Four years ago, the United States Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion altered the landscape of class action litigation. Putative class plaintiffs Vincent and Liza Concepcion filed a suit against their cellphone service provider, AT&T Mobility. AT&T Mobility then moved to compel arbitration based on the service contract’s requirement that all disputes be arbitrated and that all claims be brought in the parties’ individual capacity, not in a class or representative proceeding. The Concepcions argued that the arbitration agreement— specifically, the class waiver—was unconscionable under California law. The district court agreed with the Concepcions, and the Ninth Circuit affirmed. The Supreme Court, however, reversed the Ninth Circuit’s ruling, holding that consumer contracts waiving the right to class arbitration are enforceable, and California case law maintaining otherwise is preempted by the Federal Arbitration Act.
While Concepcion establishes the validity of class waivers in contracts, it leaves open the question of how to treat agreements that are silent on the issue of class wide arbitration. What if a contract has an arbitration clause with no express class waiver? And who, between the trial court or an arbitrator, should make the determination of whether class wide arbitration may proceed in such circumstances? These are questions that have not been conclusively answered, but are on the cusp of resolution.
The Supreme Court seemingly answered these very questions a decade ago in Green Tree Financial Corp. v. Bazzle. There, a plurality held that the question of whether a contract forbids class arbitration should be made by arbitrators because the issue concerns contract interpretation and arbitration procedures. In opinions bookending Concepcion, however, the Court backed away from Bazzle, and expressly confirmed that Bazzle does not control: “When Bazzle reached this Court, no single rationale commanded a majority…. In fact, [ ] only the plurality decided that question.” Stolt-Nielsen S.A. v. Animalfeeds International Corp., 559 U.S. 662, 678-80 (2010); see also Oxford Health Plans v. Sutter, 133 S.Ct. 2064, 2068 n. 2 (2013) (“Stolt- Nielsen made clear that this Court has not yet decided whether the availability of class arbitration is a question [for courts to decide].”). The Court has bolstered its refreshed view by emphasizing the importance of the class arbitrability decision. For example, class arbitration would mean that the arbitrator would no longer resolve a single dispute between parties to a single agreement, but instead resolve many disputes between hundreds or thousands of absent parties. Moreover, “the commercial stakes of class-action arbitration are comparable to those of class-action litigation, even though the scope of judicial review is much more limited.” Stolt-Nielsen, 559 U.S. at 685.
Based on its recognition that class arbitrability is a significant issue with tremendous ramifications, and not merely a procedural device, it would appear that if the Court were presented with the issue, it would hold that class arbitration is a decision for courts to resolve. Notably, a majority of courts deciding this issue, including the Fourth District of the California Court of Appeal, have applied the Court’s recent dicta to conclude that a court must decide whether parties agreed to class wide arbitrations. A minority of courts, including the Second District of the California Court of Appeal, continue to cling to the holding in Bazzle as an express holding by the Supreme Court mandating that the issue is merely a procedural question that the arbitrator should decide. For its part, the California Supreme Court is poised to decide this issue for the state; earlier this year, it granted petitions for review in two cases—one where the Second District held that the question of whether the parties agreed to class arbitration was for the arbitrator to decide, see Sandquist v. Lebo Automotive, Inc., 228 Cal.App.4th 65 (2014), and another where the Fourth District held that the question is for the trial court to resolve, Network Capital Funding Corporation v. Papke, 230 Cal. App.4th 503 (2014).
The California Supreme Court’s imminent decision in Sandquist and Network Capital may generate more questions than answers. If, for example, the conclusion is that the availability of class arbitration is a matter for the trial court to resolve, what is the future for class arbitration? Indeed, the subtext from the Supreme Court’s post- Bazzle rationale seems to be that it doubts arbitrators are suited to adjudicate class arbitrations at all, and therefore should not resolve the predicate question of whether class wide arbitration is available. See Concepcion, 131 S. Ct. 1740, 1751-52 (2011) (“[I]t is at the very least odd to think that an arbitrator would be entrusted with ensuring that third parties’ due process rights are satisfied.”). If trial courts follow the same reasoning, they may similarly conclude that arbitrations may not proceed on a class wide basis. Class arbitration may ultimately become an extinct procedural tool.