Stay Classy, Eleventh Circuit: Class Arbitration Allowed

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In a major decision, the U.S. Court of Appeals for the Eleventh Circuit recently confirmed an arbitral award that permitted class arbitration when the underlying arbitration clause was silent on the permissibility of class arbitration. By issuing this decision in Southern Communications Services, Inc v Thomas, No 11-15587, 2013 WL 3481467 (11th Cir July 12 2013), the court once again underscored the extremely high level of deference granted to arbitrators, while at the same time threw a lifeline to the sputtering class action practice in the United States.

The case involved a conflict over an early termination fee. The claimant filed for arbitration and then sought class certification from the arbitrator. Although the arbitration clause in the contract was silent on the issue of class arbitration, the arbitrator certified the class. The wireless carrier brought an action in federal court to vacate the award under section 10(a)(4) of the F.A.A., but the district court denied that motion and confirmed the award, as did the Eleventh Circuit on appeal.

By doing so, the Eleventh Circuit deferred to the arbitrator’s legal interpretation of the contract, refusing to second-guess his decision. This deference should be familiar to most practitioners, as vacating an arbitral award has become almost impossible in the face of such unrelenting deference from the various courts along the United States.

Finally, although the use of class action lawsuits as a method of practice has recently suffered many setbacks at the Supreme Court level – which has held that class arbitration waivers are enforceable – this decision rejuvenates the flagging industry. Now, if a contract is silent on the issue of class arbitration, an arbitrator may very well certify a class. As always, it is imperative that attorneys drafting contracts review the dispute resolution clause with knowledgeable litigators and arbitrators, or else suffer the unintended consequences of their oversight.

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