Who Decides if an Arbitration Clause Allows for a Class Action?

By Joel M. Grossman

Joel M. Grossman is a mediator and arbitrator with JAMS in Los Angeles. He has been selected four times as one of the Top Neutrals in California by the Daily Journal. For more information please contact www.grossmanmediation.com.

Sometimes an arbitration agreement is very clear as to whether an employee can bring a class action through arbitration. This clarity usually is due to a class action waiver, which states unambiguously that the employee may bring an arbitration claim only for herself, and not on behalf of a class. Under both federal law¹ and California law² such waivers are enforceable. But in most cases, there is simply no mention one way or the other of the availability of a class action.³

Assuming that the arbitration clause is ambiguous, and the employee wishes to proceed in arbitration with a class action while the employer does not, who decides whether the arbitration may proceed as a class action—a court or an arbitrator? This was the issue considered by the California Supreme Court in the recent case of Sandquist v. Lebo Automotive, Inc.⁴ Following a lengthy analysis of state and federal case law, the court concluded that there was no universal rule governing the question, and there was no presumption one way or the other as to whether a court or an arbitrator should decide. Rather, the issue is a matter of contract interpretation—an attempt to ascertain the intent of the parties. The Sandquist court concluded that "these parties’ arbitration agreement allocates the decision to the arbitrator," so that was determinative.