In House - The FindLaw Corporate Counsel Blog

Update Your Arbitration Agreements Right Now

If you have any say over how your company's arbitration agreements read with employees, clients, or anyone for that matter, you should take a look at the recent Eleventh Circuit decision in the JPay v. Kobel matter.

The court there ruled that arbitration agreements that did not specifically include or exclude class claims could fall under an arbitrator's purview to decide whether the claims should be arbitrated or litigated in court. Basically, it all depends on whether the clause calls for the application of particular arbitration rules, such as JAMS or AAA.

Don't Be Ambiguous Arbitrarily

The principle lesson to be learned from the JPay case is simple: When it comes to your arbitration clause, you need to get specific if you want to ensure that class claims are handled in court or via arbitration.

In the case, two customers of JPay sought to arbitrate their claims on behalf of similarly situated customers. JPay, in turn, decided that it would prefer the matter be heard by the courts, and filed a motion. The federal district court agreed with JPay, and also ruled in the company's favor on summary judgment.

However, the appellate court saw it a little bit differently. Though it noted that the district court almost got it right, it failed to recognize that when the parties agreed to arbitrate by AAA rules, they specifically agreed to allow an arbitrator to decide questions of arbitrability. Based upon that very important fact, the circuit panel reversed the decision, sending the case back to arbitration to decide whether the class claims should be heard there or in federal court.

Do You Really Want Arbitration at All?

While arbitration may have, at one time, been thought of as a budget alternative, and still is under certain conditions, the fact remains that blanket arbitration agreements might not be in a company's best interest. As such, you may want to consider specifically carving out what is and isn't important for the company when it comes to arbitration clauses.

Related Resources: