Now Say That Five Times Fast! Eleventh Circuit Upholds Arbitration Clause Delegating Adjudication of Threshold Questions of Arbitrability to Arbitrator

On May 26, 2022, the Eleventh Circuit issued an opinion reversing the Southern District of Florida’s denial of the appellant’s motion to compel arbitration, therein finding that the district court erred in failing to apply the arbitration agreement’s delegation clause, as agreed to by the parties. The appellate court answered the alliterative tongue-twister of “whether an arbitrator should arbitrate arbitrability” in the affirmative.

In Attix v. Carrington Mortgage Services LLC, –– F.4th ––, 2022 WL 1682237 (11th Cir. May 26, 2022), the plaintiff filed a putative class action lawsuit under the Fair Debt Collection Practices Act (“FDCPA”) and related Florida law against his mortgage servicer, Carrington Mortgage Services LLC (“Carrington”). The basis for the plaintiff’s claims derived from a mortgage payment he made utilizing an automated pay-by-phone service provided by third-party Speedpay. In using this service, he had agreed to be bound by Speedpay’s terms and conditions, including an arbitration clause stating that any dispute arising from the use of Speedpay’s services shall be adjudicated in arbitration. On this basis, Carrington moved to compel arbitration of the plaintiff’s consumer claims.

In denying Carrington’s motion to compel arbitration, the Southern District of Florida held that the Dodd-Frank Act prohibited enforcement of the arbitration provision as written –– despite the existence of a delegation provision in the arbitration agreement. However, the Eleventh Circuit found that the district court erred in making such findings.

The court held that the parties “clearly and unmistakably” consented to delegate all questions of arbitrability to an arbitrator –– including whether the arbitration agreement is enforceable as to the plaintiff’s claims under the Dodd-Frank Act. Specifically, the court found the phrase “[t]he arbitrator shall also decide what is subject to arbitration unless prohibited by law” and the incorporation of the American Arbitration Association’s (“AAA”) Consumer Arbitration Rules which state “[t]he arbitrator shall have the power to rule on his or her own jurisdiction…” together, was sufficiently broad to encompass the parties’ arbitrability dispute.

The court declined to apply the plaintiff’s rationale that the phrase “unless prohibited by law” created a “partial delegation” provision such as to bifurcate the arbitrability analysis into questions of scope (i.e., whether the arbitration agreement applies to this dispute, to be determined by an arbitrator) or enforceability (i.e., whether the arbitration agreement is enforceable as to the parties, to be determined by the court). Rather, the court found the “plain and natural” reading of the delegation clause dictates that all questions of arbitrability are delegated to an arbitrator, including questions as to whether the parties’ arbitration agreement is enforceable unless the law prohibits the delegation of threshold arbitrability issues itself.

Finally, the court noted the plaintiff had not specifically challenged the validity or enforceability of the delegation clause itself –– rather, the plaintiff had broadly challenged whether the parties’ underlying arbitration agreement was enforceable, but did not specifically attack the delegation language as a standalone issue. Thus, the plaintiff’s failure to sway the court on the “partial delegation” argument did not otherwise permit the court to make any determinations regarding the enforceability of the delegation clause separate and apart from the arbitration agreement as a whole.

Notably, the Eleventh Circuit’s ruling is limited, as the court did not rule on the merit of the plaintiff’s claims or whether the parties must arbitrate said claims. Rather, the court decided the narrow issue of who must decide whether the parties must arbitrate. Nevertheless, in upholding the so-called “arbitrability of arbitrability,” the Eleventh Circuit has underscored the freedom of parties to choose arbitration as a forum to adjudicate claims –– including threshold issues regarding the validity of the very forum itself.

Written by Sara Solano.

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