THIRD CIRCUIT RULES AUTHORIZATION OF CLASS ARBITRATION SHOULD BE DECIDED BY COURTS

The Third Circuit ruled that courts, not arbitrators, should determine whether an arbitration agreement entered into by two parties allows for classwide arbitration.  The Third Circuit’s decision reversed the lower court’s ruling that the availability of class arbitration was a matter for the arbitrators to decide.  In overturning the district court’s decision, the Third Circuit explained that “[b]ecause of the fundamental differences between classwide and individual arbitration, and the consequences of proceeding with one rather than the other…the availability of classwide arbitration is a ‘substantive question of arbitrability’ to be decided by a court[,]” unless the parties unmistakably provide otherwise.

This decision changes the field of class arbitration in the Third Circuit as now, the issue may be solely decided by the courts, except when the parties have clearly agreed that the issue is to be determined by the arbitrator.  The Third Circuit shares the same view as Sixth Circuit on this subject.