Wells Fargo Advisors, LLC v. Sappington, Wells Fargo Advisors, LLC
884 F.3d 392
2d Cir.2018Background
- Six former Wells Fargo Advisors employees filed putative class arbitrations alleging unpaid overtime under the FLSA and state law; their employment agreements contained broad arbitration clauses governed by Missouri law.
- Employees filed with FINRA and AAA; FINRA refused class claims (its rules bar class/collective actions), leaving AAA proceedings for class arbitration.
- Wells Fargo petitioned the Southern District of New York to compel bilateral (individual) arbitration; the District Court denied the petitions, holding an arbitrator should decide availability of class arbitration.
- The Second Circuit assumed (without deciding) that whether a clause permits class arbitration is a presumptive gateway question of arbitrability for courts, but reviewed whether the parties clearly and unmistakably delegated that question to arbitrators under Missouri law.
- The court examined two clause forms: the Tucker clause (broad "any controversy or dispute" language and incorporation of AAA rules) and the Sappington clause (similar broad language plus an explicit delegation of disputes about validity/enforceability to arbitration).
- The Second Circuit concluded both clauses, construed under Missouri law and given the rules incorporated, clearly and unmistakably delegated questions of arbitrability — including class arbitration availability — to arbitrators, and affirmed the District Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides whether an arbitration clause permits class arbitration? | Employees: arbitrator should decide under clause language and incorporated rules. | Wells Fargo: court should decide gateway arbitrability questions and compel bilateral arbitration. | Court assumed the issue is presumptively judicial but held parties clearly delegated it to arbitrators. |
| Whether the Tucker clause clearly and unmistakably delegates class-arbitrability | Employees: broad "any controversy or dispute" language plus AAA rules incorporation delegates arbitrability. | Wells Fargo: bilateral phrasing and 1993 AAA Rules do not clearly delegate class-arbitrability; requires explicit class delegation. | Held: under Missouri law, Tucker clause (and incorporation of AAA rules as updated) suffices to clearly delegate arbitrability, including class questions. |
| Whether incorporation of older AAA Securities Rules can bind parties to later AAA rules that empower arbitrators | Employees: Rule 1 means the version in force when demand filed governs; later AAA rules authorize arbitrator to decide arbitrability and class procedures. | Wells Fargo: "string of inferences"; 1993 rules don't themselves empower arbitrator to decide arbitrability; cannot rely on subsequent rule changes. | Held: incorporation-by-reference (with Rule 1) makes later-applicable AAA rules part of the contract; those rules delegate arbitrability and class-certification preliminaries to arbitrators. |
| Whether Sappington clause delegates arbitrability | Employees: clause expressly commits controversies and challenges to validity/enforceability to arbitration. | Wells Fargo: argued bilateral intent / forum exclusivity (FINRA) complicates delegation. | Held: Sappington clause’s explicit delegation language clearly and unmistakably commits arbitrability (including class availability) to arbitrator. |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (standard for who decides arbitrability; clear-and-unmistakable delegation required to send gateway issues to arbitrator)
- BG Group PLC v. Republic of Argentina, 134 S. Ct. 1198 (2014) (presumption that courts decide gateway arbitrability questions)
- PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (applying clear-and-unmistakable standard under federal law)
- Contec Corp. v. Remote Sol. Co., 398 F.3d 205 (2d Cir. 2005) (incorporation of arbitration rules that empower arbitrators can evidence delegation)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (distinguishing types of arbitrability questions and contract expectations)
- Shaw Grp. Inc. v. Triplefine Int’l Corp., 322 F.3d 115 (2d Cir. 2003) (broad "any and all" controversies language can evidence intent to arbitrate arbitrability)
- Dotson v. Dillard’s, Inc., 472 S.W.3d 599 (Mo. Ct. App. 2015) (Missouri law: agreement need not literally recite delegation to show clear-and-unmistakable intent)