Class Arbitration:
Last week, the Third Circuit joined the Sixth Circuit and issued an important decision holding that whether an arbitration agreement provides for class arbitration is presumptively an issue for a court, not an arbitrator, to decide, unless the parties have clearly authorized the arbitrator to answer that question. See Opalinski v. Robert Half International, Inc., No. 12-4444 (3rd Cir. July 30, 2014) (click here to see the Third Circuit’s decision) (click here to see blog post about earlier Sixth Circuit opinion). According to the Third Circuit, deciding whether an agreement permits class arbitration implicates the rights of absent class members and in effect determines whether the absent class members are bound to arbitrate. The Third Circuit reasoned that traditionally, a court decides whether an individual is bound to arbitrate, and similarly, a court should determine whether absent class members are bound to arbitrate. Moreover, the Third Circuit reasoned that whether an agreement provides for class arbitration is a game-changing issue that transforms the entire arbitration proceeding, and this issue should not be treated as a mere procedural question for arbitrators to decide.
Appellate Jurisdiction:
In Murchison Capital Partners, L.P. v. Nuance Communications, Inc., No. 13-10852 (5th Cir. July 25, 2014) (click here for a copy of the decision), the Fifth Circuit found that it lacked jurisdiction to hear an appeal of a district court order remanding a case to the arbitration panel for clarification.
The district court neither vacated nor confirmed the original arbitration award, and instead, upon the plaintiff’s request, the district court remanded the case back to the arbitration panel so that the panel could consider a distinct category of potential damages. It appeared that the arbitration panel had failed to issue specific findings regarding this distinct category of damages.
In a 2-to-1 decision, the Fifth Circuit held that the defendant could not immediately appeal the district court’s order remanding the case back to the arbitration panel for clarification. The Fifth Circuit explained that district court orders vacating or confirming arbitration awards could be appealed. However, in this case, there was neither a vacatur or confirmation of the arbitration award. Moreover, denying appellate jurisdiction at this stage would help conserve judicial resources and avoid piecemeal appeals because after the award is clarified on remand to the arbitrators, the parties could seek to confirm or vacate the clarified award, which could then lead to a proper appeal. A dissenting judge, however, believed that there was a final, appealable order since the district court completely resolved the sole issue set before it – whether the arbitration panel had overlooked a category of damages.
To avoid this appellate jurisdiction problem, the defendant in this case should have cross-petitioned to confirm the original award, because a court’s denial of a petition to confirm is immediately appealable. But as pointed out in the dissent, this strategy may not always work if the district court defers ruling on the petition to confirm until a clarified award exists.