Two different panels of the Second Circuit issued opinions about class arbitration on the same day last week. One creates a circuit split over how specific parties must be to delegate the availability of class arbitration to arbitrators, and the second addresses when bankruptcy law can preempt the federal arbitration act.

In Wells Fargo Advisors, LLC v. Sappington, 2018 WL 1177230 (2d Cir. March 7, 2018), a putative class of former Wells Fargo employees brought suit for unpaid overtime (FLSA). Wells Fargo moved to compel “bilateral” (individual) arbitration. The district court denied the motion, finding that the arbitrator was authorized to decide whether class arbitration was available. The Second Circuit affirmed.

As you may recall from this blog, at least four federal circuit courts have found that whether class arbitration is available is a gateway issue of arbitrability, meaning that it is presumptively for the courts to determine. (The 8th, 6th, 4th, and 3d.) And, while parties can delegate gateway issues to the arbitrator if they do so clearly and unmistakably, at least three of those circuits have held that a higher standard applies to the class arbitration issue. (For example, the Eighth Circuit found that incorporating AAA rules was not sufficient to delegate class arbitrability, while it is sufficient to delegate other gateway issues.)

In the Wells Fargo matter, the Second Circuit “assume[d] without deciding” that the availability of class arbitration is a gateway question. (Wimps. Just decide.) It then considered whether the delegation of that issue to an arbitrator was clear and unmistakable under Missouri law. One set of plaintiffs had an agreement stating that “any controversy relating to your duty to arbitrate hereunder, or to the validity or enforceability of this arbitration clause, or to any defense to arbitration, shall also be arbitrated.” The court found that was clear and unmistakable delegation of the class arbitration issue to an arbitrator.

More surprisingly, the court found that a second set of plaintiffs had also clearly and unmistakable delegated class arbitration to an arbitrator, even though their agreement only agreed to arbitrate “any dispute” and adopted either FINRA rules or alternatively 1993 Securities Arbitration Rules of the AAA. In its analysis, the court noted that because some types of disputes were excluded from arbitration (unemployment), but class arbitration was not excluded, Missouri law would consider it included. And the court found that more recent iterations of the AAA rules applied, which allow an arbitrator to determine whether a class can proceed. This decision creates a circuit split on the issue of whether class arbitration is special enough to deserve its own rules for delegation.

As if creating a circuit split on class arbitrability wasn’t exciting enough, the Second Circuit also allowed another putative class action to go forward, despite an arbitration clause. In In re Anderson, 2018 WL 1177227 (2d Cir. March 7, 2018), Mr. Anderson went through Chapter 7 bankruptcy and his debts were released. One of those debts was to his credit card company. However, Mr. Anderson alleged that the credit card company refused to update his credit reports after the bankruptcy. So, he filed a putative class action. The credit card moved to compel arbitration under the cardholder agreement, but the bankruptcy court found it was non-arbitrable because it “was a core bankruptcy proceeding that went to the heart of the ‘fresh start’ guaranteed to debtors.” On appeal, the Second Circuit agreed.