Who Decides If a Class Action Can be Arbitrated?

Munger, Tolles & Olson attorneys E. Martin Estrada and Bethany W. Kristovich published an article in Law360 discussing the issue of whether a court or an arbitrator should decide if an arbitration agreement allows for arbitration on a classwide basis. It is a question that has been litigated in both state and federal courts, including the U.S. Supreme Court.

The California Supreme Court is the most recent panel to weigh in on the issue. In Sandquist v. Lebo Automotive, the court ruled on July 28, 2016 in favor of the arbitrator on the decision-making issue, going against the trend seen in federal courts on this issue. However, in determining whether an arbitration agreement allows for classwide arbitration, the court noted that the answer will depend on the language of the arbitration agreement as opposed to a blanket position.

Mr. Estrada and Ms. Kristovich analyze the divided position on the answer to this “who decides” issue seen in different courts and discuss several takeaways from the Sandquist decision for individuals and businesses in California. Among the lessons, they note that in drafting arbitration agreements post-Sandquist, it is critical for parties to address whether the agreement includes class arbitration, consider all possible claims including class claims, and allocate express decision-making authority when possible. The piece was among Law360’s most-read expert analysis article’s during the week of its release.

“Presumably, if the parties clearly lay out their intention as to whether the agreement provides for arbitration of class claims, it matters less who interprets that language. It is only in situations in which there is some ambiguity that the ‘who decides’ question becomes more important,” Mr. Estrada and Ms. Kristovich conclude.

Mr. Estrada is a former federal prosecutor who focuses his practice on trials, complex litigation, internal investigations and appeals.

Ms. Kristovich is a litigator whose practice is focused on complex civil litigation, with particular emphasis in unfair competition class actions, media litigation and trials.