Reed Elsevier v. Crockett, 734 F.3d 594 (6th Cir. 2013) [click for opinion]
Craig Crockett's law firm filed a classwide arbitration demand for $500 million against LexisNexis, a division of Reed Elsevier, for charging subscribers hidden fees. The LexisNexis Subscription Plan contained an arbitration clause but was silent about classwide arbitration. Reed Elsevier sued in district court seeking a declaration that the classwide arbitration is not allowed under the contract. The court ruled in favor of Reed Elsevier, and Crockett appealed.
The Sixth Circuit first had to decide if the issue of whether an arbitration agreement authorizes classwide arbitration is a "gateway dispute" or a "subsidiary question." The court explained that gateway disputes are fundamental questions that courts decide (unless the parties make a clear and unmistakable agreement to the contrary). Subsidiary questions grow out of the merits of the parties' dispute and are presumptively for the arbitrator to decide.
In a 2003 Supreme Court decision, a plurality of justices seemed to treat classwide arbitrability as a subsidiary question. More recently, however, the Supreme Court indicated that it "has not yet decided whether the availability of class arbitration" is a gateway question. Nevertheless, the Sixth Circuit thought the Supreme Court had "given every indication, short of an outright holding, that classwide arbitrability is a gateway question rather than a subsidiary one." This conclusion is supported, the Sixth Circuit believed, by the significant consequences of classwide arbitration: it jeopardizes the principal benefit of arbitration (lower costs and greater efficiency and speed), complicates issues of confidentiality, and raises serious due-process concerns for class members. Therefore, the issue of classwide arbitrability should be reserved for judges, unless the parties clearly indicate otherwise. The parties in this case did not, as their agreement made no mention of classwide arbitration.
Furthermore, because the Supreme Court held in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp. that classwide arbitration is available only if the parties expressly provide for it in their arbitration agreement, the Sixth Circuit held that the parties' arbitration agreement did not in fact authorize classwide arbitration.
Plaintiff's fallback argument—that the arbitration agreement is unconscionable in the absence of a class-action right—was foreclosed by the Supreme Court’s recent decision in American Express Co. v. Italian Colors Restaurant, in which the Supreme Court held that the complete absence of class-action rights in an arbitration agreement in an adhesion contract does not make the agreement unenforceable even if it means that pursuing individual claims in arbitration is economically unfeasible.