Piersing v. Domino’s Pizza, No. 19-2388 (6th Cir. June 17, 2020) [click for opinion]
Plaintiff, Derek Piersing (“Piersing”) was an employee in the state of Washington for Defendant, Domino’s Pizza (“Domino’s”). Piersing accepted employment at a second Domino’s location and signed an arbitration agreement that specified that “all issues related to employment would be arbitrated and conducted according to the American Arbitration Association National Rules for the Resolution of Employment Disputes” (the “AAA Rules“). Piersing was fired from his first employer and resigned from the second job for medical reasons.
Piersing and another individual filed a class action that alleged that Domino’s franchise agreement, which required its franchises to neither solicit nor hire employees from other franchises without consent from the prior employer, violated federal antitrust and state law. Domino’s moved to compel arbitration pursuant to the Federal Arbitration Act (the “FAA“). Piersing opposed the motion and argued that Domino’s could not enforce the arbitration agreement because Domino’s did not sign the employment agreements, the individual franchises signed the agreements. The district court ordered Piersing to arbitration anyway, finding that Piersing had agreed to arbitrate not only the merits of certain claims, but also threshold questions about the agreements themselves.
On appeal, the Sixth Circuit considered whether an arbitrator or judge should resolve the subject of “arbitrability”—whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy. The court explained that the parties can delegate such questions to an arbitrator, but only if there is “clear and unmistakable evidence” that the parties agreed to do so. Here, Piersing agreed that the American Arbitration Association (the “AAA”) would administer the arbitration and have their rules apply. Those rules provide the arbitrator with the “power to rule on his or her own jurisdiction including any objections with respect to the existence, scope, or validity of the arbitration agreement.” The Sixth Circuit held that the incorporation of the AAA Rules into the parties’ arbitration agreement was “clear and unmistakable evidence” that Piersing had agreed to arbitrate the issue of arbitrability.
Piersing asserted a number of arguments in opposition. Among other things, Piersing claimed that the relevant AAA rule—that “the arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement”—addressed the arbitration agreement’s scope, not whether a non-signatory could enforce the agreement. The court explained that the use of the term “including” showed that “scope, existence, and validity” were meant to illustrate rather than exhaust the concept of the arbitrator’s jurisdiction. The question of whether Domino’s could enforce the agreement against Piersing, a signatory thereto, was thus a question of arbitrability that Piersing had assigned to the arbitrator by incorporation of the AAA Rules.
Piersing also argued that, even if the AAA Rules gave the arbitrator the power to decide the question of arbitrability, this power was not exclusive. The court acknowledged that the AAA rule did not include the word “exclusive.” But adoption of Piersing’s position would entail a chaotic race to the courthouse and arbitral forum for a ruling on jurisdiction. In addition, it appeared that the AAA adopted its jurisdictional rule to provide “clear and unmistakable” evidence that the parties agreed to arbitrate “arbitrability.” Indeed, nearly every circuit court in this country, including Piersing’s local regional circuit, have held that this rule, or similar ones, gave arbitrators the exclusive authority to arbitrate “arbitrability.” To adopt a different understanding now would deprive countless parties of the benefit of their bargain.
Lastly, Piersing claimed that a ruling in support of Domino’s would mean that anyone could force him to arbitrate “arbitrability,” no matter how frivolous the argument for arbitration. The court pointed out that the Supreme Court had recently rejected a nearly identical argument about “frivolous motions to compel arbitration.” The Supreme Court explained that—whatever the merits of this policy concern—it could not rewrite the text of the FAA to accommodate this concern. It also found the concern overstated: arbitrators can quickly resolve frivolous motions and in some cases even impose sanctions for such motions.
In rejecting Piersing’s arguments, the Sixth Circuit emphasized that the question it was deciding was a narrow one. It was not a question about the merits of the case, or even whether the parties have to arbitrate the merits. It was simply about who should decide whether the parties have to arbitrate the merits. Here, that person was the arbitrator.