Airbnb, Inc. v. Rice

138 Nev., Advance Opinion (06
IN THE SUPREME COURT OF THE STATE OF NEVADA
AIRBNB, INC., A FOREIGN No. 81346
CORPORATION,
Appellant,
vs.
ERIC RICE, INDIVIDUALLY;
Ft
JEFFERSON TEMPLE, AS SPECIAL SEP 29 202
ADMINISTRATOR OF THE ESTATE
A. BROWN
OF RAHEEM RICE; AND BRYAN
BY
LOVETT, 1EF EPUTY CLERK
Respondents.
Appeal from a district court order denying a motion to compel
arbitration. Eighth Judicial District Court, Clark County; Gloria Sturman,
Judge.
Reversed and remanded.
O'Melveny & Myers LLP and Dawn Sestito, Los Angeles, California, and
Damali A. Taylor, San Francisco, California; McDonald Carano LLP and
Jeff Silvestri and Chelsea Latino, Las Vegas; P.K. Schrieffer LLP and David
T. Hayek, West Covina, California,
for Appellant.
Lewis Roca Rothgerber Christie LLP and Joel D. Henriod, Daniel F.
Polsenberg, Abraham G. Smith, and Erik J. Foley, Las Vegas; The702Firm
and Michael C. Kane, Las Vegas,
for Respondents Eric Rice and Jefferson Temple.
The Schnitzer Law Firm and Jordan P. Schnitzer, Las Vegas,
for Respondent Bryan Lovett.
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BEFORE THE SUPREME COURT, EN BANC.
OPINION
By the Court, HARDESTY, J.:
In this appeal, we must apply the United States Supreme
Court's holding in Henry Schein, Inc. v. Archer & White Sales, Inc., that,
under the Federal Arbitration Act (FAA), a court has no power to determine
the arbitrability of a dispute where the contract delegates the arbitrability
question to an arbitrator, even if the argument that the arbitration
agreement applies to the dispute is "wholly groundless." U.S. ,
139 S. Ct. 524, 528 (2019) (internal quotations omitted). Because the
agreement in this case is governed by the FAA and includes a delegation
provision, Henry Schein requires that the arbitrability question be decided
by the arbitrator. Accordingly, we conclude that the district court erred in
denying the motion to compel arbitration and refusing to submit the
arbitrability determination to an arbitrator.
FACTS
In the summer of 2018, Raheem Rice and Bryan Lovett were
walking to a house party in Las Vegas and were on or near the premises
when an unknown individual opened fire on the crowd, killing Raheem and
injuring Bryan. Eric Rice, Raheem's father; Jefferson Temple, as special
administrator of Raheem's estate (the Estate); and Bryan sued Airbnb, Inc.,
and other defendants for wrongful death and personal injury. They alleged
that Airbnb's services had been used by the party's host to rent the house
where the shooting occurred.
In response, Airbnb filed a motion to compel arbitration.
Airbnb asserted that Raheem, Bryan, and Eric all had Airbnb accounts at
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the time of the shooting and had agreed to Airbnb's Terms of Service during
the account registration process. The Terms of Service included an
arbitration agreement, which specified the following:
You and Airbnb mutually agree that any dispute,
claim or controversy arising out of or relating to
these Terms or the breach, termination,
enforcement or interpretation thereof, or to the use
of the Airbnb Platform, the Host Services, the
Group Payment Service, or the Collective Content
(collectively, "Disputes") will be settled by binding
arbitration (the "Arbitration Agreement"). If there
is a dispute about whether this Arbitration
Agreement can be enforced or applies to our
Dispute, you and Airbnb agree that the arbitrator
will decide that issue.
The Arbitration Agreement evidences a transaction
in interstate commerce and thus the Federal
Arbitration Agreement governs the interpretation
and enforcement of this provision.
Airbnb argued that the Estate's, Bryan's, and Eric's claims were therefore
subject to arbitration under the Terms of Service agreements and that any
dispute about whether the arbitration agreement applied to those claims
had to be submitted to an arbitrator.
The district court denied Airbnb's motion to compel arbitration
in two separate orders. In its order concerning Bryan, the district court
found that he was underage when he assented to Airbnb's Terms of Service.
In its order concerning Eric and the Estate, the district court found that
Airbnb could not compel arbitration under the Terms of Service agreements
because the dispute did not arise from the agreements. Airbnb appeals only
the order concerning Eric and the Estate.
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DISCUSSION
Airbnb argues that the district court lacked discretion to
determine whether the dispute was arbitrable because the arbitration
agreement in the Terms of Service included a delegation provision requiring
the issue of arbitrability to be submitted to an arbitrator. Airbnb asserts
that the Supreme Court made clear in Henry Schein, U.S. at , 139 S.
Ct. at 527-28, that when, as here, the parties clearly and unmistakably
delegate the issue of arbitrability to an arbitrator, a court may not disregard
that intent, even if the arguments in favor of arbitration are wholly
groundless.
Eric and the Estate respond that the district court had
discretion to decide that the dispute is not arbitrable because the dispute
did not arise from the parties' contractual agreements but from duties owed
under Nevada law. They allege that Raheem did not book the Airbnb rental
where the shooting occurred, that nothing indicates Raheem knew the
house was rented through Airbnb when he died, and that the record does
not indicate that Raheem or Eric ever utilized Airbnb's services at all. For
the above reasons, Eric and the Estate assert that the parties did not clearly
and unmistakably agree to submit this dispute to arbitration and argue that
holding such would create an absurd result.
The parties do not dispute that Raheem and Eric both assented
to the arbitration agreement in Airbnb's Terms of Service, which delegates
the matter of arbitrability to an arbitrator, nor do they dispute the validity
of the arbitration agreement or delegation provision. Rather, the issue
before us is whether the district court erred in finding that the arbitration
agreement did not apply to the claims at issue and in refusing to submit the
question of arbitrability to an arbitrator.
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The arbitration agreement specified that the FAA governs its
enforcement and interpretation. Under the FAA, "arbitration is a matter of
contract, and courts must enforce arbitration contracts according to their
terms." Henry Schein, U.S. at , 139 S. Ct. at 529. Generally, when
deciding whether to compel arbitration, a court must resolve two issues: (1)
whether the parties have a valid agreement to arbitrate and (2) whether the
agreement applies to the dispute. Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 84 (2002). However, the Supreme Court has recognized that
parties may agree to arbitrate "gateway questions of arbitrability, such as
whether the parties have agreed to arbitrate or whether their agreement
covers a particular controversy." Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S.
63, 68-69 (2010) (internal quotations omitted). Thus, when the parties
clearly and unmistakably agree to delegate these questions to an arbitrator,
the delegation agreement must be enforced like any other arbitration
agreement under the FAA. Id. at 70 (recognizing that the FAA operates on
an "additional" agreement to arbitrate a gateway issue); see also First
Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943 (1995) ("[T]he court's
standard for reviewing the arbitrator's decision [of who has the primary
power to decide arbitrability] should not differ from the standard that courts
apply when they review any other matter that parties have agreed to
arbitrate."). As the Supreme Court explained in Henry Schein,
When the parties' contract delegates the
arbitrability question to an arbitrator, a court may
not override the contract. In those circumstances,
a court possesses no power to decide the
arbitrability issue. That is true even if the court
thinks that the argument that the arbitration
agreement applies to a particular dispute is wholly
groundless.
U.S. at , 139 S. Ct. at 529 (emphasis added).
5
Here, the parties have a valid arbitration agreement with a
clear delegation clause requiring that an arbitrator decide any dispute as to
whether the agreement applies to the claims at issue. However, the district
court determined that the arbitration agreement did not apply to Eric's and
the Estate's claims because those claims arose from Nevada's wrongful
death statute, rather than the Terms of Service or Eric's or Raheem's
contractual relationships with Airbnb. Essentially, the district court found
that Airbnb's argument that the arbitration agreement applied to Eric's and
the Estate's claims was wholly groundless, a finding that Henry Schein
oddly, but explicitly, precludes the court from making when there is a
delegation agreement.
Eric and the Estate attempt to distinguish Henry Schein by
focusing on its language requiring "clear and unmistakable evidence" that
the parties intended to delegate the arbitrability of a dispute between them.
U.S. at , 139 S. Ct. at 530 (internal quotation marks omitted). They
argue that because their claims clearly do not relate to or arise from
Airbnb's Terms of Service, there is no arbitration agreement that applies to
those claims and thus no showing that the parties intended to arbitrate the
claims.
The Supreme Court has held that "[c] ourts should not assume
that the parties agreed to arbitrate arbitrability unless there is 'clear and
unmistakable' evidence that they did so." First Options, 514 U.S. at 944(alterations omitted) (quoting AT&T Techs., Inc. v. Commc'ns Workers of
Am., 475 U.S. 643, 649 (1986)). This reflects the principle that "a party
cannot be required to submit to arbitration any dispute which he has not
agreed so to submit." Howsam, 537 U.S. at 83 (internal quotation marks
omitted). However, a valid arbitration agreement that delegates the
arbitrability issue to an arbitrator serves as "clear and unmistakable"
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evidence of an agreement to arbitrate arbitrability. See Henry Schein,
U.S. at , 139 S. Ct. at 530. While Eric and the Estate argue that their
claims are unrelated to the Terms of Service agreement and thus there is
no valid arbitration agreement, their argument about the validity of the
arbitration agreement depends on a determination that the claims are not
arbitrable—a determination that the arbitration agreement expressly
delegates to an arbitrator.
We are cognizant that, unlike in Henry Schein, the dispute here
did not arise out of a contract between the parties. The facts underlying
Eric's and the Estate's wrongful death action have no relation to Erie's or
Raheem's use of Airbnb's services or platform. They do not arise out of
Airbnb's duties to Eric or Raheem by virtue of their agreements to Airbnb's
Terms of Service. Further, the parties here do not agree that the contract
containing the arbitration agreement generally governs the parties' dispute.
Nevertheless, we believe the rule from Henry Schein applies to
this situation, particularly when we consider Henry Schein's abrogation of
the Fifth Circuit's decision in Douglas v. Regions Bank, 757 F.3d 460, 464
(5th Cir. 2014). In Douglas, an attorney in a bankruptcy matter embezzled
money from a client, who then sued the bank where the attorney
maintained his accounts, alleging negligence and conversion. Id. at 461.
The bank moved to compel arbitration based on a delegation provision in an
arbitration agreement that the client had signed when she briefly opened a
checking account with the bank's predecessor years earlier. Id. The trial
court denied the motion, and the Fifth Circuit Court of Appeals affirmed,
concluding that the delegation provision in "the completely unrelated
contract" could not "possibly bind [her] to arbitrate gateway questions of
arbitrability in all future disputes with the other party, no matter their
origin." Id. at 462. The court found that in signing the arbitration
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agreement, the client intended "only to bind herself to arbitrate gateway
questions of arbitrability if the argument that the dispute falls within the
scope of the agreement is not wholly groundless." Id. at 464. The court thus
adopted the "wholly groundless" exception used by other circuits and
concluded that the client's claims, which had no connection to the
arbitration agreement she had signed years earlier, were clearly not
arbitrable. Id.
The Court in Henry Schein expressly rejected use of the "wholly
groundless" exception to get around the delegation provision, concluding
that it was not consistent with the FAA, thus abrogating Douglas. U.S.
at 139 S. Ct. at 528-29. We can infer from this that the wholly
groundless exception is improper even where the arbitration agreement
clearly is unrelated to the dispute, and we thus feel constrained to apply the
rule from Henry Schein when a valid arbitration agreement between the
parties contains a delegation clause. If there is a delegation clause, the
court has no authority to decide the arbitrability question but must instead
grant the motion to compel arbitration.
The cases cited by Eric and the Estate do not alter our
understanding of Henry Schein. The Tenth Circuit case on which they
rely—Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir.
1995)—pre-dates Schein and did not specifically address the issue of who
should decide whether the dispute was arbitrable. Furthermore, the Tenth
Circuit more recently has rejected the argument that courts may decide the
arbitrability of a dispute despite a delegation provision and has disavowed
reaching a contrary conclusion in earlier decisions such as Coors. Belnap v.
Iasis Healthcare, 844 F.3d 1272, 1289-90 (10th Cir. 2017) (explaining that
the issue was never briefed or expressly addressed in Coors).
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The other case on which Eric and the Estate primarily rely—
Moritz v. Universal City Studios LLC, 268 Cal. Rptr. 3d 467 (Ct. App.
2020)—is distinguishable. There, the parties had multiple movie contracts
with arbitration agreements, and the contract at issue in the litigation did
not include a separate arbitration clause but instead included a provision
subjecting movies produced as sequels or remakes to an arbitration clause
contained in an earlier contract. Id. at 471. The district court determined
that the plaintiffs contract claims did not pertain to a movie that was a
remake or a sequel and thus were not subject to arbitration. Id. at 472-73.
The California Court of Appeal affirmed the district court's denial of the
motion to compel arbitration, concluding that the arbitration agreement
and delegation clause in the earlier contract did not apply to the dispute.
Id. at 474-75. Thus, in Moritz, the issue was not whether the claims were
governed by a contract, but whether the relevant contract actually required
the arbitrability of the claims to be delegated. Although Moritz states that
"Mlle FAA requires no enforcement of an arbitration provision with respect
to disputes unrelated to the contract in which the provision appears," id. at
476, we cannot countenance such a reading of Henry Schein and are bound
by the decisions of the Supreme Court on this matter.
CONCLUSION
The Supreme Court has held that, when a contract delegates the
arbitrability question to the arbitrator, a court has no authority to decide
whether the arbitration agreement applies to the dispute, even where the
argument for arbitrability is wholly groundless. Henry Schein, U.S. at
, 139 S. Ct. at 528-29. Because the FAA governs the enforcement of the
arbitration agreement at issue here, and the agreement delegates the
arbitrability question to an arbitrator, the district court erred in deciding the
arbitrability question itself. Accordingly, we reverse the district court's
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order denying Airbnb's motion to compel arbitration and remand for further
proceedings consistent with this opinion.
, J.
Hardesty
W concur:
Parraguirre
Cadish
J.
Silver
J.
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STIGLICH, J., with whom HERNDON, J., agrees, dissenting:
I respectfully dissent from the majority's opinion that both
misreads Henry Schein' and will lead to absurd consequences in the future.
As a California appellate court has demonstrated, there is a way to
harmonize Henry Schein with common sense. I would have elected to follow
this path tread by our neighboring colleagues.
In Moritz v. Universal City Studios LLC, the California Court
of Appeal explained that "lain arbitration agreement is tied to the
underlying contract containing it, and applies 'only where a dispute has its
real source in the contract.' 268 Cal. Rptr. 3d 467, 473 (Ct. App. 2020)
(quoting Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 205 (1991)).
Additionally, the court noted, InJo authority permits sending a matter to
arbitration simply because the same parties agreed to arbitrate a different
matter." Id. Henry Schein, the Moritz court concluded, is not to the
contrary, because that case "presupposes a dispute arising out of the
contract or transaction, i.e., some minimal connection between the contract
and the dispute." Id. at 475. Moritz observed that Henry Schein "expressly
understood that the (FAA] requires enforcement of arbitration clauses with
respect to disputes 'thereafter arising out of such contract' but did not
require "enforcement of an arbitration provision with respect to disputes
unrelated to the contract in which the provision appears." Id. (quoting
Henry Schein, U.S. at , 139 S. Ct. at 529). It thus rejected defendants'
"argument that an arbitration provision creates a perpetual obligation to
arbitrate any conceivable claim that [plaintiff] might ever have against
'Henry Schein, Inc. v. Archer & White Sales, Inc., U.S. , 139 S.
Ct. 524 (2019).
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sound as a matter of law and policy. The tort law claims that undergird the
dispute here did not arise out of a contract between the parties; indeed,
there is no evidence respondents ever utilized Airbnb's services.2 Henry
Schein does not change the principle that "Mlle FAA requires no
enforcement of an arbitration provision with respect to disputes unrelated
to the contract in which the provision appears." Moritz, 268 Cal. Rptr. 3d
at 476; see 9 U.S.C. § 2 (providing that an arbitration agreement applies to
a "controversy arising out of such contract"); cf. Zoller v. GCA Advisors,
LLC, 993 F.3d 1198, 1201 (9th Cir. 2021) (recognizing that before a court
enforces an arbitration agreement, it must first determine whether a valid
arbitration agreement exists); Coors Brewing Co. v. Molson Breweries, 51
F.3d 1511, 1516 (10th Cir. 1995) ("A dispute within the scope of the contract
is still a condition precedent to . . . involuntary arbitration ....").
In cautioning against extending an arbitration clause's scope
beyond the reach of the parties' contract, the Tenth Circuit Court of Appeals
2As this court has previously recognized, "tort law is designed to
secure the protection of all citizens from the danger of physical harm to their
persons or to their property and seeks to enforce standards of conduct.
These standards are imposed by society, without regard to any agreement."
Calloway v. City of Reno, 116 Nev. 250, 261, 993 P.2d 1_259, 1265 (2000),
overruled on other grounds by Olson v. Richard, 120 Nev. 240, 243-44, 89
P.3d 31, 33 (2004). Furthermore, a tort is "a wrong independent of
contract." Bernard v. Rockhill Dev. Co., 103 Nev. 132, 135, 734 P.2d 1238,
1240 (1987) (quoting Malone v. Univ. of Kan. Med. Ctr., 552 P.2d 885, 888
(Kan. 1976)). And so, where a dispute between two parties is wholly
unrelated to any contract between them, such a contract has no bearing on
the resolution of the dispute. Put simply, a party's dispute cannot be
governed by a contract out of which it did not arise.
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provided the following example to show how doing so could lead to absurd
results:
[I]f two small business owners execute a sales
contract including a general arbitration clause, and
one assaults the other, we would think it
elementary that the sales contract did not require
the victim to arbitrate the tort claim because the
tort claim is not related to the sales contract. In
other words, with respect to the alleged wrong, it is
simply fortuitous that the parties happened to have
a contractual relationship.
Coors Brewing Co., 51 F.3d at 1516. Consequently, the district court must
ensure that claims sent to arbitration arise under the parties' agreement.
Cf. Metro. Life Ins. Co. v. Bucsek, 919 F.3d 184, 191 (2d Cir. 2019)
(examining whether there was "a clear and unmistakable agreement by the
parties to have the question of arbitrability of this dispute determined by
arbitrators rather than the court" (emphasis added)). The Terms of Service
bind hosts and guests who utilize Airbnb. As relevant to the underlying tort
claims, respondents were neither.
What the aforementioned cases suggest, common sense
confirms. Airbnb's argument that the Terms of Service applies to this
dispute is unreasonable and would lead to an absurd result. Cf. Moritz, 268
Cal. Rptr. 3d at 474 (concluding that "no reasonable person" would construe
an arbitration provision in a contract "to require arbitration of any future
claim of whatever nature or type, no matter how unrelated to the
agreement [] nor how distant in the future the claim arose"); Horne
Warranty Adm'r of Nev., Inc. v. State, Dep't of Bus. & Indus., 137 Nev. 43,
47, 481 P.3d 1242, 1247 (2021) (observing that "an absurd result is one 'so
gross as to shock the general moral or common sense' (quoting Crooks v.
Harrelson, 282 U.S. 55, 60 (1930))); Smith v. Steinkamp, 318 F.3d 775, 777
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(7th Cir. 2003) (observing that "absurd results ensue" when an arbitration
clause is "read as standing free from any [underlying] agreement"). In this
scenario, "it is simply fortuitous that the parties happened to have a
contractual relationship" completely unrelated to the underlying tort
claims. Coors Brewing Co., 51 F.3d at 1516. But it is the foundational
tenants of contract formation, not chance, that bind parties into a
contractual relationship.
Accordingly, I believe that the majority has erred in reaching
its disposition, and therefore I respectfully dissent.
Stiglich
I concur:
J.
Herndon
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