Joseph Ciccio v. SmileDirectClub, LLC, 2 F.4th 577

Background

SmileDirect’s customer Dana Johnson filed consumer claims that were governed by a purchase agreement containing an arbitration clause: arbitration by a single neutral arbitrator and “resolved using the rules of the American Arbitration Association (AAA).”
The district court had earlier compelled a different plaintiff (Nigohosian) to arbitrate, finding the parties delegated gateway arbitrability questions to an arbitrator.
Johnson filed a demand with the AAA; an AAA administrator concluded AAA’s Healthcare Due Process Protocol and Healthcare Policy Statement applied, meaning AAA would not administer healthcare-related claims absent a post-dispute agreement or a court order.
Johnson refused to sign a post-dispute agreement and returned to federal court; the district court interpreted the Agreement and AAA rules to hold Johnson had satisfied the arbitration process and denied SmileDirect’s renewed motion to compel arbitration.
The Sixth Circuit majority reversed, holding that (1) the parties’ incorporation of AAA rules is clear and unmistakable evidence delegating gateway arbitrability questions to an arbitrator; and (2) an AAA administrator exceeded its role by resolving the arbitrability question or by applying AAA policy in a way that short-circuited the parties’ contractual delegation to an arbitrator.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether AAA administrator could apply AAA Healthcare Policy Statement to preclude arbitration absent post-dispute agreement or court order	AAA’s rules were incorporated into the contract; AAA administration — including its initial due-process review — is an essential term, so administrator properly declined administration	Administrator usurped arbitrator’s role or imposed AAA policy contrary to parties’ agreement to have arbitrator decide arbitrability	Administrator’s procedural denial was improper to decide gateway arbitrability; arbitrability must go to an arbitrator (reversed)
Whether incorporation of AAA rules is clear and unmistakable evidence delegating gateway arbitrability questions to an arbitrator	Johnson: AAA’s administrative procedures evidence that gateway issues are governed by AAA administration	SmileDirect: Incorporation of AAA rules (including the rule vesting arbitrators with power to rule on jurisdiction and arbitrability) shows clear delegation to arbitrator	Court: Incorporation of AAA rules provides clear and unmistakable evidence that parties delegated arbitrability to an arbitrator
Whether district court correctly denied motion to compel arbitration after AAA administration	Johnson: He exhausted the AAA process the contract required; court need not force re-initiation of AAA proceedings	SmileDirect: District court’s de novo interpretation of arbitrability conflicts with parties’ delegation and converts narrow §10 review into full de novo review	Court: District court erred; must compel arbitration and let arbitrator decide arbitrability (remanded to grant motion)

Key Cases Cited

Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63 (gateway arbitrability is a question of who decides whether arbitration applies)
Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (if parties delegate arbitrability, a court must send that question to the arbitrator)
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (clear-and-unmistakable standard for delegating arbitrability)
Blanton v. Domino’s Pizza Franchising LLC, 962 F.3d 842 (6th Cir.: incorporation of AAA rules can provide clear delegation to arbitrator)
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (distinguishing procedural questions for arbitrator versus questions for courts)
Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (arbitrators may not impose policies that contradict the parties’ contract)
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (FAA requires enforcement of arbitration agreements according to their terms)