Fourth Circuit Affirms Confirmation of Arbitration Determination

In December, 2011, in a per curiam opinion, the Fourth Circuit affirmed a district court’s ruling confirming an arbitration award which certified a nationwide class of claimants alleging unfair and deceptive acts and practices in violation of the Maryland Consumer Protection Act.  (Amerix Corp. et al. v. Jones et al., Case No. 09-2174, United States Court of Appeals for the Fourth Circuit, Unpublished Opinion, December 9, 2011.) The decision is significant for at least two reasons.  The Court of Appeals affirmed:  (1) the district court’s confirmation of an award certifying a class in arbitration; and (2) the district court’s confirmation of an award certifying a nationwide class alleging claims brought under a single state’s consumer protection laws.

The Claimants in the arbitration originally brought their claims as a putative class action in the District of Maryland, but the claims were dismissed because of a broad arbitration provision in an underlying agreement requiring arbitration of “[a]ny dispute between [the parties] that cannot be amicably resolved, and all claims or controversies arising out of this Agreement, shall be settled solely and exclusively by binding arbitration in the City of Columbia, Maryland. . . .”  Interestingly, the arbitration provision also stated, “it being expressly acknowledged that you will not participate in any class action lawsuit in connection with any such dispute, claim, or controversy, either as a representative plaintiff or as a member of a putative class.”  The district court held that the arbitrator would have to decide whether the claims could be arbitrated on a class-wide basis.  In the face of argument by the Defendants to the contrary, the arbitrator determined that the contractual language did not preclude class arbitration and that it was warranted in this case.

The arbitrator went on to certify a nationwide class of claims under the Maryland Consumer Protection Act, even when none of the representative claimants were Maryland residents.  The arbitrator construed the first sentence of the arbitration clause (“[a]ny dispute between the parties . . . shall be settled solely and exclusively by binding arbitration . . .”) in conjunction with the choice-of-law provision selecting Maryland law to mean that the parties intended for the substantive law of Maryland, including the consumer protection statute to apply across the board.

The district court confirmed the arbitration class determination award, which included certification of the Maryland Consumer Protection Act claims.  The Fourth Circuit affirmed finding specifically that the arbitrator did not exceed his authority – he interpreted the provisions he was asked to interpret – and further, his ruling was not in manifest disregard of the law.  The Fourth Circuit expressed some reservation over whether “manifest disregard of the law” remains a viable challenge to an arbitration award after Hall Street Assocs., LLC v. Mattel, Inc., 552 U.S. 576 (2008), but nonetheless held that even if it is, the arbitrator’s decision in this case did not fall into that category.

The class determination award made by the arbitrator was made before the Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, which held that arbitration agreements must be enforced as written and that an agreement which precluded arbitration on a class-wide basis was not unconscionable.  Id. at 1748, 1753.  More specifically, the majority in Concepcion stated that it was “unlikely that in passing the [Federal Arbitration Act] Congress meant to leave the disposition of [whether to allow a class proceeding] to an arbitrator.”  Id. at 1751.  Prior to Concepcion, the District of Maryland held in Amerix that the arbitrator should determine whether the arbitration could proceed on behalf of a class, not once but twice.  The district court followed up its initial order directing the parties to arbitrate with a letter saying that the arbitrator could make the class determination and then dismissing defendants’ motion to have the arbitrator’s decision on that issue vacated.  The bases for the arbitrator’s decision to permit class arbitration are unclear – perhaps similar reasoning to that found in Discover Bank v. Superior Court, 36 Cal. 4th 148, 113 P. 3d 1100 (2005), or similar cases.  In any event, an arbitrator would be hard-pressed to make such a ruling when faced with an arbitration provision like the one in Amerix post-Concepcion.