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Media Alerts - Elsevier, Inc. v. Crockett - Sixth Circuit
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January 28, 2014
  Elsevier, Inc. v. Crockett - Sixth Circuit
Headline: Courts - not arbitrators - should decide whether an arbitration agreement allows for classwide arbitration when the agreement is silent or ambiguous on the question.

Area of Law: Alternative Dispute Resolution; Contract Law

Issue Presented: May an arbitrator decide whether an arbitration agreement allows for classwide arbitration when the agreement is silent on the question?

Brief Summary: Two parties disagreed on whether their arbitration agreement allowed for classwide arbitration. The agreement did not specifically mention classwide arbitration. The district court held that a court, not an arbitrator, should decide whether an arbitration agreement allows for classwide arbitration. The Sixth Circuit affirmed, holding that the question of classwide arbitration is a gateway question, not a subsidiary question. And gateway questions are reserved for the courts unless the parties clearly and unmistakably provide otherwise.

Significance: The Sixth Circuit is the first court to decide whether classwide arbitrability is presumptively for an arbitrator to decide or presumptively for a court to decide.

Extended Summary: A New York lawyer entered into a LexisNexis subscription agreement. Later, the parties had a billing dispute. The agreement contained an arbitration clause. The clause required that any arbitration of a billing dispute occur in LexisNexis's home city. Because the provision made the lawyer's dispute economically unfeasible, he filed an arbitration demand on behalf of himself and two putative classes, seeking damages exceeding $500 million. In response, LexisNexis sued the lawyer in a federal district court in Ohio, seeking a declaration that the arbitration clause does not authorize class arbitration and seeking an injunction barring the lawyer from proceeding with classwide arbitration. The district court granted summary judgment in favor of LexisNexis. The lawyer appealed.

On appeal, the lawyer argued that an arbitrator - not the district court - should have decided whether the arbitration clause allowed classwide arbitration. The Sixth Circuit rejected this argument and affirmed. The court's first order of business was to determine whether classwide arbitrability is a gateway question or a subsidiary one. The court explained that "gateway questions" relate to the manner in which the parties will resolve their dispute. Conversely, "subsidiary questions" involve issues that "grow out of the dispute and bear on its final disposition."

The Sixth Circuit looked to the Supreme Court for guidance. Although the Supreme Court hasn't squarely decided the question, its most-recent precedent "has given every indication, short of an outright holding, that classwide arbitrability is a gateway question rather than a subsidiary one." The Supreme Court has also emphasized that arbitration clauses must be interpreted according to their terms. Against this backdrop, the Sixth Circuit examined the fundamental differences between bilateral and classwide arbitration. First, arbitration's putative benefits - reducing costs and improving efficiency - are less assured in classwide arbitration. Second, maintaining confidentiality is more difficult in classwide arbitrations. Third, the commercial stakes in classwide arbitration are similar to that of class-action litigation. And fourth, if arbitration is expanded classwide, it could potentially violate the due-process rights of individuals who are not part of the class.

After examining the fundamental differences between bilateral and classwide arbitration, the Sixth Circuit concluded that whether an arbitration agreement allows classwide arbitration is a gateway question reserved "for judicial determination unless the parties clearly and unmistakable provide otherwise."

Next, the Sixth Circuit examined the arbitration-clause language and concluded that the clause did not mention classwide arbitration at all. So the Sixth Circuit concluded that the agreement, at best, was ambiguous on the question of classwide arbitrability. Thus, the Sixth Circuit agreed with the district court and held that the question of whether the parties agreed to arbitrate must be decided by a court - not an arbitrator. Consenting to arbitration, the court noted, does not necessarily mean consenting to classwide arbitration.

The lawyer's final argument was that the arbitration clause was unconscionable because it didn't allow classwide arbitration. The Sixth Circuit acknowledged that the agreement favored LexisNexis but found that "the absence of a class-action right doesn't render an arbitration agreement unenforceable."

Link to Full Opinion: http://www.ca6.uscourts.gov/op...13a0323p-06.pdf


Panel: Batchelder, Merritt, and Kethledge

Argument: January 17, 2013

Date of Issued Opinion: November 5, 2013

Docket Number: 12-3574

Decided: Affirmed.

Case Alert Author: Jessica Michels

Counsel: Blair C. Fensterstock, FENSTERSTOCK & PARTNERS LLP, New York, New York, for Appellants. Charles J. Faruki, FARUKI, IRELAND & COX, P.L.L., Dayton, Ohio, for Appellee. ON BRIEF: Blair C. Fensterstock, Eugene D. Kublanovsky, FENSTERSTOCK & PARTNERS LLP, New York, New York, Patrick F. Haggerty, Lindsey A. Carr-Siegler, FRANTZ WARD LLP, Cleveland, Ohio, for Appellants. Charles J. Faruki, Donald E. Burton, FARUKI, IRELAND & COX, P.L.L., Dayton, Ohio, for Appellee.

Author of Opinion: Circuit Judge Kethledge

Case Alert Circuit Supervisor: Professor Tammy Asher

    Posted By: Mark Cooney @ 01/28/2014 02:45 PM     6th Circuit  

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