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Sixth Circuit Considers Class Action Waiver

Posted in News and Analysis, Supreme Court

Class action waivers have garnered significant attention in the arbitration context over recent years, including several cases that have reached the Supreme Court on this and related issues.  Earlier this week, in Lowry v. JPMorgan Chase Bank, the Sixth Circuit considered the effect of a class action waiver in an arbitration clause.  The plaintiff in that case signed an agreement with Chase that contained a broad arbitration clause, including a class action waiver.  Nevertheless, he brought a lawsuit against Chase on behalf of a putative class claiming violation of antitrust laws and related state law.  In response to Chase’s motion to compel arbitration, the district court granted the motion but denied the motion to dismiss class claims, submitting all of the claims to arbitration.  On appeal, Chase argued that the class claims were not arbitrable because of the clear class action waiver.  The Sixth Circuit, however, disagreed, relying on the broad delegation clause that delegated to the arbitrator authority to decide arbitrability.  Therefore, even though the plaintiff signed a clear class action waiver, the Court held that it was up to the arbitrator to determine how to interpret the contract.

Although this is an unpublished opinion, it attains new significance in light of the decision issued the day before by the  U.S. Supreme Court in Oxford Health Plans LLC v. Sutter.  In that case, the Court refused to disturb an arbitrator’s award determining that a case could proceed on a class action basis.  The case underscores the difficulty of overturning arbitrator decisions, even if they are simply wrong.

When these two cases are considered together, it poses a number of issues for parties desiring arbitration of disputes and how those arbitration clauses should be drafted.  It also raises questions concerning whether parties should include broad delegation clauses in their arbitration agreement (which have gained favor in recent years) and risk that an arbitrator might determine (contrary to the language in the agreement) that a claim could proceed on a class basis.   As the Supreme Court recently determined, such a holding will be difficult to overturn through judicial review. But the Supreme Court did not consider a clear class action waiver in Oxford, so it remains to be seen how or whether its analysis might change if confronted with that scenario.