Class arbitration in the US may have some remaining vitality, under arbitration agreements made before the recent Concepcion decision and which do not include express class action waivers. A recent decision from a federal district judge in San Francisco indicates this, as the Court held that it was for the arbitrators to decide whether the language of the arbitration clauses at issue permits classwide arbitration. (Hayes v. Servicemaster Global Holdings, Inc., 2011 WL 2471001 (N.D. Cal. June 22, 2011).
After sorting through the Supreme Court’s decisions in Bazzle, Stolt-Nielsen, and (by implication) Concepcion, this Court concluded that there were legitimate questions about the intent of the parties as well as questions about precisely what arbitration clause language each of the plaintiffs had agreed to in their employment contract. The fact that the arbitration clauses were “silent” about class arbitration, in the sense of containing no express reference to class arbitration, was not dispositive, the Court held. Stolt-Nielsen should not be read broadly to preclude arbitrators from permitting arbitration whenever there is such “silence.” The “silence” of the arbitration clause in Stolt-Nielsen was of special significance, said this Court: it connoted, in light of a stipulation of the parties, that they had made no agreement about class arbitration. Without such a stipulation, the Court reasoned, arbitrators after Stolt-Nielsen may still apply to the class arbitration issue rules of state contract law concerning implication of missing terms.
Further, in looking for the intent of the parties, the Court holds, arbitrators may take into consideration that the state of State law concerning class arbitration at the time of the arbitration agreement – which, in the case of California, included the rule treating as unconscionable an arbitration agreement in an adhesion contract that purported to exclude class arbitration. That rule (the so-called “Discover Bank Rule”) was expressly overruled by the Supreme Court in Concepcion. But it survives, this Court holds, at least as evidence of parties’ intentions in regard to arbitration clauses signed while the Discover Bank Rule was good law.
It has been widely assumed that after Concepcion, consumer and employment contracts will be widely reviewed to include class action waivers if they do not already. But even if this does occur, there will remain situations where, due to contracting customs, or relatively more equal bargaining power, the arbitration clause will not expressly address the class actions question. While the Supreme Court majority in Concepcion spoke unfavorably toward class arbitration, nevertheless the Court did not hold that the question of whether class arbitration is permitted must always be taken away from the arbitrator by the courts. It is reasonable to expect that many arbitrators will continue to be asked to decide whether the agreements permit class arbitration, and that some class arbitrations will proceed based on such decisions.