{"id":897053,"date":"2020-02-11T15:21:40","date_gmt":"2020-02-11T22:21:40","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897053"},"modified":"2020-02-11T15:21:48","modified_gmt":"2020-02-11T22:21:48","slug":"deciding-whether-class-arbitration-is-available-might-be-arbitrator","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/deciding-whether-class-arbitration-is-available-might-be-arbitrator\/","title":{"rendered":"Who Gets To Decide Whether Class Arbitration Is Available? It Just Might Be The Arbitrator"},"content":{"rendered":"\n

Philip Mohr | Womble Bond Dickinson<\/a><\/p>\n\n\n\n

Where an agreement provides that \u201cany dispute\u2026 arising out of the agreement\u201d would be settled by binding arbitration in accordance with \u201cthe Rules of the American Arbitration Association,\u201d such language provides \u201cclear and unmistakable evidence\u201d of the parties\u2019 agreement to delegate certain substantive issues\u2014like the availability of class arbitration\u2014to the arbitrator.\u00a0Rickenbaugh v. Power Home Solar, LLC,\u00a02019 NCBC 79 (J. Bledsoe). As such, when agreements incorporate AAA\u2019s Rules, the Business Court will compel arbitration but leave it to the arbitrator to determine whether class wide arbitration is available.<\/p>\n\n\n\n

Plaintiffs are North Carolina homeowners. Defendant Power Home Solar, LLC (\u201cPower Home\u201d), a nation-wide solar installation company, contacted Plaintiffs to discuss Power Home\u2019s \u201cstandard energy savings package.\u201d Power Home\u2019s representative allegedly promised Plaintiffs savings in excess of 90% on their energy bills if they purchased its energy package. Based upon these representations, Plaintiffs entered into an agreement with Power Home to purchase the energy package and have it installed (\u201cAgreement\u201d). The Agreement contained an arbitration provision that stated, \u201c[A]ny dispute arising out of \u2026any aspect of this agreement\u2026shall be settled by binding arbitration in accordance with the Construction Industry Rules of the American Arbitration Association\u2026\u201d Power Home installed the energy package, but Plaintiffs did not experience the drop in energy bills they were expecting. Plaintiffs filed a putative class action against Power Home in Mecklenburg County Superior Court on behalf of themselves and other Power Home customers. Power Home filed a motion to dismiss or, in the alternative, to compel bilateral arbitration (thereby effectively precluding class-wide arbitration). In its Motion, Power Home argued that the Agreement clearly required Plaintiffs to arbitrate their claims and, because the Agreement had no clear language permitting class wide arbitration, the Court should determine whether Plaintiffs could maintain a class wide arbitration. Plaintiffs disagreed and contended, at a minimum, the inclusion of AAA\u2019s Rules meant that the arbitrator, and not the Court, had to decide whether the Agreement allowed for class wide arbitration.<\/p>\n\n\n\n

In its decision, the Business Court compelled Plaintiffs to arbitrate, but agreed with Plaintiffs that the arbitrator\u2014and not the Court\u2014would decide whether class wide arbitration was permitted. While a court typically decides questions of \u201csubstantive arbitrability\u201d (e.g., whether the parties are bound by a given arbitration clause, whether the arbitration clause applies to a particular type of controversy, etc.), the Business Court recognized that the parties can delegate \u201csubstantive arbitrability\u201d questions to the arbitrator so long as there is \u201cclear and unmistakable evidence\u201d of an agreement to so delegate. Because AAA\u2019s Construction Rules empower the arbitrator to determine the \u201cscope\u201d of the arbitration agreement, the Business Court followed numerous federal court decisions and held the Agreement\u2019s incorporation of AAA\u2019s Rules provided \u201cclear and unmistakable evidence\u201d that Plaintiffs and Power Home had delegated the issue of the arbitrability of their personal<\/em> claims to the arbitrator. (Opinion, \u00b6\u00b621,31,32). However, the Business Court also recognized whether the inclusion of AAA\u2019s Rules constituted \u201cclear and unmistakable evidence\u201d that the parties\u2019 had agreed to delegate the question of class wide<\/em> arbitration to the arbitrator was an issue that had divided federal circuit courts and had not been definitively answered by the U.S. Supreme Court. (Id., \u00b6<\/em>\u00b625,27,28). Acknowledging the \u201cfundamental difference\u201d between class arbitration and bilateral arbitration, as well as the potential due process concerns for allowing an arbitrator to determine the existence of a class (Id<\/em>., \u00b6\u00b623,27), the Business Court nonetheless sided with those federal circuit courts that have concluded the incorporation of AAA\u2019s Rules constitutes \u201cclear and unmistakable evidence\u201d to delegate the question of class wide arbitration to the arbitrator. (Id<\/em>., \u00b633). As a result, the arbitrator\u2014and not the Business Court\u2014would determine the availability of class wide arbitration. (Id<\/em>., \u00b634).<\/p>\n\n\n\n

Based upon this decision, a business which incorporates any of the Rules of the American Arbitration Association into its arbitration agreements should understand that it is agreeing that an arbitrator\u2014and not a judge\u2014will decide whether an agreement permits class wide arbitration and, correspondingly, whether a class can be certified, whether a class action can be maintained, etc. All such decisions will be made with limited opportunity for judicial review. In order to avoid such a result, a business would be well served to provided explicit language in its arbitration agreements that requires any issue about the availability of class wide arbitration to remain with the court.<\/p>\n\n\n\n

Additional legal points from this decision:<\/p>\n\n\n\n