Incorporation By Reference Of AAA Rules Is The Key Here.
Plaintiffs, who worked as armed security guards, brought an employment class action against their employers Universal Protection Service, LP and Universal Services of America, Inc. (UPS). After the trial court denied UPS’ motion to compel individual arbitration, while staying the suit pending arbitration, UPS sought a writ of mandamus in order to compel individual arbitration. As the Court of Appeal framed the issue, “We agree with UPS that the issue to be decided is whether the arbitration agreement in this case clearly and unmistakably vested the arbitrator with the power to decide whether the agreement authorizes class arbitration.” Universal Protection Services, LP v. Superior Court of Yolo County (Michael Parnow, et al., Real Parties in Interest), C078557 (3d Dist. August 18, 2015) (Duarte, Raye, Robie) (published).
The arbitration agreement was broadly written, requiring arbitration of most disputes, including this one, before the AAA. The key to an answer about individual arbitration here is that the arbitration agreement incorporated by reference the Rules of the AAA, and the AAA Supplementary Rules for Class Arbitration apply “to any dispute arising out of an agreement that provides for arbitration pursuant to any of the rules of the [AAA] where a party submits a dispute to arbitration on behalf of or against a class or purported class, and shall supplement any other applicable AAA rules.” The Rules further delegate to the arbitrator the task of deciding whether a class arbitration can proceed.
Bottom line: the parties’ “agreement to conduct their arbitration under the AAA Rules constitutes clear and unmistakable evidence of their shared intent that the arbitrator decide whether it permits arbitration of class claims.” Therefore, the Court of Appeal denied the employers’ writ petition.
COMMENT: The case neatly analyzes how other cases are either in agreement, or have missed the target regarding the effect of incorporation by reference. The battle in this case may be far from over, because the AAA Rules also require that “the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class. . . “ Under the Rules, the arbitrator must then stay proceedings for a period of at least 30 days to permit any party to move a court to confirm or vacate the “Clause Construction Award.”