From the Employer Law Report (Caroline Gentry):
The Sixth Circuit held that courts, not arbitrators, must decide the “gateway” issue of whether an arbitration clause permits classwide arbitration—and that clauses that are silent on the issue do not permit classwide arbitrations.
In Reed Elsevier, Inc. v. Crockett, No. 12-3574, (6th Cir. Nov. 5, 2013), the plaintiff was a Texas attorney who alleged that his firm was being charged steep fees for using research databases outside of its LexisNexis Subscription Plan without any displayed warning. The parties’ contract contained an arbitration clause that was silent on the issue of classwide arbitration. Crockett filed a classwide arbitration demand for $500 million on behalf of two putative classes, and LexisNexis asked a federal district court to declare that the arbitration clause did not authorize classwide arbitration. The district court awarded judgment to LexisNexis.
On appeal, Crockett argued that an arbitrator, rather than a court, should have decided whether the arbitration clause authorizes classwide arbitration. The Sixth Circuit disagreed. Resolving an issue left open by the United States Supreme Court, it held that “the question whether an arbitration agreement permits classwide arbitration is a gateway matter, which is reserved ‘for judicial determination unless the parties clearly and unmistakably provide otherwise.’” The Sixth Circuit concluded that because the arbitration clause was silent on the issue of classwide arbitrability, it did not “clearly and unmistakably” assign that question to an arbitrator and the court was therefore the proper decisionmaker.
Turning to the parties’ arbitration clause, the Sixth Circuit held that because it did not expressly address classwide arbitrations it must be read to bar them. The court felt compelled to reach this conclusion even though “[t]he idea that the arbitration agreement in this case reflects the intent of anyone but LexisNexis is the purest legal fiction,” the arbitration clause appeared in an “adhesion contract” and its provisions made Crockett’s individual claim “economically unfeasible.” Nevertheless, the Sixth Circuit concluded that under United States Supreme Court precedent, the arbitration clause was not unconscionable and it must be interpreted to bar classwide arbitrations.
Reed Elsevier is a major win for companies and employers. Classwide arbitrations are effectively barred unless they are expressly authorized by an arbitration clause. Defendants can ask courts to enforce this limitation at the outset and need not submit the question to an arbitrator, who may rule differently and whose decision is not easily appealable. Finally, plaintiffs cannot avoid these results by arguing that the parties’ contract is one-sided, adhesive or unconscionable. All of these holdings are a major win for companies and employers that do not want to be forced to defend class arbitrations.