Court upholds class action in arbitration

Posted on: September 26th, 2013 by Steve Larson

Law and justice concept, gavelIn Southern Communications Services, Inc. v. Thomas, No. 11-15584, 2013 WL 3481467 (11th Cir. July 12, 2013) (Tjoflat, J.), cellular telephone customers brought an action in arbitration against their cellular telephone provider for charging early termination fees.  After the arbitrator determined that the contract allowed for class arbitration and certified a class, Defendant appealed.

The Eleventh Circuit determined that the arbitrator did not exceed his power in determining (1) that class arbitration was allowed under the contract, and (2) that class treatment was appropriate.  In support of its decision, the Court reasoned that it must give deference to the arbitrator’s decision and that under the Federal Arbitration Act (FAA) the only question left for the court is whether the arbitrator interpreted the parties’ contract, not whether he got the meaning right or wrong. 

The record indicated that the arbitrator began by looking at the language of the contract, and upon recognizing that there was no mention of class treatment, the arbitrator turned to the American Arbitration Association Supplementary Rules, which had been incorproated by reference into the arbitration agreement.  The arbitrator ultimately made a determination based on the text of the parties’ contract and determined that nothing barred class arbitration. 

Thus, under the highly deferential standard of the FAA, the Court upheld the arbitrator’s decision to allow class arbitration, and found no reason to disturb his decision to certify a class, rejecting Defendant’s argument attempting to do so as merely an argument that the arbitrator wrongly applied the law, which is not sufficient grounds to disturb the ruling.