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November 07, 2018 practice point

Be Sure Your Arbitration Agreement Is Clear about Who Decides Arbitrability

By Maretta Comfort Toedt

In JPay, Inc. v. Kobel, (U.S. Dist. 11 Cir. Sep. 19, 2018) the parties agreed that their dispute was to be settled in arbitration but not whether the arbitration agreement provided for the dispute to be heard as a class. The parties also disagreed as to who should decide whether the dispute could be heard on a class basis.

The Eleventh Circuit determined that:

JPay and its users contracted and consented to arbitrate "any and all . . . disputes, claims and controversies" arising out of or relating to JPay's Terms of Service, and they agreed to arbitrate the arbitrability of those claims. When parties ask whether an arbitration may be conducted on a class basis, they are asking whether a class-based claim — a unique type of claim — is arbitrable. Thus, the instant dispute poses a question of arbitrability, and JPay has agreed that this is a question to be answered in arbitration.

The court also noted that the parties here incorporated the AAA rules in general terms and that by doing so, the parties also incorporated the AAA Supplemental Rules for Class Arbitration.

Thus, the court found that whether or not an arbitration agreement allowed class arbitration was a gateway question and therefore an issue for a court, not an arbitrator, to decide. Upon review of the specific arbitration language, however, the court determined that the broad language used by the parties and/or their incorporation of the AAA rules expressed their “clear intent” that the arbitrator decide all disputes about arbitrability, including whether class arbitration was available.

Maretta Comfort Toedt is a labor arbitrator in the Houston, Texas, area.

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