Practice Updates

Sixth Circuit Holds Arbitrability Must Be Decided By Arbitrator, Not AAA Administrator

In the United States, early agreements to arbitrate were met with judicial hostility by courts who felt their authority was usurped by private adjudicators, or who felt that individual consumers’ rights stood to be trampled by privatizing the judiciary. Regardless of the myriad rationales by which courts chose to disfavor private arbitration agreements, virtually all opposition was swept away by Congress when it passed the Federal Arbitration Act (FAA) in 1925, making arbitration the law of the land.

          Since the FAA became the controlling authority on what may or may not be arbitrated, courts have wrestled with the question of who should determine the arbitrability of a dispute. While countless cases stand for the proposition that an arbitrator may determine whether a dispute is arbitrable, the Sixth Circuit recently decided in Ciccio v. SmileDirectClub, LLC, 20-5833, 2021 WL 2621115, at *1 (6th Cir. June 25, 2021) the question of whether an American Arbitration Association (AAA) administrator could pass judgment on the arbitrability of a dispute.

          Dana Johnson brought suit against SmileDirectClub LLC in court, but due to an earlier arbitration agreement between the parties, Johnson voluntarily dismissed his claim and submitted it for arbitration to the AAA. However, prior to an arbitrator actually hearing the dispute, an AAA administrator determined the claim implicated numerous AAA policies precluding arbitration.

          Upon his return to the judicial system, the district court held Johnson satisfied his obligations under the arbitration agreement. Not so, according to the Sixth Circuit, which held that, “Whether an arbitration agreement covers a dispute is a gateway question of arbitrability, and here the parties delegated such questions to an arbitrator.” The Court reversed and remanded, sending the question to an arbitrator.

          Some might say the courts have come full circle of arbitrability from snatching cases away from arbitrators one hundred years ago to now sending cases back to arbitrators who may not even wish to hear them.