IN RE A2P SMS ANTITRUST LITIGATION

Filing 251

OPINION: Defendants' request that the Court order individual arbitration in this matter is denied, as the matter is for the arbitrator to resolve. Plaintiffs' cross-motion is granted to the extent that the Court finds that the availability of class arbitration proceedings is an issue to be resolved by the arbitrator. The Court does not reach the parties' other arguments as to whether class arbitration is available or whether Plaintiffs' have waived or conceded the merits of this issue. These are matters for the arbitrator to decide. This resolves docket numbers 236 and 243. SO ORDERED. (Signed by Judge Alison J. Nathan on 5/29/2014) (ajs)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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IN REA2P SMS
ANTITRUST LITIGATION

MASTER FILE: 12 CV 2656 (AJN)

OPINION
THIS DOCUMENT RELATES TO:
ALL ACTIONS

ALISON J. NATHAN, District Judge:
On September 16, 2013, the Court issued an order compelling arbitration of the claims
against certain Defendants in this matter and staying the remainder of this action. (Dkt. No.
225). In response to that order, Plaintiffs submitted a "Demand for Arbitration" to the American
Arbitration Association ("AAA") that sought a class arbitration of the parties' dispute.
(Frederick Deel. Ex. 1). In a reversal of roles, the parties have now returned to Court and
Defendants request the Court's intervention to preclude Plaintiffs from pursuing class arbitration

and to require individual arbitration, whereas Plaintiffs urge this issue is one for the arbitrator to
decide. The Court, however, stays its course and concludes that the issue of the availability of
class arbitration, like the underlying merits, is for the arbitrator to decide.
I. Background

The allegations underlying the Plaintiffs' claims are summarized in the Court's
September 16, 2013, decision and have little bearing on matters at hand. Of substantially greater
import is the procedural history of this case, particularly surrounding the motion to compel
arbitration.
On October 9, 2012, Defendants filed-among other things-several motions to compel
arbitration based on the governing Registration Sublicense Agreement's ("RSA") arbitration
clause. (Dkt.Nos.151, 153, 162-63, 171, 173). TheRSAprovides,inpertinentpart,that

Any dispute, controversy or claim arising out of or relating to this Agreement or
the breach, termination, non-renewal of this Agreement or any CSC, refusal to
grant new CS Cs, or the validity of this Agreement, shall be finally settled in
accordance with the commercial arbitration rules of the American Arbitration
Association (the "AAA").
RSA~

19. It also provides that, "[e]xcept as precluded by the United Nations Convention on the

Recognition and Enforcements of Foreign Arbitral Awards, the internal procedural and
substantive laws of Virginia and the [FAA] shall govern all questions of arbitral procedure,
arbitral review, scope of arbitral authority, and arbitral enforcement."

RSA~

19.

Two of Defendants' three Notices of Motion requested that the Court compel arbitration
"on an individual basis." (Dkt. Nos. 162, 171). All three of the memoranda of law
accompanying those motions also argued that class arbitration was not permitted under the
circumstances, arguing that the RSA was silent as to class wide arbitration and, therefore, Stolt-

Nielsen SA. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), precluded class
arbitration. (Dkt. No. 153 at 16; Dkt. No. 163 at 12-13; Dkt. No. 173 at 23-24). These
memoranda of law also expressly (albeit briefly) argued that whether class arbitration was
available was an issue for the Court, rather than the arbitrator, to resolve.
In response, Plaintiffs challenged the arbitration agreement as a whole, contending that
the Court should deny the motion to compel. In particular, Plaintiffs argued, under thengoverning Second Circuit precedent, that because the costs of arbitration would preclude them
from effectively vindicating their statutory rights, the arbitration clauses as a whole were
unenforceable. (Dkt. No. 231 at 25-29). To make this argument, Plaintiffs cited Stolt-Nielsen
for the proposition that "no class arbitration is available" because the applicable "arbitration
clauses are silent about any class arbitration." (Dkt. No. 231 at 29 n. 42). Likewise, in support
of this argument, Plaintiffs had previously represented to the Court that class arbitration was

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unavailable. (07/30/12 Tr. at 15:20-16:15 ("[B]ecause the arbitration clause doesn't have a
provision in it allowing for class cases to go forward, under the Stolt-Nielsen case from the
Supreme Court, then you can't bring a class action in arbitration, which means that if we were to
have to arbitrate, they would have to be individual actions.")). In other words, Plaintiffs sought
to defeat the motions to compel arbitration by arguing, among other things, that class arbitration
was unavailable under the RSA and that this was a reason to invalidate the arbitration clauses as
a whole.
On June 24, 2013, the Court ordered supplemental briefing on the impact of the Supreme
Court's decision in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013),
on the pending motions to compel. Plaintiffs' supplemental brief maintained that that decision
had "little effect on the pending motions," explaining that "[t]he one change in the law applicable
here is Justice Scalia's limitation of the exception from arbitration for effective vindication" to
situations involving high filing and administrative fees. (Dkt. No. 205).
In granting Defendants' motion to compel arbitration and stay the litigation, the Court
held that the Supreme Court's decision in American Express disposed of Plaintiffs' "effective
vindication" argument insofar as it relied generally on the costs of individual arbitration as
compared to class arbitration. (Dkt. No. 225 at 45). In conjunction with explaining Plaintiffs'
argument, the Court stated in a footnote that
[t]he [arbitration] clauses [in the RSA] do not specifically disallow class-wide
arbitration, but the Supreme Court has held that arbitration clauses will not be
read to implicitly authorize class-wide arbitration unless such a provision is
explicitly contained in the agreement. Stolt-Nielsen S.A., 559 U.S. at 685 ("An
implicit agreement to authorize class-action arbitration, however, is not a term
that the arbitrator may infer solely from the fact of the parties' agreement to
arbitrate.").
(Dkt. No. 225 at 43 n.16). As noted above, following this decision Plaintiffs submitted a request

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to the arbitrator for class arbitration, leading Defendants to request this Court's intervention.

II. Whether Plaintiffs Have Waived the Argument that the Arbitrator Should Decide
the Availability of Class Arbitration
Defendants assert that Plaintiffs failed to previously argue that the arbitrator, rather than
the Court, should decide whether class arbitration proceedings are available and, as a result,
Plaintiffs cannot now maintain this position. 1 (Mot. at 14; Reply at 2-4). See, e.g., AXA

Versicherung AG v. NH Ins. Co., 708 F. Supp. 2d 423, 432-38 (S.D.N.Y. 2010). Before
addressing this waiver argument, the Court must revisit its September 16, 2013, decision,
particularly as to footnote 16. In particular, the parties' briefing at this stage has drawn into
sharper focus the Supreme Court's holding in Stolt-Nielsen and the Second Circuit's subsequent
decision in Jock v. Sterling Jewelers Inc., 646 F.3d 113 (2d Cir. 2011 ). As a result, the Court has
determined that two points of its September 16, 2013, decision require clarification.
First, footnote 16 overstated the breadth of Stolt-Nielsen in asserting that "the Supreme
Court has held that arbitration clauses will not be read to implicitly authorize class-wide
arbitration unless such a provision is explicitly contained in the agreement." Specifically, in

Jock, the Second Circuit explained that Stolt-Nielsen does not foreclose the possibility that
parties may implicitly, rather than expressly, agree to authorize class-action arbitration. See 646
F.3d at 123. Although resolving this question was not crucial to addressing Plaintiffs' effective
vindication argument-which was the context this statement was made in-the present motions
have alerted the Court to the overstatement and it is incumbent upon the Court to clarify it.
Second, although the Defendants moved to compel individual arbitration, rather than
class arbitration, the Court failed to address Defendants' argument that the availability of class
proceedings is a gateway issue for the Court to resolve, rather than an arbitrator. Although
1

Indeed, Defendants suggest that Plaintiffs impliedly conceded that the Court can decide this threshold question by
arguing to the Court that class proceedings were, in fact, unavailable.

4

footnote 16 could arguably be read as implicitly resolving this issue in Defendants' favor, that
footnote was intended to provide context for the basis of Plaintiffs' "effective vindication"
argument. Particularly given that the Supreme Court's decision in Amex meant that the Court did
not need to resolve whether class arbitration was available to dispose of Plaintiffs' effective
vindication argument, the Court did not intend this single sentence to dispose of the complicated
issue discussed below. Rather, the Court inadvertently overlooked the aspect of Defendants'
motion requesting the particularized relief now at issue. As a result, the Court does not agree
that it may resolve the present dispute simply by "enforcing" its previous order.
The question remains whether Plaintiffs waived their argument that the arbitrator should
decide the availability of class arbitration. The Court finds that they have not. As Plaintiffs note,
in light of the strong federal policy favoring arbitration, waivers of arbitration are not lightly
inferred and doubts concerning waiver are resolved in favor of arbitration. PPG Indus. v.
Webster Auto Parts, 128 F.3d 103, 107 (2d Cir. 1997). Although waiver may be found where a

party has engaged in protracted litigation that prejudices the opposing party, none of the factors
that typically counsels in favor of waiver is sufficient to find waiver here. See id. (noting that
courts consider such factors as "(1) the time elapsed from the commencement oflitigation to the
request for arbitration, (2) the amount of litigation (including any substantive motions and
discovery), and (3) proof of prejudice"). Here, the proceedings up to this point have been
relatively limited and have, in fact, focused on the appropriateness of referring the matter to
arbitration. Cf AXA Versicherung AG, 708 F. Supp. 2d at 434-35, 437-38 (party seeking
arbitration of an issue raised the issue for the first time after the close of discovery in summary
judgment motions and motions in limine, leading to substantial expense, which conduct
"evince[ d] its intention to keep its potential rights to arbitration in its back pocket"). In addition,

5

Defendants have not pointed to any substantial prejudice that they have suffered. Finally, while
a non-trivial amount of time has elapsed since the commencement of this litigation, based on the
procedural history of this case, it would not be appropriate to attribute most of this delay to
Plaintiffs' conduct. In addition, determining whether the Court or an arbitrator should resolve
the availability of class arbitration proceedings is a question of law, which also counsels against
finding waiver under these particular circumstances. See, e.g., McGarr v. City of Peekskill, No.
07-cv-9488, 2013 U.S. Dist. LEXIS 141064, at *36 (S.D.N.Y. Sept. 27, 2013) ("[C]ourts
generally do not deem an argument to be waived where [it] presents a question of law and there
is no need for additional fact-finding." (quotation marks omitted)).
Moreover, Plaintiffs' failure to argue that the availability of class arbitration proceedings
was for the arbitrator rather than the Court must be understood in the context in which it was
made. Specifically, under the Second Circuit precedent governing at the time, Plaintiffs were
arguing against the availability of arbitration at all based on the view that the unavailability of
class arbitration would render the arbitration clause of the RSA unenforceable as a whole. (See,

e.g., Dkt. No. 231 at 25-29). It would have been inconsistent for Plaintiffs to argue against
referring the matter as a whole to an arbitrator while simultaneously arguing that the predicate
for their position-the unavailability of class arbitration-was a matter that must be decided by
an arbitrator. See Reedv. Fla. Metro. Univ., 681F.3d630, 634 (5th Cir. 2012) ("Indeed, as Reed
sought to avoid arbitration altogether and to proceed as a class action, we cannot conclude that
he intended to submit the class arbitration issue to the district court.") abrogated in part on other

grounds Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013). Furthermore, in light
of the Supreme Court's opinion in American Express Co., 133 S. Ct. 2304, the legal landscape
shifted during the course of this proceeding and the Court was not called upon to resolve this

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question in order to dispose of Plaintiffs' effective vindication argument. (See Dkt. No. 225 at
45).
III. The Gateway Question
Having concluded that Plaintiffs have not waived their argument that the arbitrator should
decide whether class arbitration procedures are available, the Court turns to the substance of this
argument and Defendants' opposition thereto. The background principles regarding whether an
issue is to be resolved by the Court or by an arbitrator were summarized in Howsam v. Dean

Witter Reynolds, 537 U.S. 79 (2002). There, the Supreme Court explained the distinction
between "questions of arbitrability," which are presumptively for resolution by the Court unless
the parties "clearly and unmistakably provide otherwise," versus "other kinds of general
circumstances where parties would likely expect that an arbitrator would decide the gateway
question." Id. at 83-84 (quotation marks omitted). Questions of arbitrability arise in the
narrow circumstance where contracting parties would likely have expected a court
to have decided the gateway matter, where they are not likely to have thought that
they had agreed that an arbitrator would do so, and, consequently, where
reference of the gateway dispute to the court avoids the risk of forcing parties to
arbitrate a matter that they may well not have agreed to arbitrate.

Id. at 84. "Thus, a gateway dispute about whether the parties are bound by a given arbitration
clause raises a 'question of arbitrability' for a court to decide" as does "a disagreement about
whether an arbitration clause in a concededly binding contract applies to a particular type of
controversy." Id. On the other hand, questions that are presumptively for the arbitrator include
'"procedural' questions that grow out of the dispute and bear on its final disposition," as well as
issues of waiver, delay, or a like defense to arbitrability. Id.
As a result, a determination that the Court, rather than an arbitrator, is to decide whether
class arbitration is available requires the Court to make two determinations. First, the Court

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must assess whether this is a question of arbitrability that is presumptively for Court resolution.
Second, if the Court determines that this is a question of arbitrability, the Court must find that the
RSA does not "clearly and unmistakably" assign this question to the arbitrator.

A. Supreme Court Precedent
Although the Supreme Court has yet to definitively answer the question of whether the
availability of class arbitration procedures is presumptively a question for the Court or the
arbitrator, a series of cases guide the Court's inquiry.
The Supreme Court focused on the question at hand in Green Tree Fin. Corp. v. Bazzle,
539 U.S. 444 (2003). In a fractured decision, a four-Justice plurality explained that determining
whether class arbitration was allowed by an agreement that was "silent" with respect to the
availability of such procedures was for the arbitrator to resolve, rather than the Court. See id. at
452-53 The plurality decision reasoned that this issue was not a question of arbitrability because
"[i]t concerns neither the validity of the arbitration clause nor its applicability to the underlying
dispute between the parties," but was, instead, an issue "concern[ing] contract interpretation and
arbitration procedures." Id. Specifically, "the question is not whether the parties wanted a judge
or an arbitrator to decide whether they agreed to arbitrate a matter. Rather, the relevant question
here is what kind of arbitration proceeding the parties agreed to." Id. at 452. Given the
contract's "sweeping language concerning the scope of the questions committed to arbitrationnamely "all disputes, claims or controversies" arising from or relating to the contract or the
relationships resulting from the contract-the plurality viewed the availability of classwide
arbitration as a question for the arbitrator. Id. at 453.
Next, in Stolt-Nielsen the Supreme Court addressed an arbitral decision which had held
that class arbitration was available under an arbitration agreement that the parties had stipulated

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was "silent" on the availability of such procedures-i. e., the parties "agreed ... that they had not
reached any agreement on the issue of class arbitration." Stolt-Nielsen S. A. v. Anima!Feeds Int'!
Corp., 559 U.S. 662, 673 (2010). In particular, because the parties stipulated that they had not

come to an agreement on the availability of class arbitration, "the arbitrators' proper task was to
identify the rule of law that governs in that situation" by looking to the FAA or the bodies of law
that the parties contended were governing. Id. Applying even the deferential standard applicable
to review of such decisions, the Supreme Court held that the arbitration panel exceeded its
powers by imposing its own policy choice on the issue of the availability of class arbitration. Id.
at 676-77.
In the course of analyzing the arbitration panel's decision, Stolt-Nielsen discussed the
plurality decision in Bazzle. After recounting the background to that case, Stolt-Nielsen
emphasized that "only the plurality" decided that "an arbitrator, not a court, [must] decide
whether a contract permits class arbitration." Id. at 680. The Supreme Court expressly declined
to revisit that question in Stolt-Nielsen "because the parties' supplemental agreement expressly
assigned this issue to the arbitration panel, and no party argue[ d] that this assignment was
impermissible." Id.
After discussing Bazzle, the Supreme Court in Stolt-Nielsen reiterated certain of the
Federal Arbitration Act's "rules of fundamental importance, including the basic precept that
arbitration is a matter of consent, not coercion." Id. at 681; see also id. at 682-83 (noting also
that the parties are generally free to structure their agreements as they see fit, and that courts and
arbitrators are to give effect to their contractual rights and expectations). Moreover, "it is also
clear ... that parties may specify with whom they choose to arbitrate their disputes." Id. at 683.
Applying these principles, the Supreme Court held that "[a]n implicit agreement to

9

authorize class-action arbitration ... is not a term that the arbitrator may infer solely from the
fact of the parties' agreement to arbitrate." Id. at 685. "This is so because class-action
arbitration changes the nature of arbitration to such a degree that it cannot be presumed the
parties consented to it by simply agreeing to submit their disputes to an arbitrator." Id. (noting
that among the benefits of bilateral arbitration that prompt parties to forego the safeguards of
litigation in court are "lower costs, greater efficiency and speed, and the ability to choose expert
adjudicators to resolve specialized disputes"). Among the "fundamental changes" identified by
the Supreme Court in this context were (1) the arbitrator resolves many disputes between very
large numbers of parties; (2) the changes in rules as to privacy and confidentiality under class
arbitration rules; (3) that the arbitration binds absent parties; and (4) that the commercial stakes
resemble those in class-action litigation. See id. at 686. As a result, "the differences between
bilateral and class-action arbitration are too great for arbitrators to presume ... that the parties'
mere silence on the issue of class-action arbitration constitutes consent to resolve their disputes
in class proceedings." Id. 2
The Supreme Court reiterated these views in AT&T Mobility LLC v. Concepcion, 131 S.
Ct. 17 40, 17 45-46 (2011 ), in the course of invalidating as preempted by the FAA a California
Supreme Court ruling that "classifl:ied] most collective-action waivers in consumer contracts as
unconscionable." For example, the Supreme Court noted that the FAA was intended to promote
arbitration and that the point of allowing the parties to pursue such alternative dispute resolution
procedures is "to allow for efficient, streamlined procedures tailored to the type of dispute." Id.
at 1749. Class arbitration, compared to bilateral arbitration, "sacrifices the principal advantage
of arbitration-its informality-and makes the process slower, more costly, and more likely to
2

Due to the parties' stipulation that the arbitration agreement was silent as to class procedures, the Supreme Court
had "no occasion to decide what contractual basis may support a finding that the parties agreed to authorize classaction arbitration." Stolt-Nielsen, 559 U.S. 662, 687 n. l.

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generate procedural morass than final judgment." Id. at 1751 (noting also that "class arbitration
requires procedural formality" and finding it unlikely that Congress intended "to leave the

disposition of these procedural requirements to an arbitrator"). Moreover, "class arbitration
greatly increases risks to defendants" due to arbitration's lack of multilayered review and the
high stakes involved when an entire class's claims are aggregated into one action. Id. at 1752.
In short, the Supreme Court has not issued binding precedent addressing the issue before
the Court, but has provided guideposts for the Court's consideration. In particular Bazzle,
although non-binding, suggests that the arbitrator should decide the availability of class
arbitration, whereas Stolt-Nielsen and Concepcion caution that classwide arbitration and
individual arbitrations are very different procedures.
B. Lower Court Decisions

Having reviewed the Supreme Court precedent and finding that it does not definitively
resolve the issue, the Court next looks to Second Circuit case law and then to the decisions of
other courts as persuasive authority.
Defendants' for their part, contend that the Second Circuit's decisions in the Amex line of
cases control, requiring the Court to decide the availability of classwide arbitration. Defendants
claim that these cases hold that "[ w]hether class proceedings are available in arbitration is a
'gateway dispute' that 'raises a question of arbitrability for a court to decide.'" (Mot. at 8-9
(quoting Italian Colors Rest. v. Am. Express Travel Related Servs. Co. (Jn re Am. Express
Merchants' Litig.), 554 F.3d 300, 311 (2d Cir. 2009) (Amex I) (internal quotation marks omitted)
vacated on other grounds Am. Express Co. v. Italian Colors Rest., 559 U.S. 1103 (2010)); see
also Emilio v. Sprint Spectrum L.P., 508 Fed. Appx. 3, 4-5 (2d Cir. 2013). InAmex I, the Second

Circuit held that courts, rather than arbitrators, are to address whether class action waivers

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contained in arbitration agreements are enforceable. 554 F.3d at 311. Specifically, Amex I
explained that because the plaintiffs in that case were disputing the enforceability of the class
action waiver and, "by extension, the validity of the parties' agreement to arbitrate," the
plaintiffs had raised a question of arbitrability about whether the parties are bound by the
arbitration clause. Id. at 311.
The present case does not involve a challenge to the enforceability of an express class
action waiver or, at this stage, any enforceability challenge at all. Rather, the issue is one of
contract interpretation as to the form of the arbitration proceeding, occurring after the Court
already resolved the parties' arguments as to the enforceability of the arbitration clauses.
Although there are parallels between the two issues in terms of their practical effect-both may
be dispositive as to the availability of class arbitration and whether an agreement provides for the
availability of class arbitration might raise issues pertaining to the enforceability of that
agreement-the former relates to whether the parties are bound by the plain terms of their
arbitration agreement whereas the latter relates to determining the parties' intent as to a binding
agreement to arbitrate.
Amex I itself noted this distinction, explaining that Bazzle did not require that the

arbitrator resolve the enforceability of a class action waiver because, unlike Bazzle, the Second
Circuit "d[id] not face an issue of contract interpretation; the Card Acceptance Agreement is
unambiguous in forbidding arbitration to proceed on a class basis." Id. at 311 n.1 O; see also
Guida v. Home Sav. ofAm., Inc., 793 F. Supp. 2d 611, 617 n.4 (E.D.N.Y. 201 l)(noting this

distinction). Other courts have similarly distinguished cases involving the enforceability of class
action waivers from those merely involving contract interpretation. See Quilloin v. Tenet
HealthSystem Phi/a., Inc., 673 F.3d 221, 232 (3d Cir. 2012) ("Here, the arbitration agreement

12

does not contain an express class action waiver. . . . [T]he actual determination as to whether
class action is prohibited is a question of interpretation and procedure for the arbitrator.");
Vilches v. Travelers Cos., 413 Fed. Appx. 487, 491-92 (3d Cir. 2011); Puleo v. Chase Bank USA,
N.A., 605 F.3d 172, 178-80 (3d Cir. 2010) (rejecting the argument that an arbitrator could decide

the enforceability of a class action waiver); Kristian v. Comcast Corp., 446 F.3d 25, 53-54 (1st
Cir. 2006). And the Supreme Court has held that courts "should not, on the basis of 'mere
speculation' that an arbitrator might interpret ... ambiguous agreements in a manner that casts
their enforceability into doubt, take upon ... the authority to decide the antecedent question of
how the ambiguity is to be resolved." Pac(fiCare Health Sys. v. Book, 538 U.S. 401, 406-07
(2003). The Court concludes that the Amex line of cases do not control this inquiry.
For their part, Plaintiffs contend that "Second Circuit case law compels the result that the
question for whether a class arbitration may be conducted here is for the arbitrators and not this
Court," citing Jock, 646 F.3d 113, and Vaughn v. Leeds, Morelli & Brown, P.C., 315 Fed. Appx.
327 (2d Cir. 2009). (Opp. at 8-9). Likewise, Plaintiffs rely on a slew of cases from the First,
Third, Fourth, Fifth, Seventh, Ninth, and Eleventh Circuits that they contend "all held, at least
implicitly, that determination of whether an arbitration clause permits class proceedings is a
matter for arbitrators." (Opp. at 11). However, review of many of these cases shows that-at
least as to the present issue-they add little to the Supreme Court decisions summarized above.
For example, in Jock, after the district court compelled arbitration, "[t]he parties
submitted to the arbitrator the question whether [the arbitration] agreement permitted or
prohibited class arbitration." Jock, 646 F.3d at 116. As a result, the issue before the Second
Circuit was the substantive review, under the deferential standard of the FAA, of the arbitrator's
ruling the class arbitration was available-not, as Plaintiffs would have it, whether this question

13

was for the Court rather than the arbitrator to resolve in the first instance, a question that it does
not appear was raised on appeal. See id. at 121-25.
Nor does the Court read into Jock an "implicit" holding that the determination of the
availability of class arbitration is an issue for the arbitrator based on the Court of Appeals' failure
to address this issue, as it is plain that the Second Circuit was not compelled to raise this issue
sua sponte. Stolt-Nielsen arose on a materially identical procedural posture-review of an

arbitral decision where the parties committed this question to the arbitrator-and the Supreme
Comi explained that, in light of the parties' commitment of the question to the arbitrator and the
failure to object, they would not revisit Bazzle and would leave the matter an open question.
Stolt-Nielsen S. A., 559 U.S. at 680; see also Oxford Health Plans LLC, 133 S. Ct. at 2068 n.2

(arising on a similar posture and noting that "this case gives us no opportunity to [resolve
whether the availability of class arbitration is a question of arbitrability] because Oxford agreed
that the arbitrator should determine whether its contract with Sutter authorized class
procedures"); Guida, 793 F. Supp. 2d at 619 n.7 (noting that "Jock does not address the
threshold question of who should decide whether the parties agreed to class arbitration."). 3
Certain of the out-of-circuit cases on which Plaintiffs rely arise in a similar posture and
are, therefore, inapt. See, e.g., Southern Communs. Servs. v. Thomas, 720 F.3d 1352, 1356-57
(1 lth Cir. 2013); Long John Silver's Rests., Inc. v. Cole, 514 F.3d 345, 348 (4th Cir. 2008). And

even if these cases could be construed as implicitly endorsing Plaintiffs' position, they contain
no reasoning on this point and are thus lacking in persuasive force. Moreover, to the extent that
Plaintiffs rely on cases suggesting that the arbitrator had authority to address the availability of
3

The other Second Circuit case on which Plaintiffs rely, the unpublished decision in Vaughn, 315 Fed. Appx. at
329, was decided before Stolt-Nielsen and, without analysis, simply treated the Bazzle plurality holding as
controlling. The same also appears true for Veliz v. Cintas Corp., 273 Fed. Appx. 608, 609 (9th Cir. 2008). See also
.!SC Surgutnejiegaz v. President & Fellows of Harvard College, No. 04-cv-60692007 U.S. Dist. LEXIS 79161, at
*5-6 (S.D.N.Y. Oct. 11, 2007) (relying on Bazzle and the AAA Supplementary Rules to confirm an arbitral award).

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class arbitration because the arbitration agreement incorporated the rules of the arbitration forum
that provided for such authority, see, e.g., Reed, 681 F.3d at 635 abrogated in part on other
grounds Oxford Health Plans LLC, 133 S. Ct. at 2068; Long John Silver's Rests., 514 F.3d at

347; Contee Corp. v. Remote Solution Co., 398 F.3d 205, 208 (2d Cir. 2005), this principally
relates to whether the parties "clearly and unmistakably" committed the question to the
arbitrator, not whether it is a "question of arbitrability" in the first instance.
Other cases that Plaintiff cites, although speaking to similar disputes as to what
constitutes a question of arbitrability, do not address class arbitration. For example, Fantastic
Sams Franchise Corp. v. FSRO Ass'n, 683 F.3d 18, 23-26 (1st Cir. 2012), did not raise the

question of the availability of class arbitration but rather involved "associational" arbitrationi.e., whether an association could represent its members in an arbitration proceeding. Likewise,
Blue Cross Blue Shield of Mass. v. BCS Ins. Co., 671F.3d635, 638-40 (7th Cir. 2011),

addressed whether the decision to allow consolidated arbitration proceedings is for the court or
the arbitrator. Both cases distinguished class arbitration as raising different concerns. See
Fantastic Sams Franchise Corp., 683 F.3d at 23-24; Blue Cross Blue Shield of Mass., 671 F.3d

at 640 ("Class actions always have been treated as special."); see also Sa.fra Nat'! Bank v.
Penfold Inv. Trading, Ltd., No. 10-cv-8255, 2011 U.S. Dist. LEXIS 51687, at *8-9 (S.D.N.Y.

Apr. 20, 2011) (explaining that "Stolt-Nielsen held that, absent an agreement to arbitrate on a
class basis, the availability of class arbitration is a gateway issue to be decided by the courts" but
that this holding did not apply because the issues raised were joinder and consolidation).
Viewed in this light, it is apparent that the appellate courts addressing this issue after
Stolt-Nielsen have arrived at divergent results. 4 Compare Qui/loin, 673 F.3d at 232 (holding,

4

Indeed, several of the district court cases on which Plaintiffs rely state that the issue is an open question in their
circuits. Lee v. JPMorgan Chase & Co., No. SACV 13-511, 2013 U.S. Dist. LEXIS 165959, at *9-13 & n.3 (C.D.

15

without analysis, that "the actual determination as to whether class action is prohibited is a
question of interpretation and procedure for the arbitrator" and citing Stolt-Nielsen for this
proposition); Vilches, 413 Fed. Appx. at 491-92 with Reed Elsevier, Inc. v. Crockett, 734 F.3d
594, 597-99 (6th Cir. 2013). Although when one considers the analysis of district court cases on
the issue, the weight of authority likely favors Plaintiffs' position, the decisions of these courts
are merely persuasive authority. Compare, e.g., Lee v. JPMorgan Chase & Co., No. SACV 13511, 2013 U.S. Dist. LEXIS 165959, at *9-13 (C.D. Cal. Nov. 14, 2013); Cramer v. Bank of
America, N.A., No. 12 C 8681, 2013 WL 2384313, at *3-4 (N.D. Ill. May 30, 2013); Hesse v.
Sprint Spectrum L.P., No. C06-0592, 2012 U.S. Dist. LEXIS 20389, at *9-14 (W.D. Wash. Feb.

17, 2012); Price, 908 F. Supp. 2d at 944-45; Okechukwu v. DEM Enterprises, Inc., No. C 1203654, 2012 WL 4470537, at *2-3 (N.D.Cal. Sept. 27, 2012); Guida, 793 F. Supp. 2d at 617-18
(collecting cases); Fisher v. General Steel Domestic Sales, LLC, No. 10-cv-01509, 2010 WL
3791181, at *2-3 (D.Colo. Sept. 22, 2010) with Safra Nat'! Bank, 2011 U.S. Dist. LEXIS 51687,
at *8-9. Given the absence of binding precedent the Court turns to the merits of the various
arguments relating to whether the question of the availability of class arbitration ought to be
decided by the Court.

C. Analysis
For the reasons explained below, the Court is persuaded by the Supreme Court's decision
in Bazzle that the arbitrator, rather than the Court, should decide whether class arbitration is
available. In particular, the availability of class arbitration does not concern determining either
the general enforceability of an arbitration agreement or determining which substantive claims

Cal. Nov. 14, 2013); Price v. NCR Corp., 908 F. Supp. 2d 935, 941 (N.D. Ill. 2012); Yahoo! Inc. v. Iversen, 836 F.
Supp. 2d 1007, 1011 (N.D. Cal. 2011); cf Planet Beach Franchising Corp. v. Zaroff, 2013 U.S. Dist. LEXIS
121908, at *26-27 (E.D. La. Aug. 27, 2013).

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may be subject to an arbitration clause. See Bazzle, 539 U.S. at 452-53; see also Howsam, 537
U.S. at 84 (identifying disputes about whether the parties are bound by an arbitration clause or
whether an arbitration clause covers a particular controversy as questions of arbitrability);
Vilches, 413 Fed. Appx. at 491-92. Put succinctly, the question of the availability of class
arbitration does not go to the power of the arbitrators to hear the dispute, but rather to an issue
that simply pertains to the conduct of proceedings that are properly before the arbitrator.
For example, in the circumstances at hand, the Court has already ruled that the parties'
agreement to arbitrate is clear, that this agreement is enforceable, and that the arbitration clauses
cover the parties' substantive claims. See Bazzle, 539 U.S. at 452-53 (distinguishing questions
pertaining to whether a party agreed to arbitrate a matter from the "kind of proceeding" they may
have agreed to). The Court having already made these initial determinations, interpreting the
provisions of the RSA to determine whether they allow for class arbitration is a matter within the
arbitrator's competence. See Howsam, 537 U.S. at 84 (noting that "procedural" questions are
presumptively for the arbitrator to resolve); Vilches, 413 Fed. Appx. at 491-92 (viewing the
availability of class arbitrability as a procedural question for the arbitrator to resolve).
This view is also wholly consistent with Supreme Court precedent explaining that, in the
face of a valid agreement to arbitrate, it will be the rare question that must be decided by the
Court. For example, the Supreme Court has characterized questions of arbitrability as a
"narrow" and "limited" exception to the general policy in favor of arbitration of disputes.
Bazzle, 539 U.S. at 452; see also Howsam, 537 U.S. at 83-84 (explaining that "questions of
arbitrability" should not be read so broadly as to include "any potentially dispositive gateway
question" merely because "its answer will determine whether the underlying controversy will
proceed to arbitration on the merits"). Such statements demonstrate that courts should be

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reluctant to expand the categories of "questions of arbitrability" beyond the limits identified by
the Supreme Court. Moreover, further counseling against such an expansion is the FAA's policy
in favor of arbitration, a policy which is "beyond dispute" according to the Supreme Court, and
the objective of arbitration in achieving streamlined proceedings and expeditious results.
Concepcion, 131 S. Ct. at 1749; see also Howsam, 537 U.S. at 83; Planet Beach Franchising
Corp., 2013 U.S. Dist. LEXIS 121908, at *29-30. Removing an issue from consideration by the

arbitrator and assigning it the courts to address through relatively formal procedures and multilayered review tends to run counter to this policy. See also Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) ("The Arbitration Act establishes that, as a

matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration, whether the problem at hand is the construction of the contract language
itself or an allegation of waiver, delay, or a like defense to arbitrability.").
Bazzle remains the most pertinent authority and, in the absence of other Supreme Court

or Second Circuit precedent or a clear trend to the contrary among lower courts, the Court
assigns its analysis substantial weight. See, e.g., Lee, 2013 U.S. Dist. LEXIS 165959, at *9-13;
Guida, 793 F. Supp. 2d at 615. Although, as the Court will explain, two concerns arising from
Stolt-Nielsen counsel against blindly accepting the approach in Bazzle without further

consideration, upon reflection these concerns are not sufficient to outweigh the persuasive
analysis set forth by Bazzle's plurality.
The first concern arising from Stolt-Nielsen is that the Court noted in dicta that Bazzle
does not constitute binding precedent and that the issue presently before the Court is an open
question. Stolt-Nielsen S. A., 559 U.S. at 680. This, however, is far cry from a holding-or even
a suggestion-that Bazzle reached the wrong result. Indeed, as dicta goes, the Court's comment

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in Stolt-Nielsen was particularly unrevealing, as the Court refrained from commenting on the
reasoning of Bazzle and set forth no explicit reasoning favoring Defendants' position.
The second potential concern raised by Stolt-Nielsen-and again in Concepcion-is that
the Court identified several "fundamental" differences between bilateral and class arbitration,
including the high stakes of class arbitration; the relative formality, cost, and slow pace of class
arbitration; and the difficulties surrounding binding absent parties to the decision. See
Concepcion, 131 S. Ct. at 1750-51; Stolt-Nielsen S. A., 559 U.S. at 686. However, under StoltNielsen these differences are primarily relevant to deciding the availability of such class
arbitration, not the antecedent question of whether that decision is assigned to the Court or the
arbitrator. Indeed, some courts have dismissed these differences on that basis. See, e.g., Lee,
2013 U.S. Dist. LEXIS 165959, at *12 ("However, this Court concludes, as did the Third
Circuit, that the Supreme Court identified these features only to explain why the standard for
determining when pa1iies have consented to class arbitration is stringent."); Guida, 793 F. Supp.
2d at 616 & n.3, 618-19.
The Court does not go so far as to entirely discount these concerns. There are reasons to
view the "fundamental" differences between class arbitration and bilateral arbitration as relevant
to whether the availability of such class arbitration is a "question of arbitrability." Specifically,
the Supreme Court has described questions of arbitrability as arising in the "narrow circumstance
where contracting parties would likely have expected a court to have decided the gateway
matter," rather than the arbitrator, "and, consequently, where reference of the gateway dispute to
the court avoids the risk of forcing parties to arbitrate a matter that they may well not have
agreed to arbitrate." Howsam, 537 U.S. at 83-84. Viewed in this context, the availability of
class arbitration is plausibly an issue that contracting parties might expect a court to resolve,

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subject to standard appellate review, rather than risk undergoing the entirety of a high-stakes,
high-cost arbitration that may differ from the proceeding contemplated by the parties. See Reed
Elsevier, Inc., 734 F.3d at 598. ("Gateway questions are fundamental to the manner in which the

parties will resolve their dispute-whereas subsidiary questions, by comparison, concern details.
And whether the parties arbitrate one claim or 1,000 in a single proceeding is no mere detail.").
However, none of these differences rebut the core point in Bazzle that the class of
questions of arbitrability is a limited one, and that the availability of class arbitration pertains to
the procedures to be employed at an arbitration, not whether an arbitration is permissible in the
first instance. As the Seventh Circuit pointed out, "the Court in Stolt-Nielsen did not deny that
class-wide arbitration is still 'arbitration'; it just held that certifying a class exceeds an
arbitrator's powers unless the parties have consented to class procedures." Blue Cross Blue
Shield of Mass., 671 F.3d at 639.

Although the issue is a close one, I am persuaded by the reasoning in Bazzle and hold that
the availability of class arbitration is an issue to be resolved by the arbitrators in the first
instance. In the end, the issue raised is not one of enforcement of an arbitration agreement or the
power of the arbitrator to hear a dispute, but rather the form of the proceedings as to a dispute
that is, as this Court previously determined, subject to the arbitrator's authority. Although the
differences articulated in Stolt-Nielsen and Concepcion between class arbitration and bilateral
arbitration are a relevant consideration that gives the Court some pause, these differences speak
more to the default rule regarding the availability of class arbitration than the default rule of
which forum should decide that issue.

IV. Conclusion
Defendants' request that the Court order individual arbitration in this matter is denied, as

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the matter is for the arbitrator to resolve. Plaintiffs' cross-motion is granted to the extent that the
Comi finds that the availability of class arbitration proceedings is an issue to be resolved by the
arbitrator. The Court does not reach the parties' other arguments as to whether class arbitration
is available or whether Plaintiffs' have waived or conceded the merits of this issue. These are
matters for the arbitrator to decide. This resolves docket numbers 236 and 243.
SO ORDERED.

Dated: May

'l <\ ,2014

New~York

United States District Judge

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