Reed Elsevier v. Crockett: Sixth Circuit Rules That Courts, Not Arbitrators, Decide Whether An Arbitration Agreement Allows Classwide Arbitration

The United States Court of Appeals for the Sixth Circuit recently held that courts, not arbitrators, decide whether an arbitration agreement permits classwide arbitration, unless the parties clearly and unmistakably agreed otherwise. Reed Elsevier v. Crockett, No. 12-3574, ___ F.3d ___ (6th Cir. Nov. 5, 2013). As the Sixth Circuit noted, the issue of classwide arbitrability can have "momentous consequences" and make the difference between arbitrating "one claim or 1,000 in a single proceeding." And the threshold question—whether arbitrators or courts are presumed to decide classwide arbitrability—is consequential because arbitrators are given wide latitude in their rulings, which are subject only to limited, deferential review under the Federal Arbitration Act, while courts are bound by rules of contract interpretation and their decisions are subject to full appellate review. The United States Supreme Court recently highlighted that it has never decided that threshold question, notwithstanding the apparent belief of many courts and members of the bar that it had been resolved by an earlier Supreme Court case. Reed Elsevier is the first federal appellate court ruling on the question since the Supreme Court signaled that it remained unresolved.

In Reed Elsevier, attorney Craig Crockett alleged that LexisNexis—a division of Reed Elsevier that provides online legal-research services—breached a subscription agreement by charging extra fees without sufficient warning. The subscription agreement contained an arbitration clause, which was silent regarding the availability of classwide arbitration. Because individual bilateral arbitration would be economically unfeasible, Crockett filed his arbitration demand seeking more than $500 million in damages on behalf of two putative classes: law firm subscribers who were charged extra fees, and law firm clients onto whom such fees were passed. In response, LexisNexis sued in federal district court, seeking a declaration that the arbitration clause did not permit classwide arbitration. The district court granted summary judgment for LexisNexis, holding that the arbitration agreement did not permit classwide arbitration, and the Sixth Circuit affirmed.

The Sixth first took up the threshold jurisdictional question, explaining that the Supreme Court recently indicated that it has never decided whether classwide arbitrability is decided by a court or an arbitrator, because it has not decided whether that is a...