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Fifth Circuit holds that question of whether arbitration agreement prohibits class arbitration is for courts to resolve rather than arbitrators, absent clear and unmistakable language to the contrary in arbitration agreement

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20/20 Communications, Inc. v. Crawford, No. 18-10260 (5th Cir. July 22, 2019)

20/20 Communications, Inc. (“20/20”), a direct-sales and marketing company, had required its sales managers—as a condition of their employment—to agree to an arbitration agreement which included the following language: “[T]he parties agree that this Agreement prohibits the arbitrator from consolidating the claims of others into one proceeding, to the maximum extent permitted by law. This means that an arbitration will hear only individual claims and does not have the authority to fashion a proceeding as a class or collective action or to award relief to a group of employees in one proceeding, to the maximum extent permitted by law.” The arbitration agreement also contained various general statements regarding the arbitrator’s powers, including a general arbitrability provision stating that, “[i]f Employer and Employee disagree over issues concerning the formation or meaning of this Agreement, the arbitrator will hear and resolve these arbitrability issues.”

Various 20/20 field sales managers commenced arbitrations against 20/20, bringing identical class claims and arguing that the National Labor Relations Act prohibited the class arbitration bar. In response, 20/20 sought a declaratory judgment from the district court that (1) class arbitrability was an issue for the district court to determine and (2) the parties’ agreement foreclosed class arbitration of the sales manager’s claims. The district court decided that the parties’ agreement authorized the arbitrator to decide questions of class arbitrability.

The appeals court, in reversing the district court’s decision, quickly resolved the issue of whether class arbitrability was presumptively a question for the court or an arbitrator. Observing that numerous sister appeals courts (including the Fourth, Sixth, Seventh, Eighth, Ninth, Tenth, and Eleventh Circuits) had already held that class arbitrability was a “gateway” or “threshold” issue for courts to determine, the appeals court similarly determined that “the availability of class arbitration is ‘a fundamental question of arbitrability'” which is “presumptively decided by courts, not arbitrators.”

The appeals court then examined the specific language of the parties’ agreement. In doing so, the court noted that the presumption of court determination of class arbitrability is overcome where “the parties clearly and unmistakably agreed to allow the arbitrator to determine that issue.” The court, however, found “nothing in the arbitration agreement that gives such authority to the arbitrator with the clear and unmistakable language required by Supreme Court precedent.” The sales managers had argued that the general arbitrability provision quoted above, as well as two similar provisions, granted the arbitrator broad powers in deciding arbitrability issues. But the court found that, “when we compare these provisions with the class arbitration bar at issue in this case … none of these provisions speak with any specificity to the particular matter of class arbitrations.” Applying the maxim that specific terms are given greater weight than general ones, the appeals court refused to find any clear and unmistakable language granting the arbitrator the power to decide class arbitrability. Holding that the issue was one for the district court to determine, the Fifth Circuit remanded the case for further proceedings.

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