Schein "expressly
                 understood that the (FAA] requires enforcement of arbitration clauses with
                 respect to disputes 'thereafter arising out of such contract' but did not
                 require "enforcement of an arbitration provision with respect to disputes
                 unrelated to the contract in which the provision appears." Id. (quoting
                 Henry Schein,      U.S. at   , 139 S. Ct. at 529). It thus rejected defendants'
                 "argument that an arbitration provision creates a perpetual obligation to
                 arbitrate any conceivable claim that [plaintiff] might ever have against

                       'Henry Schein, Inc. v. Archer & White Sales, Inc.,      U.S.     , 139 S.
                 Ct. 524 (2019).
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(0) 1947A Id.
                             I believe the California court's interpretation of Henry Schein is
                sound as a matter of law and policy. The tort law claims that undergird the
                dispute here did not arise out of a contract between the parties; indeed,
                there is no evidence respondents ever utilized Airbnb's services.2        Henry
                Schein does not change the principle that "Mlle FAA requires no
                enforcement of an arbitration provision with respect to disputes unrelated
                to the contract in which the provision appears." Moritz, 268 Cal. Rptr. 3d
                at 476; see 9 U.S.C. § 2 (providing that an arbitration agreement applies to
                a "controversy arising out of such contract"); cf. Zoller v. GCA Advisors,
                LLC, 993 F.3d 1198, 1201 (9th Cir. 2021) (recognizing that before a court
                enforces an arbitration agreement, it must first determine whether a valid
                arbitration agreement exists); Coors Brewing Co. v. Molson Breweries, 51
                F.3d 1511, 1516 (10th Cir. 1995) ("A dispute within the scope of the contract
                is still a condition precedent to . . . involuntary arbitration ....").
                             In cautioning against extending an arbitration clause's scope
                beyond the reach of the parties' contract, the Tenth Circuit Court of Appeals

                      2As  this court has previously recognized, "tort law is designed to
                secure the protection of all citizens from the danger of physical harm to their
                persons or to their property and seeks to enforce standards of conduct.
                These standards are imposed by society, without regard to any agreement."
                Calloway v. City of Reno, 116 Nev. 250, 261, 993 P.2d 1_259, 1265 (2000),
                overruled on other grounds by Olson v. Richard, 120 Nev. 240, 243-44, 89
                P.3d 31, 33 (2004). Furthermore, a tort is "a wrong independent of
                contract." Bernard v. Rockhill Dev. Co., 103 Nev. 132, 135, 734 P.2d 1238,
                1240 (1987) (quoting Malone v. Univ. of Kan. Med. Ctr., 552 P.2d 885, 888
                (Kan. 1976)). And so, where a dispute between two parties is wholly
                unrelated to any contract between them, such a contract has no bearing on
                the resolution of the dispute. Put simply, a party's dispute cannot be
                governed by a contract out of which it did not arise.
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                provided the following example to show how doing so could lead to absurd
                results:
                            [I]f two small business owners execute a sales
                            contract including a general arbitration clause, and
                            one assaults the other, we would think it
                            elementary that the sales contract did not require
                            the victim to arbitrate the tort claim because the
                            tort claim is not related to the sales contract. In
                            other words, with respect to the alleged wrong, it is
                            simply fortuitous that the parties happened to have
                            a contractual relationship.
                Coors Brewing Co., 51 F.3d at 1516. Consequently, the district court must
                ensure that claims sent to arbitration arise under the parties' agreement.
                Cf. Metro. Life Ins. Co. v. Bucsek, 919 F.3d 184, 191 (2d Cir. 2019)
                (examining whether there was "a clear and unmistakable agreement by the
                parties to have the question of arbitrability of this dispute determined by
                arbitrators rather than the court" (emphasis added)). The Terms of Service
                bind hosts and guests who utilize Airbnb. As relevant to the underlying tort
                claims, respondents were neither.
                            What the aforementioned cases suggest, common sense
                confirms.   Airbnb's argument that the Terms of Service applies to this
                dispute is unreasonable and would lead to an absurd result. Cf. Moritz, 268
                Cal. Rptr. 3d at 474 (concluding that "no reasonable person" would construe
                an arbitration provision in a contract "to require arbitration of any future
                claim of whatever nature or type, no matter how unrelated to the
                agreement [] nor how distant in the future the claim arose"); Horne
                Warranty Adm'r of Nev., Inc. v. State, Dep't of Bus. & Indus., 137 Nev. 43,
                47, 481 P.3d 1242, 1247 (2021) (observing that "an absurd result is one 'so
                gross as to shock the general moral or common sense' (quoting Crooks v.
                Harrelson, 282 U.S. 55, 60 (1930))); Smith v. Steinkamp, 318 F.3d 775, 777

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                (7th Cir. 2003) (observing that "absurd results ensue" when an arbitration
                clause is "read as standing free from any [underlying] agreement"). In this
                scenario, "it is simply fortuitous that the parties happened to have a
                contractual relationship" completely unrelated to the underlying tort
                claims. Coors Brewing Co., 51 F.3d at 1516. But it is the foundational
                tenants of contract formation, not chance, that bind parties into a
                contractual relationship.
                            Accordingly, I believe that the majority has erred in reaching
                its disposition, and therefore I respectfully dissent.

                                                    Stiglich

                I concur:

                                             J.
                Herndon

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