In recent months, the Sixth Circuit has continued to rigorously enforce arbitration agreements and arbitration decisions, consistent with recent Supreme Court jurisprudence. This post profiles three Sixth Circuit cases from the past quarter that illustrate recent trends in the arbitration context. In Tillman v. Macy’s, Inc., 735 F.3d 453 (6th Cir. 2013), the Sixth Circuit held that an employee accepted her employer’s offer to arbitrate, “notwithstanding [the] absence of an employee-signed written agreement.” In Schafer v. Multiband, No. 13-1316, 2014 U.S. App. Lexis 288 (6th Cir. Jan. 6, 2014), profiled this week on the blog, the panel concluded that an arbitrator is not bound to follow Sixth Circuit precedent. And in Reed Elsevier, Inc. v. Craig Crockett, 734 F.3d 594 (6th Cir. 2013), the court put in place procedural safeguards for determining whether class claims may be brought in arbitration. More analysis after the jump.
In October, the court displayed its affinity for arbitration in Tillman v. Macy’s, Inc., 735 F.3d 453 (6th Cir. 2013), where it blessed an opt-out scheme for binding employees to arbitration. Tillman, a former Macy’s employee, brought a Title VII racial discrimination claim against Macy’s in federal court. The court denied Macy’s motion to compel arbitration, finding that the parties had never entered into an agreement to arbitrate. Reversing, the Sixth Circuit held that, “notwithstanding [the] absence of an employee-signed written agreement,” Tillman had accepted Macy’s offer to arbitrate. The panel based its findings on a series of mailings from Macy’s to Tillman that explained the arbitration program and provided her with forms for opting out, which Tillman never returned.
In finding a valid offer, the court placed emphasis on the mailing of “contract-like documents and election forms” (even though Tillman was not required to read them). And the court presumed that Tillman had received those materials, which were properly addressed and posted to her, despite Tillman’s protestations otherwise. Tillman was found to have accepted Macy’s offer “by continuing her employment with Macy’s and not returning either of the two opt-out forms provided to her.” Furthermore, the documents clearly provided that agreeing to arbitrate constitutes waiver of the right to a jury trial. Therefore, by not returning the opt-out forms, Tillman “knowingly and voluntarily assented to all of [the program’s] terms, including this clearly stated waiver of the right to trial by jury.”
As profiled this week on the blog, the court highlighted in a recent unpublished decision the extremely limited review that applies to arbitration decisions. Noting that arbitration should lead to finality even where there is legal error, the panel in Schafer v. Multiband, No. 13-1316, 2014 U.S. App. Lexis 288 (6th Cir., Jan. 6, 2014), reinstated an arbitrator’s decision that ran afoul of Sixth Circuit precedent. At issue in Schafer was the validity of indemnification agreements between Multiband and two fiduciaries. Relying on its own interpretation of ERISA, the arbitrator concluded that the indemnification agreements were void as against public policy despite Sixth Circuit authority to the contrary. Because the decision conflicted with Sixth Circuit precedent, the district court vacated on the grounds of “manifest disregard for the law.”
Reversing, the Sixth Circuit concluded that the arbitrator articulated a “colorable” reading of the ERISA statute. Reaffirming that review of an arbitration award is “one of the narrowest standards of judicial review in all of American jurisprudence,” the court reasoned that an arbitrator “is not necessarily bound by legal holdings of this court,” and may depart from the Sixth Circuit’s interpretation of the law (if not the law itself). The court also observed that manifest disregard for the law may no longer be a legitimate basis for invalidating an award, but did not reach the issue. Though nonbinding, Schafer illustrates the overwhelming leeway given to arbitrators and the absence of recourse for parties despite clear errors of law.
Despite its willingness to enforce arbitration agreements and decisions, the Sixth Circuit has recognized that the movement toward arbitration requires certain procedural safeguards, particularly in the class context. Interpreting an adhesion contract between LexisNexis and a law firm in Reed Elsevier, Inc. v. Craig Crockett, 734 F.3d 594 (6th Cir. 2013), the court held that classwide arbitration was presumptively a question for a court, and was not authorized by a silent or ambiguous arbitration agreement. After Crockett filed an arbitration demand against LexisNexis on behalf of himself and two putative classes, LexisNexis sought a declaration in federal court that class arbitration was not authorized by the Plan’s arbitration clause. That triggered the threshold question, who decides whether an arbitration clause authorizes classwide arbitration—a court or arbitrator?
The answer, according to the Sixth Circuit, is a court. Concluding that “classwide arbitrability” is a “gateway question,” the panel held that a judge should make the determination unless the parties “clearly and unmistakably provide otherwise.” In reaching this decision, the Sixth Circuit departed from the Supreme Court plurality in Green Tree Fin. Corp v. Bazzle, 539 U.S. 444 (2003), which concluded that classwide arbitrability was merely a “subsidiary question.” The court acknowledged that subsidiary questions growing out of a dispute are the province of an arbitrator. But enumerating the ways in which arbitration is “poorly suited to the higher stakes of class litigation,” the panel held that whether the class dispute itself may be arbitrated is too consequential a question to avoid judicial determination. And an arbitration agreement that is silent or ambiguous as to classwide arbitration does not overcome that presumption—even where the agreement provides that “any controversy” will be resolved by arbitration.
In sum, the Sixth Circuit continues to afford great deference to arbitrators and arbitration agreements, consistent with nationwide legal developments in favor of arbitration.