20/20 Communications, Inc. v. Randall Blevins, et ( 2019 )

Case: 18-10260 Document: 00515042973 Page: 1 Date Filed: 07/22/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 18-10260 United States Court of Appeals
Fifth Circuit
FILED
July 22, 2019
20/20 COMMUNICATIONS, INCORPORATED,
Lyle W. Cayce
Plaintiff - Appellant Clerk
v.
LENNOX CRAWFORD,
Defendant – Appellee
*********************************************
Consolidated with 19-10050
20/20 COMMUNICATIONS, INCORPORATED,
Plaintiff - Appellant
v.
RANDALL BLEVINS; KATHY DIGRUILLES; JAMES COBBLE; BRINA
HEALY; JULIA MUCHEKE-BARRETT; PETER SALDORIGA; LOREN
SIMPSON; CHARLES SMITH; BENJAMIN STANCZIK; FREDDIE TUBBS;
KYIL WAITS; DEBORAH BUFFAMANTI; DAVID VINE; JUAN CASTILLO;
LENNOX CRAWFORD; THOMAS DEMIRIS; KIMBERLY KOPPELMAN;
REDWAN NEGASH,
Defendants - Appellees
Appeals from the United States District Court
for the Northern District of Texas
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Before SMITH, BARKSDALE, and HO, Circuit Judges.
JAMES C. HO, Circuit Judge:
The parties entered an arbitration agreement that permits the arbitrator
to “hear only individual claims,” and prohibits arbitration “as a class or
collective action . . . to the maximum extent permitted by law.” An arbitrator
nevertheless commenced a class arbitration under this agreement, on the
theory that the parties’ class arbitration bar is prohibited by federal law. The
question before us today is not whether the arbitrator’s class arbitration
decision is correct, but whether class arbitration should have been an issue for
the arbitrator, rather than a court, to decide in the first place.
Ordinarily, courts must refrain from interfering with arbitration
proceedings. But as our sister circuits have held, and as we now hold today,
class arbitration is a “gateway” issue that must be decided by courts, not
arbitrators—absent clear and unmistakable language in the arbitration clause
to the contrary.
And no such contrary language exists here. Quite the opposite, in fact:
As noted, the arbitration agreement permits individual arbitrations only, and
it explicitly prohibits arbitrators from commencing class arbitrations to the
maximum extent permitted by law. That language is, at best, in substantial
tension with—and in any event, not clear and unmistakable support for—the
notion that the parties authorized the arbitrator to decide the gateway issue of
class arbitration.
Accordingly, we hold that courts, not arbitrators, must decide the
gateway issue of class arbitration presented here, and accordingly remand for
further proceedings.
I.
20/20 Communications, Inc. is a national direct-sales and marketing
company. The company employs field sales managers and requires as a
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condition of employment that they sign the company’s Mutual Arbitration
Agreement. That agreement contains, among other provisions, a class
arbitration bar, under which employees agree to bring only individual actions,
and not class or collective actions, to arbitration.
A number of field sales managers filed separate individual arbitration
claims, but later amended them to assert identical class claims. In response,
20/20 sought a declaration in federal district court that the issue of class
arbitrability is a gateway issue for the court rather than the arbitrator to
decide, and that the class arbitration bar does indeed foreclose class
arbitration. See 20/20 Commc’ns, Inc. v. Blevins, No. 4:16-cv-00810-Y (N.D.
Tex.) (Means, J.) (“Blevins”).
During the pendency of the federal district court proceedings in Blevins,
some employees asked their individual arbitrators to issue clause construction
awards holding that the class arbitration bar is prohibited by the National
Labor Relations Act. Of the six arbitrators who issued clause construction
awards, one concluded that the class arbitration bar is indeed unenforceable
under the NLRA.
In response, 20/20 filed a new action in federal district court to vacate
that arbitrator’s clause construction award invalidating the class arbitration
bar. The district court rejected 20/20’s request and instead confirmed the
clause construction award. See 20/20 Commc’ns, Inc. v. Crawford, No. 4:17-
cv-929-A (N.D. Tex.) (McBryde, J.) (“Crawford”). 20/20 appealed that ruling.
After we heard oral argument in Crawford, the district court in Blevins
held that the arbitration agreement authorized the arbitrator, rather than the
court, to determine class arbitrability, and dismissed the complaint
accordingly. 20/20 has now appealed that ruling as well.
We consolidated Blevins and Crawford for purposes of appeal, and now
decide both appeals here.
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II.
When parties agree to arbitrate certain disputes, courts naturally expect
those parties to resolve those disputes before an arbitrator, rather than a court.
Certain threshold questions of arbitrability, however, are typically reserved for
courts to decide, absent “clear and unmistakable” language in the arbitration
agreement to the contrary. Henry Schein, Inc. v. Archer and White Sales, Inc.,
139 S. Ct. 524, 530 (2019) (citing First Options of Chicago, Inc. v. Kaplan, 514
U.S. 938, 944 (1995)). For example, if parties dispute whether they in fact ever
agreed to arbitrate at all, such questions of contract formation are considered
“gateway” issues that presumptively must be decided by courts, not
arbitrators. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68–69 (2010).
The principal question presented in these appeals is whether the availability
of class arbitration, like contract formation, is a gateway issue that a court
must decide, in the absence of clear and unmistakable language subjecting
such questions of arbitrability to an arbitrator rather than a court.
To date, the Supreme Court has not decided whether class arbitrability
is such a gateway issue. See Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1417
n.4 (2019). Nor have we. 1
But a number of our sister circuits have—and all of them have concluded
that class arbitrability is a gateway issue. See Del Webb Cmtys., Inc. v.
Carlson, 817 F.3d 867, 877 (4th Cir. 2016); Reed Elsevier, Inc. ex rel. LexisNexis
Div. v. Crockett, 734 F.3d 594, 599 (6th Cir. 2013); Herrington v. Waterstone
1 Our decision in Pedcor Mgmt. Co., Inc. Welfare Benefit Plan v. Nations Personnel of
Texas, Inc., 343 F.3d 355 (5th Cir. 2003), did not decide the issue. As our court has explained,
Pedcor “did not . . . stand for the proposition that the availability of class determination must
always be decided by the arbitrator.” Robinson v. J & K Admin. Mgmt. Servs., Inc., 817 F.3d
193, 196 (5th Cir. 2016). Rather, Pedcor holds only that, “if parties agree to submit the issue
of arbitrability to the arbitrator, then the availability of class or collective arbitration is a
question for the arbitrator instead of the court.” Id. at 197 (emphasis added).
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Mortg. Corp., 907 F.3d 502, 506–07 (7th Cir. 2018); Catamaran Corp. v.
Towncrest Pharmacy, 864 F.3d 966, 972 (8th Cir. 2017); Eshagh v. Terminix
Int’l Co., L.P., 588 F. App’x 703, 704 (9th Cir. 2014) (unpublished); JPay, Inc.
v. Kobel, 904 F.3d 923, 935–36 (11th Cir. 2018).
We agree with our sister circuits and hold today that class arbitrability
is a gateway issue for courts, not arbitrators, to decide, absent clear and
unmistakable language to the contrary. Like our sister circuits, we regard the
decision to arbitrate a dispute as a class, rather than on an individual basis,
as a threshold question of arbitrability, because class arbitrations differ from
individual arbitrations in fundamental ways.
As the Supreme Court has repeatedly observed, “[t]he class action is ‘an
exception to the usual rule that litigation is conducted by and on behalf of the
individual named parties only.’” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338,
348 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700–01 (1979)). After
all, in a class action, “[t]he arbitrator’s award no longer purports to bind just
the parties to a single arbitration agreement, but adjudicates the rights of
absent parties as well.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S.
662, 686 (2010) (citation omitted).
This is not just a difference in form—it has significant practical and
substantive consequences as well. Class actions dramatically increase not only
the size but also the complexity of the dispute. See, e.g., AT&T Mobility LLC
v. Concepcion, 563 U.S. 333, 348 (2011) (noting that class arbitration “makes
the process slower, more costly, and more likely to generate procedural morass
than final judgment”). That is not just because there are more parties involved.
It is also because, as our sister circuits have observed, class actions raise
important due process concerns. See, e.g., Reed Elsevier, 734 F.3d at 598;
Catamaran, 864 F.3d at 972. Because class actions bind not only named
parties, but also countless unnamed parties as well, due process requires that
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absent parties “be afforded notice, an opportunity to be heard, and a right to
opt out of the class.” AT&T Mobility, 563 U.S. at 349. That raises the costs
and reduces the efficiency of arbitration. See, e.g., Catamaran, 864 F.3d at 972.
In addition, one of the perceived benefits of arbitration, in contrast to
litigation, is the protection of the privacy and confidentiality of the parties.
That privacy and confidentiality is threatened in a class arbitration, thereby
“frustrating the parties’ assumptions when they agreed to arbitrate.” Stolt-
Nielsen, 559 U.S. at 686. See also, e.g., Catamaran, 864 F.3d at 971–72 (same).
So we have no difficulty agreeing with our sister circuits who have
described the availability of class arbitration as “a foundational question of
arbitrability.” Herrington, 907 F.3d at 507. We hold that class arbitrability is
a gateway issue.
III.
Having determined that class arbitration is a gateway issue that is
presumptively decided by courts, not arbitrators, our next task is to determine
whether the parties here clearly and unmistakably agreed to allow the
arbitrator to determine that issue. See, e.g., First Options, 514 U.S. at 944.
The arbitration agreement at issue in these appeals contains the
following language, permitting individual arbitrations only and prohibiting
class arbitrations to the maximum extent permitted by law:
“[T]he parties agree that this Agreement prohibits the arbitrator
from consolidating the claims of others into one proceeding, to the
maximum extent permitted by law. This means that an arbitrator
will hear only individual claims and does not have the authority to
fashion a proceeding as a class or collective action or to award relief
to a group of employees in one proceeding, to the maximum extent
permitted by law.” (Emphasis added.)
We conclude that this class arbitration bar operates not only to bar class
arbitrations to the maximum extent permitted by law, but also to foreclose any
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suggestion that the parties meant to disrupt the presumption that questions
of class arbitration are decided by courts rather than arbitrators.
After all, it is difficult for us to imagine why parties would categorically
prohibit class arbitrations to the maximum extent permitted by law, only to
then take the time and effort to vest the arbitrator with the authority to decide
whether class arbitrations shall be available. Having closed the door to class
arbitrations to the fullest extent possible, why would the parties then re-open
the door to the possibility of class arbitrations, by announcing specific
procedures to govern how such determinations shall be made?
In all events, we find nothing in the arbitration agreement that gives
such authority to the arbitrator with the clear and unmistakable language
required by Supreme Court precedent.
For their part, the employees cite three provisions that vest the
arbitrator with various general powers:
• “If Employer and Employee disagree over issues concerning the
formation or meaning of this Agreement, the arbitrator will hear and
resolve these arbitrability issues.”
• “The arbitrator selected by the parties will administer the arbitration
according to the National Rules for the Resolution of Employment
Disputes (or successor rules) of the American Arbitration Association
(‘AAA’) except where such rules are inconsistent with this Agreement,
in which case the terms of this Agreement will govern.” (Emphasis
added.)
• “Except as provided below, Employee and Employer, on behalf of their
affiliates, successors, heirs, and assigns, both agree that all disputes
and claims between them . . . shall be determined exclusively by final
and binding arbitration.” (Emphasis added.)
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Divorced from other provisions of the arbitration agreement (most
notably, the class arbitration bar), these three provisions could arguably be
construed to authorize arbitrators to decide gateway issues of arbitrability
such as class arbitration. Under the first provision cited by the employees, for
example, the availability of class arbitration (and perhaps even the specific
question of whether the class arbitration bar is “permitted by law”) is arguably
a dispute over the “meaning” of the agreement. The incorporation of AAA rules
in the second cited provision is also arguably relevant here, considering that
Rule 3 of the AAA Supplementary Rules for Class Arbitration provides that
the arbitrator is empowered to determine class arbitrability. And the third
provision states in broad terms that “all disputes and claims between them”
shall be determined by the arbitrator, language arguably capacious enough
under this court’s previous rulings to include disputes over class arbitrability.
See Robinson v. J & K Admin. Mgmt. Servs., Inc., 817 F.3d 193, 196 (5th Cir.
2016) (“[W]hen an agreement includes broad coverage language, such as a
contract clause submitting ‘all disputes, claims, or controversies arising from
or relating to’ the agreement to arbitration, then the availability of class or
collective arbitration is an issue arising out of the agreement that should be
determined by the arbitrator.”).
Whether these provisions, standing alone, clearly and unmistakably
empower the arbitrator to decide questions of class arbitrability is a question
we ultimately need not answer, however. Because when we compare these
provisions with the class arbitration bar at issue in this case, we conclude that
none of them state with the requisite clear and unmistakable language that
arbitrators, rather than courts, shall decide questions of class arbitrability.
To begin with, two of these provisions include express exception clauses
(as highlighted above). These exception clauses expressly negate any effect
these provisions might have in the event they conflict with any other provision
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of the arbitration agreement—as they plainly do here in light of the class
arbitration bar.
And even putting aside the exception clauses, none of these provisions
speak with any specificity to the particular matter of class arbitrations. The
class arbitration bar, by contrast, specifically prohibits arbitrators from
arbitrating disputes as a class action, and permits the arbitration of individual
claims only. See, e.g., Baton Rouge Oil and Chem. Workers Union v.
ExxonMobil Corp., 289 F.3d 373, 377 (5th Cir. 2002) (“It is a fundamental
axiom of contract interpretation that specific provisions control general
provisions.”) (citing RESTATEMENT (SECOND) OF CONTRACTS § 203(c) (“specific
terms and exact terms are given greater weight than general language”)).
Accordingly, the provisions cited by the employees do not clearly and
unmistakably overcome the legal presumption—reinforced as it is here by the
class arbitration bar—that courts, not arbitrators, must decide the issue of
class arbitration.
***
In Blevins, we reverse the judgment of the district court and remand for
further proceedings consistent with this opinion. In Crawford, we vacate the
judgment of the district court and remand with instructions to dismiss the case
as moot, in light of our holding today that the proposed class arbitration in this
case is a gateway issue for the court, rather than the arbitrator, to decide.
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