Third Circuit Rules that the Issue of Whether the Arbitration Agreement Contained An Explicit Class Action Waiver is Within the Discretion of the District Court to Decide

PULEO V. CHASE BANK U.S.A. (CIVIL ACTION NO. 08-3837 MAY 10, 2010 )

In this action, plaintiff sued defendant over principal and interest from several credit card agreements. The credit card agreement contained a very broad arbitration agreement requiring the parties to decide “all claims” by arbitration. In addition, the arbitration agreement also expressly barred class action lawsuits. Despite the bar on class action lawsuits, plaintiff commenced an action against defendant as a putative class action. Defendant moved to compel arbitration pursuant to the credit card agreement between the parties. With respect to whether the class action waiver was enforceable, plaintiff requested that the district court make a determination.

Defendant, again, opposed the court involving itself with this dispute and requested that the issue of enforceability of the class action waiver be decided by an arbitration panel. The district court concluded that the enforceability of the class action waiver is an issue of arbitribility and, as a result, such issues are within the discretion of the court to make a determination. Defendant appealed to the Third Circuit. In its motion papers, defendant cited to several Supreme Court opinions that supported the proposition that the issue of arbitrability is more appropriate for an arbitration panel to decide. The majority disagreed and found the issue of arbitrability rests within the discretion of the court except if the arbitration clause was clear that such decisions rest with the arbitrator. The dissent claimed that the language contained in the arbitration agreement gave that right to the arbitration panel.

IMPACT (ARBITRATION): Here is another important decision regarding the scope of an arbitration clause. The Third Circuit was faced with the issue of whether a class action waiver is enforceable. Based on the decision by the Third Circuit, the issue has yet to be fully decided and it depends on the language in the arbitration agreement. For those entitles wishing to have the arbitration panel decide the issue, the language in the agreement should be explicit to avoid any interpretation to the contrary.