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Consolidation issue goes to the arbitrator
April 06, 2006 by Ross Runkel at LawMemo
"Procedural" is the label being used to identify some of the issues that are to be decided by an arbitrator rather than by a court.
Consolidation of two arbitrations into one is one of those issues.
Take these facts:
There were two companies. There were two agreements between them. Each agreement had an arbitration clause. Both companies acknowledge they are required to arbitrate.
One company demands that there be a consolidated arbitration. The other insists on two separate arbitrations. Both of the two agreements were silent on the question of consolidation. And a lawsuit followed.
The first issue for a court to decide is not whether there should be a consolidated arbitration.
The first issue for the court is to decide who decides.
The answer is clear, although the 7th Circuit felt a need to write a 17 page opinion.
The answer is that consolidation (or not) is a "procedural" matter for the arbitrator to decide.
| Employers Ins Co v. Century Indemnity Co (7th Cir 04/04/2006). |
The court relied on Howsam v. Dean Witter Reynolds, 537 US 79 (2002), which held that an arbitrator, not a court, is to decide a question dealing with a time-limit rule in the NASD rules.
The court cited decisions from other circuits holding that it is for an arbitrator to decide an issue of consolidation, and an issue of whether there should be one rather than three arbitrators.
It's really a matter of "what kind of arbitration proceeding" the parties agreed to, which is a question of contract interpretation, which is a question for the arbitrator.
Interesting that the court did not rely on Green Tree Financial v. Bazzle, 539 US 444 (2003), which involved the issue of whether there could be a class action arbitration when the agreement was silent on the question. The court did not rely on Green Tree because the Supreme Court's decision resulted in multiple opinions and no one opinion commanded a majority. (Note that the 5th Circuit has held that Green Tree should be read to mean that the arbitrator decides on the validity of a class action, absent evidence that the parties intended the issue to resolved by a court. Pedcor Mgt Welfare v. Nations Personnel, 343 F3d 355 (5th Cir 2003).)
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