Court Opinion

ID: 4304204
Source: CourtListenerOpinion
Date Created: 2018-08-15 21:00:35.562501+00
Date Added: 2024-06-11T07:49:32.618116
License: Public Domain

Case: 17-14415     Date Filed: 08/15/2018   Page: 1 of 12

                                                                       [PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                     FOR THE ELEVENTH CIRCUIT
                       ________________________

                                No. 17-14415
                          ________________________

                    D.C. Docket No. 0:17-cv-61086-BB

SPIRIT AIRLINES, INC.,
a Delaware Corporation,
                                                            Plaintiff - Appellant,

                                    versus

STEVEN MAIZES,
an individual,
VINCENT ANZALONE,
an individual,
LEE TRAYLOR,
an individual,
HOWARD MADENBERG,
an individual,
                                                         Defendants - Appellees.

                          ________________________

                Appeal from the United States District Court
                    for the Southern District of Florida
                      ________________________

                              (August 15, 2018)
               Case: 17-14415        Date Filed: 08/15/2018      Page: 2 of 12

Before WILLIAM PRYOR and MARTIN, Circuit Judges, and WOOD, * District
Judge.

MARTIN, Circuit Judge:

       This appeal presents the question of whether it is a judge or an arbitrator

who must decide if the arbitration agreement between Spirit Airlines, Inc. and

members of its $9 Fare Club allows for arbitration of claims brought by a class of

claimants. To answer this question, we must, in turn, decide whether the

agreement’s choice of American Arbitration Association rules, standing alone, is

clear and unmistakable evidence that Spirit intended that the arbitrator decide this

question. Following the reasoning of Terminix International Co. v. Palmer Ranch

Ltd. Partnership, 432 F.3d 1327, 1332 (11th Cir. 2005), we conclude that it is, so

the arbitrator will decide. For this reason and a few others we will discuss, we

affirm.

                                       I. Background

       On April 12, 2017, Steven Maizes and three other class representatives filed

a claim in arbitration against Spirit Airlines, Inc. on behalf of a class of consumers.

The claim arose out of Spirit’s offer of membership in a club called the “$9 Fare

Club,” for a yearly membership fee of $59.95. Spirit advertised that club members

would “experience the ultimate in cost savings” and could “cancel at any time.”

       *
          Honorable Lisa Wood, United States District Judge for the Southern District of Georgia,
sitting by designation.

                                               2
              Case: 17-14415     Date Filed: 08/15/2018     Page: 3 of 12

But the class representatives alleged Spirit broke several promises made in the $9

Fare Club Agreement. The details of these promises, and whether or how they

were broken, are not the subject of this appeal.

      Soon after, on May 30, Spirit filed suit against the class representatives in

federal court in the Southern District of Florida. Spirit’s lawsuit sought a

declaration that the agreement’s arbitration clause does not authorize class

arbitration claims. The agreement’s arbitration clause states:

      This Agreement and the terms of membership shall be governed and
      construed in accordance with the laws of the State of Florida without
      giving effect to the choice of law provisions thereof. Any dispute
      arising between Members and Spirit will be resolved by submission to
      arbitration in Broward County, State of Florida in accordance with the
      rules of the American Arbitration Association then in effect.
      Notwithstanding the foregoing, nothing in this Agreement is intended
      or shall be construed to negate or otherwise affect the consumer
      protection laws of the state in which Members reside.

      Shortly after Spirit filed its suit, it asked the District Court to impose a

preliminary injunction to stop the arbitration of class claims. The class

representatives, in turn, moved to dismiss Spirit’s lawsuit, saying subject matter

jurisdiction did not exist in federal court. The District Court held a hearing on both

motions. During the hearing, Spirit’s counsel said he would like to have Spirit’s

vice president testify “that there was never an intent to arbitrate more than one

dispute at a time.” Spirit’s counsel said that the vice president’s testimony would

be relevant “[i]f there is an ambiguity as to what’s intended” in the agreement.

                                           3
              Case: 17-14415     Date Filed: 08/15/2018   Page: 4 of 12

      After the hearing, the District Court denied Spirit’s request for an injunction

and dismissed the case. The District Court ruled that the agreement’s choice of

AAA rules incorporated Rule 3 of the Supplementary Rules for Class Actions,

which designates the arbitrator to decide whether the arbitration agreement permits

class arbitration. Because the AAA rules require the arbitrator to decide this

question, the court dismissed the case for lack of jurisdiction. This appeal

followed.

                               II. Standard of Review

      “We review de novo the district court’s grant of a motion to dismiss and

compel arbitration.” Bodine v. Cook’s Pest Control Inc., 830 F.3d 1320, 1324

(11th Cir. 2016).

                                   III. Discussion

      Arbitrations routinely generate three categories of dispute. First, there are

the merits of the disagreement. Second, there is a dispute about whether the parties

agreed to arbitrate their disagreement. Third, parties disagree about who gets to

decide whether they agreed to arbitrate their differences. See First Options of

Chicago, Inc. v. Kaplan, 514 U.S. 938, 942, 115 S. Ct. 1920, 1923 (1995).

      In First Options, the Supreme Court told us how to go about determining

whether the parties agreed to have a court or an arbitrator decide whether they

agreed to arbitrate the dispute. Id. at 944, 115 S. Ct. at 1924. The Court observed

                                          4
                Case: 17-14415         Date Filed: 08/15/2018        Page: 5 of 12

that when parties enter into an arbitration agreement, they “often might not focus”

on who should decide whether their agreement to arbitrate extends to a given

dispute. Id. at 945, 115 S. Ct. at 1925. With this in mind, the Court directed lower

courts to never assume the parties agreed to have an arbitrator decide questions of

arbitrability “unless there is clear and unmistakable evidence that they did so.” Id.

at 944, 115 S. Ct. at 1924 (alterations adopted and quotation omitted).

       Here, the parties dispute whether the agreement’s choice of AAA arbitration

rules amounts to “clear and unmistakable” evidence of the parties’ intent to have

an arbitrator decide whether the agreement permits class arbitration.1 Spirit points

to opinions from four other circuits to argue that the incorporation of AAA rules,

standing alone, is not enough to overcome the First Options presumption. We have

concluded to the contrary.

       Our court’s opinion in Terminix weighs heavily in our consideration. In

Terminix, Palmer Ranch sued Terminix in Florida state court. 432 F.3d at 1329.

Terminix responded by suing Palmer Ranch in federal court to compel it to

       1
          Neither this circuit nor the Supreme Court has resolved whether the availability of class
arbitration is a question of arbitrability under First Options. See Oxford Health Plans LLC v.
Sutter, 569 U.S. 564, 569 n.2, 133 S. Ct. 2064, 2068 n.2 (2013); S. Commc’ns Servs., Inc. v.
Thomas, 720 F.3d 1352, 1358 n.6 (11th Cir. 2013). But see Green Tree Fin. Corp. v. Bazzle,
539 U.S. 444, 452, 123 S. Ct. 2402, 2407 (2003) (plurality opinion) (stating that class
arbitrability was not a question of “whether they agreed to arbitrate a matter,” but a question of
“what kind of arbitration proceeding the parties agreed to” (emphasis removed)). On appeal, the
class representatives did not dispute Spirit’s argument that the availability of class arbitration is a
question of arbitrability. Because the parties agreed this issue is a question of arbitrability, we
assume it without deciding the issue.
                                                  5
               Case: 17-14415      Date Filed: 08/15/2018     Page: 6 of 12

arbitrate based on agreements between the parties. Id. Palmer Ranch responded

that the arbitration agreements were not enforceable because they eliminated

Palmer Ranch’s statutory remedies and rights under Florida’s Deceptive and

Unfair Trade Practices Act. Id. The District Court agreed with Palmer Ranch,

held the agreements unenforceable, and denied Terminix’s motion to compel

arbitration. Id. at 1329–31.

       On appeal, this Court reversed and directed the District Court to grant the

motion to compel arbitration. Id. at 1333. We observed that Rule 8(a) of the AAA

Commercial Arbitration Rules provides that “the arbitrator shall have the power to

rule on his or her own jurisdiction, including any objections with respect to the

existence, scope or validity of the arbitration agreement.” Id. at 1332 (alteration

adopted). Based on Rule 8(a), Terminix held that the parties’ choice of AAA’s

Commercial Arbitration Rules was clear and unmistakable evidence that they

intended an arbitrator to decide whether the arbitration agreements were

enforceable. Id.

       The reasoning of Terminix applies here as well. The parties’ agreement

plainly chose AAA rules. Those rules include AAA’s Supplementary Rules for

Class Arbitrations, which, true to their name, supplement the other AAA rules. 2

       2
         AAA maintains a number of industry specific rules like the “Commercial Arbitration
Rules and Mediation Procedures,” “Consumer Arbitration Rules,” “Labor Arbitration Rules,”
“International Dispute Resolution Procedures,” among others. See Am. Arbitration Ass’n, AAA
                                             6
                 Case: 17-14415       Date Filed: 08/15/2018       Page: 7 of 12

Supplementary Rule 3 provides that an arbitrator shall decide whether an

arbitration clause permits class arbitration. 3 According to Terminix, this is clear

and unmistakable evidence that the parties chose to have an arbitrator decide

whether their agreement provided for class arbitration. 4 See id.

       Spirit argues that we should demand a higher showing for questions of class

arbitrability than for other questions of arbitrability. It says this higher burden is

needed because class arbitration dramatically changes what ordinarily goes on in

arbitration. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 686–

Court and Time-Tested Rules & Procedures, https://www.adr.org/active-rules. The effect of
Supplementary Rule 1(a) is to “supplement any other applicable AAA rules.”
       3
           In full, Supplementary Rule 3 provides:
               Upon appointment, the arbitrator shall determine as a threshold matter, in
       a reasoned, partial final award on the construction of the arbitration clause,
       whether the applicable arbitration clause permits the arbitration to proceed on
       behalf of or against a class (the “Clause Construction Award”). The arbitrator
       shall stay all proceedings following the issuance of the Clause Construction
       Award for a period of at least 30 days to permit any party to move a court of
       competent jurisdiction to confirm or to vacate the Clause Construction Award.
       Once all parties inform the arbitrator in writing during the period of the stay that
       they do not intend to seek judicial review of the Clause Construction Award, or
       once the requisite time period expires without any party having informed the
       arbitrator that it has done so, the arbitrator may proceed with the arbitration on the
       basis stated in the Clause Construction Award. If any party informs the arbitrator
       within the period provided that it has sought judicial review, the arbitrator may
       stay further proceedings, or some part of them, until the arbitrator is informed of
       the ruling of the court.
               In construing the applicable arbitration clause, the arbitrator shall not
       consider the existence of these Supplementary Rules, or any other AAA rules, to
       be a factor either in favor of or against permitting the arbitration to proceed on a
       class basis.
       4
        The Fifth Circuit has adopted a similar approach. See Robinson v. J & K Admin.
Mgmt. Servs., Inc., 817 F.3d 193, 196 (5th Cir. 2016); Reed v. Fla. Metro. Univ., Inc., 681 F.3d
630, 634–35 (5th Cir. 2012), abrogated on other grounds by Oxford Health Plans, 569 U.S. at
568, 133 S. Ct. at 2068.
                                                 7
              Case: 17-14415    Date Filed: 08/15/2018   Page: 8 of 12

87, 130 S. Ct. 1758, 1776 (2010) (explaining differences between class and

bilateral arbitration). Spirit’s argument has some authority. Four circuits have

held that adoption of the AAA rules is not clear and unmistakable evidence of the

parties’ intent to have an arbitrator decide whether the agreement allows class

arbitration. See Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966, 972–73

(8th Cir. 2017); Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d

746, 762–63 (3d Cir. 2016); Dell Webb Cmtys., Inc. v. Carlson, 817 F.3d 867,

876–77 (4th Cir. 2015); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett,

734 F.3d 594, 599–600 (6th Cir. 2013).

      While we respect the work of our sister circuits, we have read Supreme

Court precedent differently. The out-of-circuit cases relied upon by Spirit import

the reasoning of Stolt-Nielsen, 559 U.S. at 684, 130 S. Ct. at 1774–75. See Reed

Elsevier, 734 F.3d at 599 (citing Stolt-Nielsen, 559 U.S. at 684–85, 130 S. Ct. at

1774–75); Chesapeake Appalachia, 809 F.3d at 760 (“We nevertheless have

looked to these ‘clause construction’ cases [like Stolt-Nielsen] for guidance in

answering the ‘who decides’ question.”). In contrast, we read Stolt-Nielsen to

address the question of whether an agreement allows class arbitration at all,

separate from the issue of who decides the question to begin with. See 559 U.S. at

684, 130 S. Ct. at 1775. We agree with Spirit that these circuits have created a

higher burden for showing “clear and unmistakable” evidence for questions of

                                          8
                Case: 17-14415         Date Filed: 08/15/2018        Page: 9 of 12

class arbitrability than for ordinary questions of arbitrability. See, e.g., Catamaran,

864 F.3d at 973 (“The risks incurred by defendants in class arbitration . . . and the

difficulties presented by class arbitration . . . all demand a more particular

delegation of the issue than we may otherwise deem sufficient in bilateral

disputes.”). However, we find no basis for that higher burden in Supreme Court

precedent. 5

       At oral argument, Spirit made a new argument based on the last paragraph of

Supplementary Rule 3. This paragraph says “[i]n construing the applicable

arbitration clause, the arbitrator shall not consider the existence of these

Supplementary Rules, or any other AAA rules, to be a factor either in favor of or

against permitting the arbitration to proceed on a class basis.” According to Spirit,

this paragraph means a court should not consider the existence of the

Supplementary Rules when deciding whether the parties empowered the arbitrator

to decide the question of class arbitrability.
       5
          The reasoning of Stolt-Nielsen lends credence to the idea that the availability of class
arbitration is not presumptively for courts to decide. First Options’s holding that courts
presumably decide questions of arbitrability was based on an empirical claim that parties are not
likely to have focused on the “who decides” question when they reached their agreement. First
Options, 514 U.S. at 944–45, 115 S. Ct. at 1924–25. But it seems to us that if the change from
bilateral to class arbitration is as important as Stolt-Nielsen states, 559 U.S. at 686–87, 130 S. Ct.
at 1776, then we would expect Spirit to have thought about who it wanted to decide that issue
when it drafted the arbitration agreement. In this way, at least for the question of who decides
the availability of class arbitration, Stolt-Nielsen may be at odds with the empirical premise at
the heart of First Options’s holding. We need consider this no further, however, because we
view Spirit’s choice of AAA rules as “clear and unmistakable” evidence that it wanted the
arbitrator to decide whether this agreement permits class arbitration. See Terminix, 432 F.3d at
1332.

                                                  9
               Case: 17-14415   Date Filed: 08/15/2018    Page: 10 of 12

      Again, we understand Spirit’s argument to substitute the question of whether

a particular agreement permits class arbitration for the different question of

whether the agreement delegates the decision on that question to the arbitrator. We

read the last paragraph of Supplementary Rule 3 to mean simply that the existence

of the Supplementary Rules has no effect on whether the agreement permits class

arbitration.

      Spirit also argues the agreement’s choice of Florida law makes the

agreement ambiguous about whether the Florida Arbitration Code or the AAA

rules apply. In this regard, we look back at the arbitration clause again, this time

with different emphasis:

      This Agreement and the terms of membership shall be governed and
      construed in accordance with the laws of the State of Florida without
      giving effect to the choice of law provisions thereof. Any dispute
      arising between Members and Spirit will be resolved by submission to
      arbitration in Broward County, State of Florida in accordance with the
      rules of the American Arbitration Association then in effect.
      Notwithstanding the foregoing, nothing in this Agreement is intended
      or shall be construed to negate or otherwise affect the consumer
      protection laws of the state in which Members reside.

Spirit says the choice of “the laws of the State of Florida” incorporates the Florida

Arbitration Code. And Florida’s Arbitration Code reserves questions of

arbitrability for courts. See Fla. Stat. § 682.02(2). According to Spirit, the

ambiguity created by the simultaneous incorporation of the Florida Arbitration

                                          10
               Case: 17-14415     Date Filed: 08/15/2018   Page: 11 of 12

Code and the AAA rules means the District Court must decide whether the

agreement permits class arbitration.

         Yet any perceived ambiguity in Spirit’s agreement can be resolved through

normal interpretive methods. See City of Homestead v. Johnson, 760 So. 2d 80, 84

(Fla. 2000) (“[W]e rely upon the rule of construction requiring courts to read

provisions of a contract harmoniously in order to give effect to all portions

thereof.”). The best interpretation of Spirit’s agreement is that Florida law covers

the parties’ substantive rights and duties while the choice of AAA rules covers

dispute resolution procedures. See Mastrobuono v. Shearson Lehman Hutton, Inc.,

514 U.S. 52, 63–64, 115 S. Ct. 1212, 1219 (1995) (giving an arbitration agreement

a similar construction). Thus the agreement is not ambiguous.

         Finally, Spirit argues the District Court should be reversed because it did not

apply the correct legal standard and instead decided an issue of fact on the motion

to dismiss. Somewhat relatedly, Spirit says the District Court erred by not

allowing its vice president to testify about Spirit’s intent in choosing the AAA

rules.

         There is no merit to these arguments. The arbitration agreement was

attached to Spirit’s complaint, was central to the case, and its authenticity was not

disputed. It was therefore appropriate for the District Court to consider it in

deciding the class representatives’ motion to dismiss for lack of subject matter

                                            11
             Case: 17-14415      Date Filed: 08/15/2018    Page: 12 of 12

jurisdiction. See Maxcess, Inc. v. Lucent Techs., Inc., 433 F.3d 1337, 1340 n.3

(11th Cir. 2005) (per curiam); see also Fed. R. Civ. P. 10(c) (“A copy of a written

instrument that is an exhibit to a pleading is a part of the pleading for all

purposes.”). And interpretation of the agreement is a question of law, not fact. See

Inetianbor v. CashCall, Inc., 768 F.3d 1346, 1350 (11th Cir. 2014).

      Also, by finding the arbitration agreement clearly and unmistakably

evidenced the parties’ intent to arbitrate the class arbitration question, the District

Court implicitly found the agreement is not ambiguous on that issue. See First

Options, 514 U.S. at 944–45, 115 S. Ct. at 1924. As a result, the District Court

was not permitted to rely on testimony from Spirit’s vice president to explain the

agreement’s meaning, and was correct to reject the offer of that testimony. See,

e.g., Lab. Corp. of Am. v. McKown, 829 So. 2d 311, 313 (Fla. 5th DCA 2002)

(“[W]hen the terms and provisions of a contract are unambiguous and complete,

parol evidence is not admissible to define or explain them.” (quotation omitted)).

There was no error in refusing this testimony.

      AFFIRMED.

                                           12