Class Action Defense Cases: American Arbitration Association (AAA) Enforces Binding Individual Arbitration While JAMS Allows Plaintiff To Unilaterally Include Dozens Of Employees In Single Arbitration Proceeding
AAA Requires Separate Arbitration Petitions by Employees Subject to Arbitration Clause with Class Action Waiver but JAMS Permits Plaintiff to Unilaterally Join Dozens of Individual Employee Claims in Single Arbitration
JMBM recently litigated a labor law class action where the employees were bound by arbitration clauses with class action waivers. Some of those agreements require arbitration before AAA. Others required arbitration before JAMS.
JMBM obtained a court order requiring “binding individual arbitration” before JAMS. Plaintiff’s counsel responded by filing an arbitration petition on behalf of 20 individuals. Plaintiff’s counsel also filed another arbitration petition with AAA on behalf of 7 individuals. In other words, plaintiff’s counsel sought to proceed with a “group” arbitration rather than “individual.” We objected.
AAA promptly decided that, as a purely procedural matter, it would not compel our client to participate in a group arbitration over its objection. Because we were not willing to stipulate to such a proceeding, it required plaintiff’s counsel to file 7 separate petitions. It took AAA but a few days to make this decision.
JAMS, on the other hand, took more than a month to conclude that, purportedly as a procedural matter, it would compel our client to participate in a group arbitration over its objection. Even more disturbing than its decision was the process utilized by JAMS to resolve the issue and the reasoning behind it.
As a preliminary matter, it is well established that the scope of an arbitration clause is to resolved either by the court or by the arbitrator. Even plaintiff’s counsel admitted this to be the law. Our disagreement with plaintiff’s counsel centered on our belief that it was a decision for the trial court to resolve under the facts of this case, while they argued that it was a matter for the arbitrator to resolve.
Unable to resolve the procedural question without a legal opinion, JAMS unilaterally appointed one of its mediators to rule on the issue. In other words, rather than appoint an arbitrator to address the issue – a decision that would necessitate all of the required disclosures from the arbitrator and that would provide each side with their right to object to the particular arbitrator being appointed – JAMS put the matter in the hands of a panel mediator. No statute or case authority permits such an individual to rule on the scope of an arbitration clause, but nevertheless JAMS followed this procedure.