The Fifth Circuit just deepened (and confused) a Circuit split over the question of who decides whether an arbitration agreement permits class proceedings. See 20/20 Communications, Incorporated v. Crawford, 2019 WL 3281412 (5th Cir. July 22, 2019).

Liz has written about the split here, here, and here. (You might also recall that SCOTUS flagged this issue, though it punted on it, in Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1417 n.4, 203 L.Ed.2d 636 (2019) (“This Court has not decided whether the availability of class arbitration is a so-called ‘question of arbitrability,’ which includes these gateway matters.”) Basically, the issue is whether courts or arbitrators should determine the availability of class arbitration.

All Circuits that have spoken about the matter (the 3d, 4th, now 5th, 6th, 7th, 8th, 9th, and 11th) agree that class arbitrability is a gateway question for courts, at least absent a delegation clause. See Opalinksi v. Robert Half Int’l, Inc., 761 F.3d 326 (3d Cir. 2014); Del Webb Cmtys., Inc. v. Carlson, 817 F.3d 867 (4th Cir. 2016); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594 (6th Cir. 2013); Herrington v. Waterstone Mortg. Corp., 907 F.3d 502 (7th Cir. 2018); Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966 (8th Cir. 2017); Eshagh v. Terminix Int’l Co., L.P., 588 F. App’x 703 (9th Cir. 2014) (unpublished);JPay, Inc. v. Kobel, 904 F.3d 923 (11th Cir. 2018). Moreover, the Second and Tenth Circuits have “assumed without deciding” that class arbitrability is a gateway question for courts. Wells Fargo Advisors, LLC v. Sappington, 2018 WL 1177230 (2d Cir. March 7, 2018); Spirit Airlines v. Maizes, 2018 WL 3866335 (11th Cir. Aug. 15, 2018). So, there’s substantial agreement about the notion that the availability of class proceedings constitutes a “foundational question of arbitrability.” Herrington, 907 F.3d at 507.

The Circuit split focuses on delegations.

At least four Circuits (3rd, 4th, 6th, and 8th) have concluded that class arbitrability is a matter for courts even if the parties have included delegation provisions or incorporated institutional rules with a delegation provision, such as the AAA Rules. Similarly, the Seventh Circuit might fall in this camp. In Herrington, the Seventh Circuit remanded the case for further proceedings at the district court level, without squarely determining whether incorporation of the AAA Rules delegated the question of class arbitrability to the arbitrator.

The Second, Tenth, Eleventh Circuits have openly disagreed. In all of these Circuits, traditional delegations suffice to commit questions of class arbitrability to the arbitrator.

The Fifth Circuit has now joined the fray charting a confusing middle path. See 20/20 Communications, Incorporated v. Crawford, 2019 WL 3281412 (5th Cir. July 22, 2019). Ultimately, the court concluded that, notwithstanding delegation provisions, the question of class arbitrability was for the court.

The facts of the case are pretty simple, and I’ll simplify them even more. An arbitration agreement between employees and their employer contained a provision permitting the arbitrator to “hear only individual claims,” and prohibiting arbitration “as a class or collective action . . . to the maximum extent permitted by law.” Notwithstanding this provision, an arbitrator determined that the parties’ class arbitration bar was prohibited by federal law and consolidated the employees’ cases.

The arbitration agreement contained two typical delegation provisions: (1) “If Employer and Employee disagree over issues concerning the formation or meaning of this Agreement, the arbitrator will hear and resolve these arbitrability issues”; and (2) “The arbitrator selected by the parties will administer the arbitration according to the National Rules for the Resolution of Employment Disputes (or successor rules) of the American Arbitration Association (‘AAA’) except where such rules are inconsistent with this Agreement, in which case the terms of this Agreement will govern.” (The court talked about a third provision as well, but I’ll exclude it here because most Circuits would probably not find it sufficient to constitute a clear and unmistakable delegation anyway.)

The Fifth Circuit acknowledged that, “[d]ivorced from other provisions of the arbitration agreement (most notably, the class arbitration bar), these . . . provisions could arguably be construed to authorize arbitrators to decide gateway issues of arbitrability such as class arbitration.” But the court went on to say that it didn’t need to decide if these provisions together or standing alone were sufficient to “clearly and unmistakably empower the arbitrator to decide questions of class arbitrability.” Instead, it concluded that these delegations could not be read harmoniously with the class action bar for two reasons.

First, the reference to the AAA is conditioned by the phrase “except where such rules are inconsistent with this Agreement.” In the court’s view, the class action bar was inconsistent with a delegation of class arbitrability to the arbitrator.

Second, “even putting aside the exception clauses, none of these provisions speak with any specificity to the particular matter of class arbitrations. The class arbitration bar, by contrast, specifically prohibits arbitrators from arbitrating disputes as a class action, and permits the arbitration of individual claims only.”

I think both arguments essentially collapse to make the same point: there’s no decision about class arbitrability to delegate because the parties prohibited class proceedings. But the only way you get to the conclusion that the parties prohibited class proceedings is to read and interpret the contract. The choice of arbitration paired with the delegation provision should send all contract interpretation issues to the arbitrator.

So, this case amounts to an elevation of the issue of class arbitrability. Its doctrinal logic places the formation of a class action waiver on the same footing as the formation of an arbitration provision itself. If that’s right, then virtually no delegation provision, no matter how “clear and unmistakable” could ever empower an arbitrator to consider class arbitrability when the agreement also contains a class action waiver.