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Eleventh Circuit Reverses Class Arbitration Decision

By George Khoury, Esq. on September 27, 2018 1:20 PM

A recent decision out of the Eleventh Circuit may have arbitration agreements the nation over getting rewritten.

The JPay v. Kobel case concerned whether JPay customers were limited to the federal court to have class claims heard. After the district court decided that the customers were in fact limited to the federal court, despite the existence of an arbitration agreement, the matter was dismissed on summary judgment. Fortunately for the customers though, the appellate court held that the lower court made a significant error requiring reversal.

Rule Selection Matters

In the instant matter, two JPay consumers sought to arbitrate class claims on behalf of all JPay customers. JPay is a service that allows individuals to transfer money to jail inmates for use within prisons.

In short, the Eleventh Circuit explained that the district court would have been correct in ruling that the customers could not arbitrate the class claims, had it not been for the fact that the arbitration clause at issue specifically called for the use of AAA rules. As the court then explained, AAA rules require the arbitrator and not the court to decide matters of arbitrability.

This ruling not only reverses the grant of summary judgment, it also sends the matter back to arbitration to decide the threshold matter of the whether the case should be arbitrated or proceed to federal court.

As noted by commentators, this decision is likely to make waves throughout many industries as the circuit court is clearly indicating here that every word in an arbitration clause can really matter.

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