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Wednesday, July 24, 2013

Eleventh Circuit Upholds Arbitrator's Decision to Permit Class Arbitration & to Certify the Class

11thCircuitSealThat headline is not a typo!  The Eleventh Circuit has actually issued a ruling favorable to plaintiffs in an arbitration case.  Earlier this month, the Eleventh Circuit issued its opinion in Southern Communications Services, Inc. v. Thomas in which it upheld a District Court's order denying a motion by Southern Communications Servcies (Southern) to vacate two arbitration awards, one construing the arbitration clause so as to allow for class litigation, the other certifying a class.  

Thomas contracted for three lines of service with Southern, covering cell phones for him, his wife, and his son.  With respect to each line, he agreed to Southern's terms of service which included a $200 termination fee per line and an arbitration clause.  Thomas eventually cancelled all three lines and was charged three termination fees.  Southern excused the first fee; Thomas paid the second fee, and the third he challenged.  He filed a demand for class arbitration, alleging that Southern's fees were unlawful penalties under Georgia law  The arbitrator certified the class.

Southern challenged the certification, and then challenged it again after the Supreme Court decided Stolt-Nielsen.  The arbitrator reconsidered but found that his original decision was consistent with Stolt-Nielsen becasue it was based "on a rule of law or rule of decision as Stolt-Nielsen requires.”  

But perhaps the got that wrong.  Once again, there is a SCOTUS decision on point.  In Sutter, the Court held that a court must uphold an arbitrator's decision, even if clearly erroneous, so long as the arbitrator is even arguably construing the parties' agreement.  Under that standard, the arbitral award could be vacated only if it lacks any contractual basis.  The Eleventh Circuit found that the arbitrator engaged with the contract's language and the parties' intent and thus did not stray from his delegated task fo interpreting the parties' agreement.  

Finding that the arbitrator had not exceeded his authority, the Eleventh Circuit affirmed the decision of the District Court.

For those interested in learning more about Stolt-Nielsen and Sutter, we recommend Jack Graves' post from June.  

 [JT]

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