PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 15-1275
_____________
CHESAPEAKE APPALACHIA, LLC
v.
SCOUT PETROLEUM, LLC;
SCOUT PETROLEUM II, LP,
Appellants
_____________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil No. 4-14-cv-00620)
District Judge: Hon. Matthew W. Brann
_______________
Argued October 8, 2015
BEFORE: SHWARTZ, KRAUSE,
and COWEN, Circuit Judges
(Opinion Filed: January 5, 2016)
Stewart L. Cohen, Esq.
Michael Coren, Esq.
Jacob A. Goldberg, Esq.
Alessandra C. Phillips, Esq.
Robert L. Pratter, Esq. (Argued)
Cohen, Placitella & Roth
2001 Market Street
Two Commerce Square, Suite 2900
Philadelphia, PA 19103
Thomas D. Kitch, Esq.
Daniel E. Lawrence, Esq.
David G. Seely, Esq.
Gregory J. Stucky, Esq.
Fleeson, Gooing Coulson & Kitch
301 North Main Street
1900 Epic Center
Wichita, KS 67202
Counsel for Appellants
Daniel T. Brier, Esq.
Myers, Brier & Kelly
425 Spruce Street
Suite 200
Scranton, PA 18503
Daniel T. Donovan, Esq. (Argued)
Ragan Naresh, Esq.
Kirkland & Ellis
655 15th Street, N.W.
Suite 1200
2
Washington, DC 20005
Counsel for Appellee
______________
OPINION OF THE COURT
______________
COWEN, Circuit Judge.
In Opalinski v. Robert Half International Inc., 761
F.3d 326 (3d Cir. 2014), cert. denied, 135 S. Ct. 1530 (2015),
we held that the availability of class arbitration constitutes a
“question of arbitrability” to be decided by the courts—and
not the arbitrators—unless the parties’ arbitration agreement
“clearly and unmistakably” provides otherwise, id. at 329,
335-36.
Scout Petroleum, LLC and Scout II, LP (collectively,
“Scout”) appeal from the orders of the United States District
Court for the Middle District of Pennsylvania granting
Chesapeake Appalachia, LLC’s (“Chesapeake”) motions for
summary judgment and for an order vacating a decision by
the arbitrators and denying Scout’s own motion to dismiss the
complaint as well its motion for reconsideration. The oil and
gas leases (“Leases”) at issue in this appeal state that, in the
event of a disagreement between “Lessor” and “Lessee”
concerning “this Lease,” performance “thereunder,” or
damages caused by “Lessee’s” operations, “all such disputes”
shall be resolved by arbitration “in accordance with the rules
3
of the American Arbitration Association.” (A247.) Based on
the language of the Leases themselves, the nature and
contents of the various AAA rules, and the existing case law,
we conclude that the Leases do not “clearly and
unmistakably” delegate the question of class arbitrability to
the arbitrators. Accordingly, we will affirm.
I.
In 2008, Chesapeake entered into various oil and gas
leases with landowners in several northeastern Pennsylvania
counties. Chesapeake is the “Lessee,” and the “Lessor” is (or
originally was) the respective landowner, e.g., “[t]his Lease
made this 10th day of January, 2008, by and between:
William D. Bergey and Joanne M. Bergey, husband and
wife . . . hereinafter collectively called ‘Lessor’ and
CHESAPEAKE APPALACHIA, L.L.C., an Oklahoma
limited liability company . . . hereinafter called ‘Lessee.’”
(A246.) The Leases indicate that they were “prepared by”
Chesapeake. (A248.) In 2013, Scout purchased the right to
several Leases, and, since then, it has been receiving royalties
from Chesapeake.
The Leases include the following arbitration provision:
ARBITRATION. In the event of a
disagreement between Lessor and Lessee
concerning this Lease, performance thereunder,
or damages caused by Lessee’s operations, the
resolution of all such disputes shall be
determined by arbitration in accordance with
4
the rules of the American Arbitration
Association. All fees and costs associated with
the arbitration shall be borne equally by Lessor
and Lessee.
(A247.)
Over the years, the AAA has adopted and amended
several rules applicable to various kinds of arbitration and
mediation proceedings. Active Rules, American Arbitration
Association,
https://www.adr.org/aaa/faces/rules/searchrules/rulesearchres
ult?x_rule_status=A (last visited Nov. 10, 2015). The AAA
website lists more than fifty sets of active rules, including the
Commercial Arbitration Rules and Mediation Procedures
(“Commercial Rules”) as well as the Supplementary Rules for
Class Arbitrations (“Supplementary Rules”). Id.
The AAA’s “Commercial Arbitration and Mediation
Procedures” publication is nearly fifty pages long and
includes fifty-eight different “Commercial Rules.” These
rules are couched in terms of individual or “bilateral”
arbitration proceedings as opposed to proceedings on behalf
of a class. They also generally address basic procedural
issues. For example, there are rules governing the
requirements for filing demands and answers, mediation, the
arbitration proceeding’s locale, pre-hearing production of
information, basic guidelines for how the hearing should be
conducted, and the timing, form, and scope of the arbitrator’s
award. Commercial Rule 1 (“Agreement of Parties”)
provides in relevant part that:
5
(a) The parties shall be deemed to have
made these rules a part of their
arbitration agreement whenever they
have provided for arbitration by the
American Arbitration Association
(hereinafter AAA) under its Commercial
Arbitration Rules or for arbitration by the
AAA of a domestic commercial dispute
without specifying particular rules.
These rules and any amendment of them
shall apply in the form in effect at the
time the administrative requirements are
met for a Demand for Arbitration or
Submission Agreement received by the
AAA. Any disputes regarding which
AAA rules shall apply shall be decided
by the AAA. The parties, by written
agreement, may vary the procedures set
forth in these rules. After appointment
of the arbitrator, such modifications may
be made only with the consent of the
arbitrator.
(A93.) Commercial Rule 7 governs the “Jurisdiction” of the
arbitrator:
(a) 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
6
arbitration agreement or to the
arbitrability of any claim or
counterclaim.
(b) The arbitrator shall have the power to
determine the existence or validity of a
contract of which an arbitration clause
forms a part. Such an arbitration clause
shall be treated as an agreement
independent of the other terms of the
contract. A decision by the arbitrator
that the contract is null and void shall not
for that reason alone render invalid the
arbitration clause.
(c) A party must object to the jurisdiction of
the arbitrator or to the arbitrability of a
claim or counterclaim no later than the
filing of the answering statement to the
claim or counterclaim that gives rise to
the objection. The arbitrator may rule on
such objections as a preliminary matter
or as part of the final award.
(A96.) Commercial Rule 8 (“Interpretation and Application
of Rules”) states, inter alia, that the arbitrator “shall interpret
and apply these rules insofar as they relate to the arbitrator’s
powers and duties.” (A97.)
The Supplementary Rules governing class arbitration
went into effect in 2003. Entitled “Applicability,”
7
Supplementary Rule 1 states:
(a) These Supplementary Rules for Class
Arbitrations (“Supplementary Rules”) shall
apply to any dispute arising out of an agreement
that provides for arbitration pursuant to any of
the rules of the American Arbitration
Association (“AAA”) where a party submits a
dispute to arbitration on behalf of or against a
class or purported class, and shall supplement
any other applicable AAA rules. These
Supplementary Rules shall also apply whenever
a court refers a matter pleaded as a class action
to the AAA for administration, or when a party
to a pending AAA arbitration asserts new
claims on behalf of or against a class or
purported class.
(b) Where inconsistencies exist between these
Supplementary Rules and other AAA rules that
apply to the dispute, these Supplementary Rules
will govern. The arbitrator shall have the
authority to resolve any inconsistency between
any agreement of the parties and these
Supplementary Rules, and in doing so shall
endeavor to avoid any prejudice to the interests
of absent members of a class or purported class.
(c) Whenever a court has, by order, addressed
and resolved any matter that would otherwise
be decided by an arbitrator under these
8
Supplementary Rules, the arbitrator shall follow
the order of the court.
(A136.) Supplementary Rule 3 is entitled “Construction of
the Arbitration Clause”:
Upon appointment, the arbitrator shall
determine as a threshold matter, in a reasoned,
partial final award on the construction of the
arbitration clause, whether the applicable
arbitration clause permits the arbitration to
proceed on behalf of or against a class (the
“Clause Construction Award”). The arbitrator
shall stay all proceedings following the issuance
of the Clause Construction Award for a period
of at least 30 days to permit any party to move a
court of competent jurisdiction to confirm or to
vacate the Clause Construction Award. Once
all parties inform the arbitrator in writing during
the period of the stay that they do not intend to
seek judicial review of the Clause Construction
Award, or once the requisite time period expires
without any party having informed the arbitrator
that it has done so, the arbitrator may proceed
with the arbitration on the basis stated in the
Clause Construction Award. If any party
informs the arbitrator within the period
provided that it has sought judicial review, the
arbitrator may stay further proceedings, or some
part of them, until the arbitrator is informed of
the ruling of the court.
9
In construing the applicable arbitration clause,
the arbitrator shall not consider the existence of
these Supplementary Rules, or any other AAA
rules, to be a factor either in favor of or against
permitting the arbitration to proceed on a class
basis.
(A137.) Under Supplementary Rule 4 (“Class
Certification”), the arbitrator, if satisfied that the arbitration
clause permits the arbitration to proceed as a class arbitration
pursuant to Supplementary Rule 3, determines whether the
proceeding should go forward as a class arbitration.
On March 17, 2014, Scout filed an arbitration demand
against Chesapeake on behalf of itself and similarly situated
lessors, alleging that Chesapeake paid insufficient royalties.
In the answering statement it filed with the AAA, Chesapeake
objected to class arbitration on the grounds that “[it] did not
agree to resolve disputes arising out of the leases at issue in
‘class arbitration,’ nor did Chesapeake agree to submit the
question of class arbitrability -- i.e., whether claimants may
proceed on a class basis in arbitration -- to an arbitrator.”
(A1128.)
Chesapeake filed a declaratory judgment action on
April 1, 2014. It specifically sought a judgment declaring
that: (1) the District Court, and not the arbitrators, must
decide whether class arbitration is available, which implicates
the “who decides” question or inquiry; and (2) the Leases do
not permit class arbitration, i.e., the so-called “clause
10
construction” inquiry. Scout asked Judge Brann to reassign
the case to Judge Mannion of the Middle District of
Pennsylvania. It claimed that Judge Mannion had already
been assigned three related cases involving Chesapeake’s oil
and gas leases, including Chesapeake Appalachia, L.L.C. v.
Burkett. This request was not granted. Chesapeake moved
for summary judgment on the “who decides” question, and
Scout filed a motion to dismiss the complaint (or, in the
alternative, for a stay pending the completion of the
arbitration).
On July 30, 2014, we issued our opinion in Opalinski.
According to the District Court, the Opalinski Court changed
the state of the law in this Circuit by holding, “for the first
time, that ‘the availability of classwide arbitration is a
substantive “question of arbitrability” to be decided by a court
absent clear agreement otherwise.’” Chesapeake Appalachia,
L.L.C. v. Scout Petroleum, LLC, 73 F. Supp. 3d 488, 499
(M.D. Pa. 2014) (quoting Opalinski, 761 F.3d at 329).
It appears that the parties had agreed to the
appointment of three retired federal judges as the AAA
arbitration panel. On October 6, 2014, the arbitrators issued a
decision entitled “CLAUSE CONSTRUCTION
DECISION RE: WHETHER A COURT OR THE
PANEL MAY DECIDE CLASS ARBITRABILITY.”
(A144.) Although they expressed some skepticism about our
opinion in Opalinski, the arbitrators purportedly applied our
holding that class arbitrability constitutes a gateway question
for the courts to decide unless there is a clear agreement to
the contrary. According to the arbitrators, “the arbitration
11
contract in this case clearly and unmistakably authorizes
[them] to make the decision about arbitrability.” (A149.)
The arbitrators directed Scout and Chesapeake to brief the
issue of whether the arbitration agreement precludes class
arbitration.
Chesapeake filed motions to vacate the arbitrators’
decision and to stay the arbitration proceeding until the
District Court resolved Chesapeake’s motions. The District
Court entered an order on October 16, 2014, granting
Chesapeake’s motion for summary judgment and its motion
to vacate the arbitrators’ decision, denying Scout’s motion to
dismiss, and denying as moot Chesapeake’s motion to stay.
In particular, the District Court found the decision of the
arbitrators “to be contrary to Opalinski.” Chesapeake
Appalachia, L.L.C. v. Scout Petroleum, LLC, No. 4:14-CV-
0620, 2014 WL 5370683, at *1 (M.D. Pa. Oct. 16, 2014).
“The next day, Judge Mannion of the Middle District entered
an opinion concerning the same legal questions presented to
the Court below, and under the same Chesapeake lease
arbitration language, but reached the opposite result to the
October 16, 2014 Order.”1 (Appellants’ Brief at 8 (citing
Chesapeake Appalachia LLC v. Burkett, Civil Action No.
1
Chesapeake appealed from Judge Mannion’s order
(No. 14-4311). It appears that the parties in Burkett have
reached a settlement in connection with another proceeding
pending in the Middle District of Pennsylvania (Demchak
Partners Ltd. P’ship v. Chesapeake Appalachia, L.L.C.). The
Burkett appeal has been held in abeyance pending judicial
approval of this settlement.
12
3:13-3073, 2014 WL 5312829 (M.D. Pa. Oct. 17, 2014)).)
Scout filed a motion for reconsideration. It also moved to
recuse Judge Brann and to vacate the October 16, 2014 order.
On December 10, 2014, the District Court heard oral
argument on these motions.
In a December 19, 2014 order, the District Court
denied Scout’s motions and amended its October 16, 2014
order to incorporate the District Court’s memorandum
opinion “issued today’s date as the reasoning in support of
that Order.” (A36.) The District Court also certified this
matter for appeal pursuant to 28 U.S.C. § 1292(b) and stayed
the action pending appeal.
In its memorandum opinion, the District Court
concluded that “[t]he contract here is silent or ambiguous as
to class arbitration, far from the ‘clear and unmistakable’
allowance needed for an arbitrator, and not a court, to turn to
the clause construction question.” Scout, 73 F. Supp. 3d at
501. In reaching this conclusion, it relied in particular on this
Court’s opinion in Opalinski as well as the Sixth Circuit’s
decision in Reed Elsevier, Inc. v. Crockett, 734 F.3d 594 (6th
Cir. 2013), cert. denied, 134 S. Ct. 2291 (2014). Judge Brann
further explained that the approach adopted by Judge
Mannion in Burkett “is not in accord with existing and
binding case law.” Scout, 73 F. Supp. 3d at 500.
On December 24, 2014, Scout filed a petition for
permission to appeal under § 1292(b). This Court granted its
petition on January 21, 2015. On March 4, 2015, Judge
Keeley of the United States District Court for the Northern
13
District of West Virginia concluded in Chesapeake
Appalachia, LLC v. Suppa, 91 F. Supp. 3d 853 (N.D. W. Va.
2015), that “[the court], not an arbitrator, will decide whether
the parties agreed to classwide arbitration in the subject
leases,” id. at 864. In another Chesapeake oil and gas lease
case, Northern District of West Virginia Judge Stamp reached
the same conclusion. Bird v. Turner, Civil Action No.
5:14CV97, 2015 WL 5168575, at *7-*9 (N.D. W. Va. Sept.
1, 2015), appeal filed, No. 15-2152 (4th Cir. Sept. 30, 2015).
II.
The District Court possessed diversity jurisdiction over
this case pursuant to 28 U.S.C. § 1332.2 This Court has
appellate jurisdiction pursuant to § 1292(b) and 9 U.S.C. §
16.
We review de novo the District Court’s orders granting
2
Chesapeake and Scout Petroleum are limited liability
companies, while Scout Petroleum II is organized as a limited
partnership. We asked the parties to submit affidavits setting
forth the citizenship of their respective members and partners.
See, e.g., Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d
412, 420 (3d Cir. 2010) (stating that citizenship of limited
liability company is determined by citizenship of its
members); Swiger v. Allegheny Energy, Inc., 540 F.3d 179,
184-85 (3d Cir. 2008) (stating that citizenship of limited
partnership is determined by citizenship of partners). In light
of these sworn statements, we find that complete diversity
exists in this matter.
14
Chesapeake’s summary judgment motion and its motion to
vacate the arbitrators’ decision and denying Scout’s motion to
dismiss the complaint. See, e.g., Blunt v. Lower Merion Sch.
Dist., 767 F.3d 247, 265 (3d Cir. 2014), cert. denied sub nom.
Allston v. Lower Merion Sch. Dist., 135 S. Ct. 1738 (2015);
Opalinski, 761 F.3d at 330; Eid v. Thompson, 740 F.3d 118,
122 (3d Cir.), cert. denied, 135 S. Ct. 175 (2014). Its order
denying Scout’s motion for reconsideration is reviewed for
abuse of discretion. See, e.g., N. River Ins. Co. v. CIGNA
Reinsurance Co., 52 F.3d 1194, 1203 (3d Cir. 1995).
III.
Although enacted by Congress ninety years ago, the
meaning and effects of the Federal Arbitration Act (“FAA”)
continue to generate a great deal of controversy. Arbitration
clauses are included in a wide variety of contracts, including
consumer contracts, employment agreements, and oil and gas
leases. In turn, it often must be decided whether class
arbitration is available under the parties’ arbitration
agreement. In this appeal, we must determine “who” is to
decide if the Leases permit class arbitration: the courts or the
arbitrators.
The availability of class arbitration implicates two
questions or inquiries: (1) the “who decides” inquiry; and (2)
the “clause construction” inquiry. As we recently explained
in Opalinski, the “who decides” inquiry, in turn, consists of
two basic components:
The analysis is twofold. We decide whether the
15
availability of classwide arbitration is a
“question of arbitrability.” See Howsam v.
Dean Witter Reynolds, Inc., [537 U.S. 79, 83]
(2002) (internal quotation marks and citation
omitted). If yes, it is presumed that the issue is
“for judicial determination unless the parties
clearly and unmistakably provide otherwise.”
Id. (internal quotation marks, citations, and
alteration omitted). If the availability of
classwide arbitration is not a “question of
arbitrability,” it is presumptively for the
arbitrator to resolve. See First Options of Chi.,
Inc. v. Kaplan, [514 U.S. 938, 944-45] (1994).
Opalinski, 761 F.3d at 330. In the “clause construction”
inquiry, the court or the arbitrator then decides whether the
parties’ arbitration agreement permits class arbitration. It is
undisputed that Opalinski held “that the availability of
classwide arbitration is a substantive ‘question of
arbitrability’ to be decided by a court absent clear agreement
otherwise.” Id. at 329. However, the parties vigorously
dispute whether or not the Leases clearly and unmistakably
delegate this “question of class arbitrability” to the arbitrators.
“The burden of overcoming the presumption is
onerous, as it requires express contractual language
unambiguously delegating the question of arbitrability to the
arbitrator.” Id. at 335 (citing Major League Umpires Ass’n v.
Am. League of Prof’l Baseball Clubs, 357 F.3d 272, 280-81
(3d Cir. 2004)). Scout’s entire approach can be summarized
in the following terms: (1) the Leases expressly state that the
16
arbitration will be conducted in accordance with “the rules of
the American Arbitration Association;” (2) under
Pennsylvania law, the arbitration clause incorporates all of the
AAA rules into the Leases, which “are part of the parties’
agreement as if fully printed in haec verba therein”
(Appellants’ Brief at 27); and (3) the Commercial and
Supplementary Rules, as integral parts of the Leases, thereby
clearly and unmistakably vest the arbitrators with the
jurisdiction to decide the question of class arbitrability.
However, we agree with the District Court and Chesapeake
that the Leases fail to satisfy this “onerous” burden.
Given the actual language of the Leases themselves,
the nature and terms of the various AAA rules, and the
existing case law, we determine that the District Court was
correct when it concluded that the Leases are “far from the
‘clear and unmistakable’ allowance needed for” the
arbitrators to decide the question of class arbitrability. Scout,
73 F. Supp. 3d at 501. We acknowledge that Scout offers one
reasonable interpretation of the Leases. As a sophisticated
business, Chesapeake could have (and, at least in retrospect,
should have) drafted a clearer arbitration agreement.
Nevertheless, it is not our role to ascertain whether one,
among various competing interpretations of an arbitration
agreement, is reasonable under ordinary principles of
contractual interpretation, assess whether in hindsight a better
arbitration agreement could have been written, or determine
whether the arbitrators possess the power to decide other
questions of arbitrability. Instead, the Court must determine
whether the Leases clearly and unmistakably delegate the
specific question of class arbitrability to the arbitrators. We
17
conclude that the Leases do not meet such an onerous burden.
A. Prior Case Law
18
While it has split the district courts,3 only two circuit
3
On the one hand, the Suppa court adopted (and
expanded on) the District Court’s reasoning in this case to
conclude that “Chesapeake and the Defendants did not clearly
and unmistakably agree to arbitrate the issue of class
arbitrability.” Suppa, 91 F. Supp. 3d at 864. In Bird, the
district court, having considered the Chesapeake lease and its
reference to the AAA rules, was “unconvinced that the parties
intended to submit to the arbitrator the question of whether
class arbitration is available.” Bird, 2015 WL 5168575, at *9.
There are additional decisions from district courts in this
Circuit indicating that arbitration agreements referring to the
AAA rules did not clearly and unmistakably delegate the
question of class arbitrability to the arbitrators. See Herzfeld
v. 1416 Chancellor, Inc., Civil Action No. 14-4966, 2015 WL
4480829, at *5-*6 (E.D. Pa. Jul. 22, 2015), appeal filed, No.
15-2835 (3d Cir. Aug. 5, 2015); Chassen v. Fidelity Nat’l
Fin., Inc., Civil Action No. 09-291 (PGS) (DEA), 2014 WL
202763, at *6 (D.N.J. Jan. 17, 2014). On the other hand,
Scout cites to a number of district court decisions (including
Judge Mannion’s opinion in Burkett) holding that such
arbitration agreements did satisfy this “clear and
unmistakable” standard. See Marriott Ownership Resorts,
Inc. v. Sterman, Case No: 6:14-cv-1400-ORL-41TBS, at 5-10
(M.D. Fla. Jan. 16, 2015); Marriott Ownership Resorts, Inc. v.
Flynn, Civil No. 14-00372 JMS-RLP, 2014 WL 7076827, at
*7-*15 (D. Haw. Dec. 11, 2014); Burkett, 2014 WL 5312829,
at *1-*9; Medicine Shoppe Int’l, Inc. v. Edlucy, Inc., No.
4:12-CV-161 CAS, 2012 WL 1672489, at *1-*5 (E.D. Mo.
May 15, 2012); Bergman v. Spruce Peak Realty, LLC, No.
19
courts have had the opportunity to consider the specific issue
of whether an arbitration agreement referring to the AAA
rules clearly and unmistakably delegated the question of class
arbitrability to the arbitrators: (1) this Court in Opalinski; and
(2) the Sixth Circuit in Reed Elsevier (and Huffman v. Hilltop
Cos., 747 F.3d 391 (6th Cir. 2014)). While the Sixth Circuit
indicated that such an agreement failed to meet this “clear and
unmistakable” standard, our opinion in Opalinski did not
address the effect of a reference to the AAA rules on this
question. However, we did emphasize the onerous nature of
overcoming the presumption in favor of judicial resolution of
such questions of arbitrability—which requires express and
unambiguous contractual language of delegation as opposed
to mere silence or ambiguous contractual language.
Like this Court, the Sixth Circuit initially held that the
question of whether an arbitration agreement permits class
arbitration constitutes a gateway matter reserved for judicial
resolution unless the parties clearly and unmistakably provide
otherwise. Reed Elsevier, 734 F.3d at 597-99. “[G]uid[ed]”
by Reed Elsevier’s “persuasive” analysis, Opalinski, 761 F.3d
at 334, we joined the Sixth Circuit in holding that the
availability of class arbitration constitutes a question of
arbitrability, id. at 335. The arbitration clause at issue in
Reed Elsevier provided that any controversy, claim, or
counterclaim arising out of or connected with the parties’
contract will be resolved by binding arbitration under the
2:11-CV-127, 2011 WL 5523329, at *2-*4 (D. Vt. Nov. 14,
2011); Yahoo! Inc. v. Iverson, 836 F. Supp. 2d 1007, 1010-12
(N.D. Cal. 2011).
20
arbitration provision and “‘the then-current Commercial
Rules and supervision of the American Arbitration
Association.’” Reed Elsevier, 734 F.3d at 599. According to
the Sixth Circuit, this language “does not clearly and
unmistakably assign to an arbitrator the question whether the
agreement permits classwide arbitration.” Id. “Instead it
does not mention classwide arbitration at all.” Id. While it
could be argued that the question of class arbitrability
constituted a controversy arising in connection with the
contract, the agreement—given the complete absence of any
reference to class arbitration—“can just as easily be read to
speak only to issues related to bilateral arbitration.” Id.
“Thus, at best, the agreement is silent or ambiguous as to
whether an arbitrator should determine the question of
classwide arbitrability; and that is not enough to wrest that
decision from the courts.” Id. (citing Stolt-Nielsen S.A. v.
AnimalFeeds Int’l Corp., 559 U.S. 662, 684-85 (2010)). The
Reed Elsevier court then conducted a “clause construction”
analysis, concluding that the arbitration agreement did not
provide for class arbitration. Id. at 599-600.
In Huffman, the Sixth Circuit applied the approach it
set out in Reed Elsevier to an arbitration agreement providing
for arbitration in accordance with the Commercial Rules as
well as the AAA’s Optional Procedures for Large, Complex
Commercial Disputes. Huffman, 747 F.3d at 398. “The
plaintiffs concede that Reed Elsevier is controlling authority.
As was the case in Reed Elsevier, here the parties’ agreement
is silent as to whether an arbitrator or a court should
determine the question of classwide arbitrability, meaning the
determination lies with this court. See [Reed Elsevier, 734
21
F.3d at 599].” Huffman, 747 F.3d at 398.
Appellees Opalinski and McCabe filed a putative class
action against their former employer, Appellant Robert Half
International, Inc. (“RHI”), under the Fair Labor Standards
Act. Opalinski, 761 F.3d at 329. The Opalinski Appellees’
employment agreements included arbitration clauses stating
that “‘[a]ny dispute or claim arising out of or relating to
Employee’s employment, termination of employment or any
provision of this Agreement’ shall be submitted to
arbitration.” Id. According to our opinion, “[n]either
agreement mentions classwide arbitration.” Id. RHI moved
to compel arbitration on an individual basis, and the district
court, although it compelled arbitration, held that the
propriety of classwide arbitration was to be decided by the
arbitrator. Id. The arbitrator determined in a partial award
that the employment agreements permitted class arbitration.
Id. The district court denied RHI’s motion to vacate the
partial award. Id.
In Opalinski, “the question before us [was] who
decides—that is, should the availability of classwide
arbitration have been decided by the arbitrator or by the
District Court?” Id. In other words, we considered “whether,
in the context of an otherwise silent contract, the availability
of classwide arbitration is to be decided by a court rather than
an arbitrator.” Id. at 330. Concluding that the district court
must decide this question, we reversed the district court’s
orders and remanded for the district court to determine
whether the employment agreements called for class
arbitration. Id. at 335.
22
The Court recognized that, even though federal policy
favors arbitration agreements, arbitration remains a matter of
contract. Id. at 331. Because parties cannot be compelled to
arbitrate any dispute they have not agreed to submit to
arbitration, arbitrators possess the power to decide an issue
only if the parties have authorized the arbitrator to do so. Id.
“Because parties frequently disagree whether a particular
dispute is arbitrable, courts play a limited threshold role in
determining ‘whether the parties have submitted a particular
dispute to arbitration, i.e., the “question of arbitrability.”’”
Id. (quoting Howsam, 537 U.S. at 83). Questions of
arbitrability are limited to a narrow range of gateway issues,
including whether the parties are bound by a given arbitration
clause and whether an arbitration agreement applies to a
particular type of controversy. Id. at 331. Questions that the
parties would likely expect the arbitrator to decide are not
questions of arbitrability. Id. These include procedural issues
that grow out of the dispute and bear on the final disposition
of the proceeding as well as allegations of waiver, delay, or
similar defenses. Id. After a review of the prior Supreme
Court and Third Circuit case law, we observed that whether
the availability of class arbitration is a question of
arbitrability “remains an open question.” Id. at 332.
We held that the availability of classwide arbitration
constitutes a question of arbitrability because it implicates
“whose claims the arbitrator may adjudicate” as well as “what
types of controversies the arbitrator may decide.” Id. We
emphasized the fundamental differences between bilateral
and class arbitration and the serious consequences that arise
from proceeding with one type rather than the other. Id. at
23
332-34. We also turned for support to the Sixth Circuit’s
ruling in Reed Elsevier, “[t]he only other Circuit Court of
Appeals to have squarely resolved the ‘who decides’ issue.”
Id. at 334. We found its analysis to be “persuasive” and
stated that it “guides our own.” Id. Accordingly, this Court
joined the Sixth Circuit in holding that the availability of
class arbitration constitutes a question of arbitrability. Id. at
335.
The Opalinski Court then determined that (in the
words of the accompanying heading) “[t]here is no evidence
rebutting the presumption that the District Court should
decide all questions of arbitrability.” Id. (emphasis omitted).
This section of our opinion consisted of two paragraphs.
First, we explained why we made this determination:
It is presumed that courts must decide
questions of arbitrability “unless the parties
clearly and unmistakably provide otherwise.”
Howsam, [537 U.S. at 83] (internal quotation
marks and citation omitted). The burden of
overcoming the presumption is onerous, as it
requires express contractual language
unambiguously delegating the question of
arbitrability to the arbitrator. See [Major
League Umpires], 357 F.3d at 280-81. Silence
or ambiguous contractual language is
insufficient to rebut the presumption. Gen.
Elec. Co. v. Deutz AG, 270 F.3d 144, 154-55
(3d Cir. 2001). Here, Opalinski and McCabe’s
employment agreements provide for arbitration
24
of any dispute or claim arising out of or relating
to their employment but are silent as to the
availability of classwide arbitration or whether
the question should be submitted to the
arbitrator. Nothing else in the agreements or
record suggests that the parties agreed to submit
questions of arbitrability to the arbitrator. Thus,
the strong presumption favoring judicial
resolution of questions of arbitrability is not
undone, and the District Court had to decide
whether the arbitration agreements permitted
classwide arbitration.
Id. at 335. In the next paragraph, we stated that the district
court’s orders were reversed and that the case was remanded
for the district court to determine whether the employment
agreements called for class arbitration. Id.
In the end, we offered the following conclusion:
“Arbitration is fundamentally a creature
of contract, and an arbitrator’s authority is
derived from an agreement to arbitrate.” [Puleo
v. Chase Bank USA, N.A., 605 F.3d 172, 194
(3d Cir. 2010) (en banc)] (alteration in original)
(internal quotation marks and citation omitted).
Here, where we have an agreement to arbitrate
individual disputes and no mention of
arbitration for a wider group, we believe the
parties would have expected a court, not an
arbitrator, to determine the availability of class
25
arbitration. This is especially so given the
critical differences between individual and class
arbitration and the significant consequences of
that determination for both whose claims are
subject to arbitration and the type of
controversy to be arbitrated. Hence we hold
that the availability of class arbitration is a
“question of arbitrability” for a court to decide
unless the parties unmistakably provide
otherwise.
Id. at 335-36.
Because Opalinski did not address the impact of
incorporating the AAA rules, it is not binding Circuit
precedent disposing of the issue of whether an arbitration
agreement referring to the AAA rules clearly and
unmistakably delegated the question of class arbitrability to
the arbitrators. According to Chesapeake, “[t]his Court
decided this very question (i.e., ‘who decides’ class
arbitrability) on the same material facts (i.e., arbitration
clauses incorporating the rules of the AAA but silent on class
arbitration) and held that in these circumstances, courts, not
arbitrators, decide class arbitrability.” (Appellee’s Brief at
12-13.) However, the Opalinski Appellees did not raise any
kind of “incorporation” argument—at least until after we
issued our opinion. In their unsuccessful petition for
rehearing en banc, the Opalinski Appellees argued that the
incorporation of the AAA rules constituted a clear and
unmistakable expression of the parties’ intent to leave the
question of arbitrability to the arbitrator. Plaintiff-Appellees’
26
Petition for Re-Hearing En Banc at 9 & n.5, Opalinski, 761
F.3d 326 (No. 12-4444). But, by then, it was too late.4 See,
e.g., Peter v. Hess Oil V.I. Corp., 910 F.2d 1179, 1181 (3d
Cir. 1990) (refusing to consider argument raised in rehearing
petition but not in appellate briefing where no legitimate
excuse was provided for failing to raise argument in timely
fashion).
Nevertheless, we did hold (based in part on the Sixth
Circuit’s own ruling in Reed Elsevier) “that the availability of
classwide arbitration is a substantive ‘question of
arbitrability’ to be decided by a court absent clear agreement
otherwise.” Opalinski, 761 F.3d at 329. The Opalinski Court
explained that “[t]he burden of overcoming the presumption
is onerous, as it requires express contractual language
unambiguously delegating the question of arbitrability to the
arbitrator.” Id. at 335 (citing Major League Umpires, 357
F.3d at 280-81). Accordingly, “[s]ilence or ambiguous
contractual language is insufficient to rebut the presumption.”
4
The Opalinski Appellees subsequently addressed this
“incorporation by reference” issue in their certiorari petition.
See Petition for a Writ of Certiorari at 3 & n.2, Opalinski, 135
S. Ct. 1530 (No. 14-625). However, according to RHI,
“Plaintiffs never argued the AAA incorporation issue in either
the district court or before the Third Circuit,” and they
thereby waived the right to seek certiorari as to that issue.
Opposition to Petition for a Writ of Certiorari at 19,
Opalinski, 135 S. Ct. 1530 (No. 14-625). In any event, the
Supreme Court denied the petition. See Opalinski, 135 S. Ct.
1530.
27
Id. (citing Deutz AG, 270 F.3d at 154-55). We now must
decide whether the Leases at issue in this appeal really satisfy
this onerous burden.
B. The Leases and the AAA Rules
Having considered the language of the Leases, the
nature and contents of the various AAA Rules, and the prior
case law, we conclude that the Leases do not satisfy the
onerous burden of overcoming the presumption in favoring of
judicial resolution of the question of class arbitrability.
We look to the actual language of the Leases, setting
aside for the moment Scout’s “incorporation by reference”
theory. We find that the Leases are, at least in a certain sense,
“silent as to the availability of classwide arbitration or
whether the question should be submitted to the arbitrator.”
Opalinski, 761 F.3d at 335. Like the arbitration agreements at
issue in cases like Opalinski and Reed Elsevier, the Leases do
not expressly mention class arbitration, the availability of
class arbitration, the Supplementary Rules, “who decides”—
the courts or the arbitrators—questions of arbitrability, or
whether the arbitrators are to decide the availability of class
arbitration under the Leases. Id.; see also Reed Elsevier, 734
F.3d at 599 (“This language does not clearly and
unmistakably assign to an arbitrator the question whether the
agreement permits classwide arbitration. Instead it does not
mention classwide arbitration at all.”); Bird, 2015 WL
5168575, at *9 (“The agreement does not mention class
arbitration or arbitrability.”); Herzfeld, 2015 WL 4480829, at
*5 (“Here, the arbitration clause did not mention class or
28
collective action resolution.”); Suppa, 91 F. Supp. 3d at 862
(“Like the arbitration clause in this case, however, [the clause
in Opalinski] was silent with respect to class arbitration.”).
We agree with Scout that, in order to undo the
presumption in favor of judicial resolution, an arbitration
agreement need not include any special “incantation” (like,
for example, “the arbitrators shall decide the question of class
arbitrability” or “the arbitrators shall decide all questions of
arbitrability”). It appears that the concept of “silence” was
first used in the “clause construction” context. In Stolt-
Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S.
662 (2010), the parties “stipulated that the arbitration clause
was ‘silent’ with respect to class arbitration,” id. at 668.
“Counsel for AnimalFeeds explained to the arbitration panel
that the term ‘silent’ did not simply mean that the clause
made no express reference to class arbitration. Rather, he
said, ‘[a]ll the parties agree that when a contract is silent on
an issue there’s been no agreement that has been reached on
that issue.’” Id. at 668-69 (citation omitted); see also, e.g.,
Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2069
(2013) (“The parties in Stolt-Nielsen had entered into an
unusual stipulation that they had never reached an agreement
on class arbitration.” (citing Stolt-Nielsen, 559 U.S. at 668-
69)). In our opinion in Sutter v. Oxford Health Plans LLC,
675 F.3d 215 (3d Cir. 2012), aff’d, 133 S. Ct. 2064 (2013),
we explained that “Stolt-Nielsen did not establish a bright line
rule that class arbitration is allowed only under an arbitration
agreement that incants ‘class arbitration’ or otherwise
expressly provides for aggregate procedures,” id. at 222
(citing Stolt-Nielsen, 130 S. Ct. at 1776 n.10; Jock v. Sterling
29
Jewelers Inc., 646 F.3d 113, 124 (2d Cir. 2011)). Instead, the
Supreme Court established a default rule under which a party
may not be compelled to submit to class arbitration unless
there is a contractual basis to conclude that the party actually
agreed to do so. Id.; see also, e.g., Oxford Health Plans, 133
S. Ct. at 2070 (“Nor, we continued, did the panel attempt to
ascertain whether federal or state law established a ‘default
rule’ to take effect absent an agreement.” (quoting Stolt-
Nielsen, 559 U.S. at 673)). We also rejected the suggestion
that an arbitration provision is “silent” whenever the words
“class arbitration” are not written into the text of the
provision itself. Sutter, 675 F.3d at 222 n.5. “[J]ust as ‘[t]he
Supreme Court has never held that a class arbitration clause
must explicitly mention that the parties agree to class
arbitration in order for a decisionmaker to conclude that the
parties consented to class arbitration, [Yahoo!, 836 F. Supp.
2d at 1011],’” the parties’ failure to use a specific set of
words does not automatically bar the courts from finding that
the agreement clearly and unmistakably delegated the
question of class arbitrability. Burkett, 2014 WL 5312829, at
*4.
Nevertheless, both the “who decides” and “clause
construction” inquiries still impose basic standards that must
be satisfied. As a practical matter, the absence of an
“incantation”—or the lack of any express reference to class
arbitration, the availability of class arbitration, the
Supplementary Rules, or who decides whether the arbitration
agreement permits class arbitration—makes it more difficult
to meet such burdens. As we also recognized in Sutter, the
requisite contractual basis may not be inferred solely from the
30
fact that the parties agreed to arbitrate or from their failure to
prohibit this form of arbitration in their agreement. Sutter,
675 F.3d at 221, 224. “‘[T]he differences between bilateral
and class-action arbitration are too great for arbitrators to
presume . . . that the parties’ mere silence on the issue of
class-action arbitration constitutes consent to resolve their
disputes in class proceedings.’” Id. at 221 (quoting Stolt-
Nielsen, 130 S. Ct. at 1776). “It follows that the parties’
silence on the question of ‘who decides’ class arbitrability
should not be read as implicitly consenting to submit the
question to an arbitrator.” Suppa, 91 F. Supp. 3d at 864. In
fact, the burden that must be met in the present “who decides”
context appears even more “onerous” than the equivalent
burden applicable to the “clause construction” phase. After
all, “[s]ilence or ambiguous contractual language” is not
enough; the burden of overcoming the presumption “requires
express contractual language unambiguously delegating the
question of arbitrability to the arbitrator.” Opalinski, 761
F.3d at 335 (citations omitted).
“[G]iven the total absence of any reference to
classwide arbitration,” the Leases “can just as easily be read
to speak only to issues related to bilateral arbitration.” Reed
Elsevier, 734 F.3d at 599. We find it significant that the
Leases consistently use singular (and defined) terms to
describe the respective parties to any arbitration proceeding
and the dispute to be arbitrated. The Leases provide that,
where there is a disagreement between “Lessor” and “Lessee”
concerning “this Lease,” performance “thereunder,” or
damages caused by “Lessee’s” operations, “all such disputes”
shall be resolved by arbitration “in accordance with the rules
31
of the American Arbitration Association.” (A247.) Each
“Lease” defines the “Lessor” (e.g., “William D. Bergey and
Joanne M. Bergey, husband and wife”) as well as the
“Lessee” (“CHESAPEAKE APPALACHIA, L.L.C.”).
(A246.) According to Chesapeake, these terms clearly
indicate that the parties only intended bilateral arbitration.
While Chesapeake may have thereby intended to arbitrate all
disagreements with each “Lessor,” the current inquiry
implicates a putative class of “Lessors,” a group that (as the
Suppa court noted) the Leases themselves never mention.
Suppa, 91 F. Supp. 3d at 864.
Scout indicates that this language has no relevance to
the present “who decides” inquiry. While Chesapeake
criticizes Scout for (as the District Court put it) “skip[ping]
directly to the clause construction question in order to answer
the threshold ‘who decides’ question,” Scout, 73 F. Supp. 3d
at 500, Scout claims that it is Chesapeake and the District
Court that have ventured into the “clause construction”
inquiry. We recognize that the “who decides” and the “clause
construction” questions represent separate inquiries, and we
do not express any opinion as to whether or not the Leases
permit class arbitration. However, the fact that specific
terminology or a particular line of reasoning may be relevant
to the “clause construction” inquiry (and we do not consider
at this juncture how this inquiry should be conducted or its
outcome) does not mean that this language or reasoning has
no bearing whatsoever on the threshold “who decides”
inquiry. For example, Opalinski relied on the agreements’
“silen[ce] as to the availability of classwide arbitration” to
conclude that the strong presumption favoring judicial
32
resolution of questions of arbitrability was not undone.
Opalinski, 761 F.3d at 335; see also, e.g., Reed Elsevier, 734
F.3d at 599 (“But given the total absence of any reference to
classwide arbitration in this clause, the agreement here can
just as easily be read to speak only to issues related to
bilateral arbitration.”). Scout also insists that, under Sutter,
“the incantation of ‘class arbitration’ in an arbitration
agreement is not necessary to permit class arbitration.”
(Appellants’ Brief at 35 (citing Sutter, 675 F.3d at 222).)
However, Sutter and Stolt-Nielsen were “clause construction”
rulings. See, e.g., Oxford Health Plans, 133 S. Ct. at 2068 n.2
(“We would face a different issue if Oxford had argued below
that the availability of class arbitration is a so-called ‘question
of arbitrability.’”); Stolt-Nielsen, 559 U.S. at 680 (“But we
need not revisit that question here because the parties’
supplemental agreement expressly assigned this issue to the
arbitration panel, and no party argues that this assignment
was impermissible.”). We nevertheless have looked to these
“clause construction” cases for guidance in answering the
“who decides” question. We do the same with respect to
other considerations relevant to the current inquiry, including
express contractual language referring to a singular “Lessor,”
“Lessee,” and “Lease.”
In light of the actual language of the Leases, Scout
quite understandably emphasizes the contractual reference to
arbitration “in accordance with the rules of the American
Arbitration Association” (A247), the AAA rules, and the
general contractual doctrine of incorporation by reference.
Courts usually apply ordinary state law principles governing
contract formation to decide whether the parties agree to
33
arbitrate a certain matter. See, e.g., First Options, 514 U.S. at
944. It is uncontested that, under Pennsylvania law,
“[i]ncorporation by reference is proper where the underlying
contract makes clear reference to a separate document, the
identity of the separate document may be ascertained, and
incorporation of the document will not result in surprise or
hardship.” Std. Bent Glass Corp. v. Glassrobots Oy, 333 F.3d
440, 447 (3d Cir. 2003) (footnote omitted).
Nevertheless, the general rule that courts should apply
ordinary state law principles is subject to the following
qualification: “Courts should not assume that the parties
agreed to arbitrate arbitrability unless there is ‘clea[r] and
unmistakabl[e]’ evidence that they did so.” First Options,
514 U.S. at 944 (quoting AT&T Techs., Inc. v. Commc’ns
Workers, 475 U.S. 643, 649 (1986)). Accordingly, it is not
enough for Scout to establish that the AAA rules provide for
the arbitrators to decide, inter alia, the question of class
arbitrability, and that, in turn, these rules are incorporated by
reference pursuant to state law. It instead must present “clear
and unmistakable evidence” of an agreement to arbitrate this
specific question. As we explained in Opalinski, the onerous
burden of overcoming the presumption requires express
contractual language unambiguously delegating the
question—not mere silence or ambiguous contractual
34
language.5 See, e.g., Opalinski, 761 F.3d at 335.
Scout argues that the reference in the Leases to “the
rules of the American Arbitration Association” is express
contractual language incorporating the content of the
Commercial Rules and the Supplementary Rules into the
contract and serves as a clear and unmistakable delegation of
authority to the arbitrators to decide class arbitrability. We,
however, agree with Chesapeake that this case implicates “a
daisy-chain of cross-references”—going from the Leases
themselves to “the rules of the American Arbitration
Association” to the Commercial Rules and, at last, to the
Supplementary Rules. (Appellees’ Brief at 31.) Having
examined the various AAA rules, we believe that the Leases
still fail to satisfy the onerous burden of undoing the
presumption in favor of judicial resolution of the question of
class arbitrability.
5
Scout turns for support to the Supreme Court’s
December 14, 2015 decision in DIRECTV, Inc. v. Imburgia, -
-- S. Ct. ---, 2015 WL 8546242 (2015). The DIRECTV Court
concluded that a California court’s refusal to enforce an
arbitration agreement “does not rest ‘upon such grounds as
exist . . . for the revocation of any contract.’” Id. at *2
(quoting 9 U.S.C. § 2). The Supreme Court did not consider
whether the parties’ agreement delegated a question of
arbitrability to the arbitrators, and it did not call into question
the well-established rule that courts should not assume that
the parties agree to arbitrate arbitrability without “‘clear and
unmistakbl[e]’ evidence that they did so.” First Options, 514
U.S. at 944 (quoting AT&T Techs., 475 U.S. at 649).
35
Initially, the Leases simply refer, without further
explanation, to “the rules of the American Arbitration
Association.” (A247.) In other words, “[their] reference to
the AAA rules is the only link to the submission of
arbitrability issues to the arbitrator.” Bird, 2015 WL
5168575, at *9. Founded in 1926, the AAA has adopted (and
amended) numerous rules over many years. The AAA
website identifies more than fifty sets of rules. Active Rules,
supra. These range from the “AAA Dispute Resolution
Board Hearing Rules and Procedures” to the “Supplementary
Rules for Fixed Time and Cost Construction Arbitration.” Id.
In turn, the Leases at issue in this case do not expressly refer
to the specific “Supplementary Rules” governing class
arbitrations or the general “Commercial Rules.” See, e.g.,
Herzfeld, 2015 WL 4480829, at *6 (“[W]e cannot find the
three-word reference to AAA ‘rules and regulations’
incorporates a panoply of collective and class action rules
applied by AAA once the matter is properly before the
arbitrators by consent or waiver.”).
While Commercial Rule 7 expressly grants the
arbitrator the power to rule on objections concerning the
arbitrability of any claim (and Commercial Rule 8 states that
the arbitrator shall interpret and apply the rules insofar as they
relate to the arbitrator’s powers and duties), the Commercial
Rules do not mention either class arbitration or the question
of class arbitrability. The AAA’s “Commercial Rules and
Mediation Procedures” publication is nearly fifty pages long
and includes fifty-eight different “Commercial Rules.” Like
the Leases and their references to a singular “Lessor,”
Lessee,” and “Lease,” these rules are couched in terms of
36
bilateral arbitration proceedings. In addition, they address
various procedural matters. Commercial Rule 4, for example,
governs “Filing Requirements,” e.g., “[a]rbitration under an
arbitration provision in a contract shall be initiated by the
initiating party (‘claimant’) filing with the AAA a Demand
for Arbitration, the administrative filing fee, and a copy of the
applicable arbitration agreement from the parties’ contract
which provides for arbitration.” (A94.) Likewise,
Commercial Rule 5 (“Answers and Counterclaims”) provides,
inter alia, that “[a] respondent may file an answering
statement with the AAA within 14 calendar days after notice
of the filing of the Demand is sent by the AAA.” (A95.) The
Commercial Rules also address, among other things, when
mediation is required, the locale for the arbitration, pre-
hearing production of information, basic principles for how
the hearing should be conducted, and the timing, form, and
scope of the arbitrator’s award. These are the basic
procedural issues that, as we noted in Opalinski, “the parties
would likely expect the arbitrator to decide.” Opalinski, 761
F.3d at 331 (citation omitted). In contrast, the question of
class arbitrability “is a substantive gateway question rather
than a procedural one.” Id. at 335.
Given the actual contractual language at issue here as
well as the language and nature of the other AAA rules, the
Supplementary Rules are not enough for us to conclude that
the Leases clearly and unmistakably delegate the question of
class arbitrability to the arbitrators. Under Supplementary
Rule 1, the Supplementary Rules apply where a party submits
a dispute on behalf of a purported class, and Supplementary
Rules 3 and 4 indicate that the arbitrator must determine
37
whether the arbitration agreement permits class arbitration.6
But, before we can even consider these Supplementary Rules,
the “daisy-chain” takes us from the Leases to the otherwise
unspecified “rules of the American Arbitration Association”
to the Commercial Rules. The Commercial Rules do not even
refer to the Supplementary Rules and are phrased in terms of
basic procedural issues arising out of bilateral arbitration
proceedings.
Because they are susceptible to more than one
reasonable interpretation, the Leases do not include the
6
Chesapeake argues that Supplementary Rule 3
refutes Scout’s argument because it states that, “[i]n
construing the applicable arbitration clause, the arbitrator
shall not consider the existence of these Supplementary
Rules, or any other AAA rules, to be a factor either in favor
of or against permitting the arbitration to proceed on a class
basis.” (A137.) This aspect of the rule, however, implicates
the “clause construction” inquiry. While the Sixth Circuit
relied on this language, it did so in order to determine
whether the parties’ arbitration agreement authorized class
arbitration (and not to answer the threshold “who decides”
question). See Reed Elsevier, 734 F.3d at 599-600 (“Crockett
responds that the arbitration clause refers to the AAA’s
Commercial Rules, which themselves incorporate the AAA’s
Supplemental Rules for Class Arbitration. But the
Supplemental Rules expressly state that one should ‘not
consider the existence of these Supplementary Rules, or any
other AAA rules, to be a factor either in favor of or against
permitting the arbitration to proceed on a class basis.’”).
38
required “express contractual language unambiguously
delegating the question of [class] arbitrability to the
arbitrator[s].” Opalinski, 761 F.3d at 335 (citation omitted).
While it is reasonable to interpret the Leases, together with
the Commercial Rules (especially Commercial Rule 7) and
the Supplementary Rules (specifically Supplementary Rule
3), as granting the arbitrators the power to decide whether
class arbitration is available, that is not the only reasonable
interpretation. For instance, what if we were to assume that a
landowner and an energy company intended to delegate to the
arbitrator questions of arbitrability arising out of a bilateral
arbitration proceeding between these two parties (i.e.,
“questions of bilateral arbitrability”)—but not the question of
class arbitrability? Wouldn’t it be reasonable for the parties
to draft an arbitration agreement that contains no reference
whatsoever to class arbitration, the question of class
arbitrability, or the Supplementary Rules but instead provides
for arbitration “[i]n the event of a disagreement between
Lessor and Lessee concerning this Lease” pursuant to “the
rules of the American Arbitration Association”? Or perhaps
the parties simply intended for the courts to decide both
questions of bilateral arbitrability as well as the question of
class arbitrability, consistent with the general presumption in
favor of judicial resolution of such questions?
According to Scout, Chesapeake is asking us to adopt
an unprecedented approach that would be inconsistent with
well-settled “incorporation” principles. We acknowledge that
it was Chesapeake that drafted the Leases. As a sophisticated
business, it could have, and, at least in retrospect, should
have, drafted a clearer arbitration agreement. However, we
39
must construe ambiguity against Scout and in Chesapeake’s
favor because “[i]t is presumed that courts must decide
questions of arbitrability ‘unless the parties clearly and
unmistakably provide otherwise.’” Id. (citation omitted).
“The burden of overcoming the presumption is onerous[.]”
Id. (citation omitted). We cannot find that this onerous
burden has been met merely because Chesapeake failed, for
example, “to insert words of limitation or an express waiver
of class arbitration” (Appellants’ Reply Brief at 15 (citations
omitted)). In fact, such a finding would (as the Suppa court
aptly observed) “turn[ ] the presumption favoring judicial
determination of classwide arbitrability on its head.” Suppa,
91 F. Supp. 3d at 864. “The entire point of the presumption is
that an arbitration clause need not expressly exclude
questions of arbitrability as outside its scope . . . .” Id.
(citation omitted).
It appears that “[v]irtually every circuit to have
considered the issue has determined that incorporation of the
[AAA] arbitration rules constitutes clear and unmistakable
evidence that the parties agreed to arbitrate arbitrability.”
Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069, 1074
(9th Cir. 2013) (citing Petrofac, Inc. v. DynMcDermott
Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012);
Fallo v. High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009);
Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1373 (Fed.
Cir. 2006); Terminix Int’l Co. v. Palmer Ranch LP, 432 F.3d
1327, 1332 (11th Cir. 2005); Contec Corp. v. Remote
Solution Co., 398 F.3d 205, 208 (2d Cir. 2005)). Like the
District Court and Chesapeake, however, we believe that this
“bilateral arbitration dispute case law” is entitled to relatively
40
little weight in the class arbitrability context. Scout, 73 F.
Supp. 3d at 500. Devoting several pages of its appellate
briefing to these bilateral arbitration cases, Scout argues that
the incorporation of the AAA rules constitutes clear and
unmistakable evidence of intent to delegate authority to the
arbitrators to decide all questions of arbitrability, including
the specific question of class arbitrability. However, the
whole notion of class arbitration implicates a particular set of
concerns that are absent in the bilateral context. Although it
ultimately chose to rely on these cases, the Burkett court
admitted that “the above cases do not address the exact issue
presented in this action,” i.e., “‘who decides’ class
arbitrability.” Burkett, 2014 WL 5312829, at *7 (footnote
omitted) (citation omitted). In concluding that the availability
of class arbitration constitutes a question of arbitrability, we
turned in Opalinski to Supreme Court rulings highlighting the
fundamental differences between bilateral arbitration and
class arbitration as well as the serious consequences of
permitting a class arbitration proceeding to go forward:
“[(1) a]n arbitrator . . . no longer resolves a
single dispute between the parties to a single
agreement, but instead resolves many disputes
between hundreds or perhaps even thousands of
parties . . . [; (2) ] the presumption of privacy
and confidentiality that applies in many bilateral
arbitrations [does] not apply in class
arbitrations[,] thus potentially frustrating the
parties’ assumptions when they agreed to
arbitrate[; (3) t]he arbitrator’s award no longer
purports to bind just the parties to a single
41
arbitration agreement, but adjudicates the rights
of absent parties as well[; and (4) ] the
commercial stakes of class-action arbitration are
comparable to those of class-action litigation,
even though the scope of judicial review is
much more limited.”
Opalinski, 761 F.3d at 333 (quoting Stolt-Nielsen, 559 U.S. at
686-87); see also, e.g., id. at 333 (“Additionally, as Justice
Alito warned in his concurrence in Oxford Health, courts
should be wary of concluding that the availability of
classwide arbitration is for the arbitrator to decide, as that
decision implicates the rights of absent class members
without their consent.” (citing Oxford Health Plans, 133 S.
Ct. at 2071-72 (Alito, J., concurring)). “In AT&T Mobility
LLC v. Concepcion, [131 S. Ct. 1740 (2011)], the Court
similarly emphasized that the ‘changes brought about by the
shift from bilateral arbitration to class-action arbitration are
fundamental,’ concluding that ‘[a]rbitration is poorly suited to
the higher stakes of class litigation’ and that classwide
arbitration ‘is not arbitration as envisioned by the FAA.’”
Opalinski, 761 F.3d at 333-34 (quoting Concepcion, 131 S.
Ct. at 1750, 1751-53). The legislative history of the FAA—
which predates the adoption of Federal Rule of Civil
Procedure 23, which governs class actions, by decades—
“contains nothing . . . that contemplates the existence of class
arbitration.” Concepcion, 131 S. Ct. at 1749 n.5. Given these
considerations, it is conceivable that a landowner and energy
company may have agreed to the Leases because they
intended to delegate questions of bilateral arbitrability to the
arbitrators—as opposed to the distinctive question of whether
42
they thereby agreed to a fundamentally different type of
arbitration not originally envisioned by the FAA itself.
Like the Burkett court, Scout asserts that consent to
any of the AAA’s rules constitutes consent to the
Supplementary Rules and that, if a dispute subject to
arbitration under these rules involves a purported class, the
arbitration must be governed by all the rules, including the
Supplementary Rules. Burkett, 2014 WL 5312829, at *7. In
Reed v. Florida Metropolitan University, Inc., 681 F.3d 630
(5th Cir. 2012), abrogated in part on other grounds, Oxford
Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013), the Fifth
Circuit refrained from deciding whether the issue of class
arbitration constitutes a question of arbitrability, id. at 633-36.
It did so because, among other things, it believed that “the
parties’ agreement to the AAA’s Commercial Rules also
constitutes consent to the Supplementary Rules,” id. at 635
(footnote omitted), and, given the substance of
Supplementary Rule 3, “[t]he parties’ consent to the
Supplementary Rules, therefore, constitutes a clear agreement
to allow the arbitrator to decide whether the party’s
agreement provides for class arbitration,” id. at 635-36.
However, we once again note that the current inquiry requires
us to determine whether the Leases clearly and unmistakably
delegate the question of class arbitrability to the arbitrators—
and not merely whether the parties have somehow
43
“consented” to the Supplementary Rules.7
Finally, we find it significant that the Sixth Circuit
held that an agreement referring to the AAA rules did not
meet the “clear and unmistakable” standard. Admittedly, the
Reed Elsevier court did not provide a detailed analysis in
7
Furthermore, it appears that the parties in Reed did
not dispute the applicability of the Supplementary Rules.
Reed, 681 F.3d at 635 n.5 (“The School, in its motion to
vacate the clause construction award, in fact represented to
the district court that it had agreed to those Rules.” (citation
omitted)).
In a footnote, the Eleventh Circuit also refrained from
deciding whether the availability of class arbitration is a
question of arbitrability because the appellant “gave the
question of whether the contract allowed for class arbitration
to the arbitrator through its choice of rules and by failing to
‘dispute th[e] [a]rbitrator’s jurisdiction to decide this
threshold issue.’” Southern Commc’ns Servs., Inc. v.
Thomas, 720 F.3d 1352, 1359 n.6 (11th Cir. 2013) (citation
omitted), cert. denied, 134 S. Ct. 1001 (2014). The parties
agreed to arbitration pursuant to the AAA’s Wireless Industry
Arbitration Rules. Id. at 1355. Like the Fifth Circuit, the
Eleventh Circuit did not reference the “onerous” burden that
applies in the current context (and also relied on the party’s
conduct in the proceeding).
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support of its holding.8 See, e.g., Burkett, 2014 WL 5312829,
at *7 (“Further, in considering the arbitration clause in Reed
[Elsevier], the Sixth Circuit looked only to whether there was
an express reference to class arbitration in the arbitration
clause.”). But, given our examination of both the language of
the Leases and the nature and contents of the various AAA
rules, we see no reason to reach a different conclusion in this
case—and create a circuit split. After all, we “join[ed] the
8
As Scout points out, the Reed Elsevier court did not
quote from or expressly examine the various AAA rules until
it conducted its “clause construction” analysis. In fact, the
court never specifically mentioned Commercial Rule 7.
Scout further insists that the Sixth Circuit mischaracterized
Supplementary Rule 3. According to Scout, the circuit court
overlooked the first sentence of the rule (which states that
“the arbitrator” shall determine whether the arbitration clause
permits the arbitration to proceed on behalf of a class) and
misstates the final sentence of the rule (providing that, in
construing the applicable arbitration clause, “the arbitrator”
shall not consider the existence of the Supplementary Rules to
be a factor either for or against permitting class arbitration).
The Sixth Circuit observed that “the Supplemental Rules
expressly state that one should ‘not consider the existence of
these Supplementary Rules, or any other AAA rules, to be a
factor either in favor of or against permitting the arbitration to
proceed on a class basis.’” Reed Elsevier, 734 F.3d at 599-
60. We do not see how the Sixth Circuit’s use of the term
“one” in place of “the arbitrator” in the “clause construction”
context casts doubt on its prior determination that the
question of class arbitrability must be decided by the court.
45
Sixth Circuit Court of Appeals in holding that the availability
of class arbitration is a ‘question of arbitrability.’” Opalinski,
761 F.3d at 335. In this appeal, we likewise conclude that the
Leases do “not clearly and unmistakably assign to an
arbitrator the question whether the agreement permits
classwide arbitration.” Reed Elsevier, 734 F.3d at 599.
C. The Relief Granted
The District Court granted Chesapeake’s motions for
summary judgment and for the vacatur of the arbitrators’
decision and denied Scout’s motions to dismiss and for
reconsideration. Scout specifically contends that the District
Court committed reversible error by vacating the arbitrators’
decision holding that the Leases clearly and unmistakably
authorize them to decide the question of class arbitrability.
Nevertheless, we have determined that the Leases do not
clearly and unmistakably delegate this question to the
arbitrators. According to Scout, “the Supreme Court in
[Oxford Health Plans] wrote that a court may review an
arbitrator’s determination de novo only absent ‘clear and
unmistakable’ evidence that the parties wanted an arbitrator
to resolve the dispute.” (Appellants’ Reply Brief at 18 (citing
Oxford Health Plans, 133 S. Ct. at 2068 n.2; Appellees’ Brief
at 12).) Given the absence of “clear and unmistakable”
evidence in this case, the District Court appropriately granted
the motion to vacate.
IV.
We will affirm the orders of the District Court.
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