Memorandum Opinion and Order
Yolanda Henderson brought this putative class action against U.S. Patent Commission, Ltd. and several of its employees, The Gray Law Group and several of its employees, and two defendants who have been dismissed. Doc. 72. Earlier in the litigation, Defendants moved to compel arbitration, Docs. 33, 36, and the court granted the motion, Docs. 60-61 (reported at
Background
The relevant facts are set forth in the court’s prior opinion, familiarity with which is assumed. To summarize, Henderson, seeking to develop and sell what she believed to be her invention of “glitter paint,” entered into two contracts with U.S. Patent Commission, formerly known as Invent Worldwide Consulting. Doc. 72 at ¶¶ 22-26, 31-35. Pursuant to the first agreement, the “Step 1 Agreement,” U.S. Patent Commission would perform a search to determine the patentability of Henderson’s putative invention. Id. at ¶ 28. Defining U.S. Patent Commission and Invent Worldwide Consulting as “Consultants” and Henderson as “Client,” the agreement contained the following choice-of-law and arbitration clause:
This agreement, and all other agreements with Consultants, unless specifically noted otherwise are interpreted in accordance with the laws of the State of Illinois and the County of DuPage. Any and all disputes regarding this or other agreements between Client and Consultants will be subject to binding arbitration and submitted to the AAA (American Arbitration Association) or some other similar organization. ...
Doc. 33-2 at 3. Under the second agreement, the “Step 2 Agreemént,” U.S. Patent Commission would “creat[e] 2D and 3D drawings of the • invention, provid[e] [Henderson] with a list of manufacturers, and fil[e] a provisional patent application with the United States Patent and Trademark Office (‘USPTO’).” Doc. 72 at ¶ 32. The Step 2 Agreement included an arbitration clause identical to that in the Step 1 Agreement. Doc. 33-3 at 4. Henderson paid $100.00 for the services specified in the Step 1 Agreement and $2,600.00' for the services specified in the Step 2 Agreement. Doc. 72 at ¶¶ 28, 31.
Henderson alleges that Defendants conspired to deceive her from discovering that glitter paint was neither patentable nor profitable, violating both federal and state law. Doc. 72. As noted, the court compelled arbitration on November 1, 2015. On February 8, 2016, Henderson filed a demand for arbitration before the JAMS arbitral
Discussion
“An agreement to arbitrate is treated like' any other contract,” and a “party can be forced to arbitrate only those matters that-he or she has agreed to submit to arbitration.” Dr. Robert L. Meinders, D.C., Ltd. v. UnitedHealthcare, Inc.,
Defendants have so moved, contending that the Step 1 and Step 2 Agreements do not permit class arbitration. Docs. 76-77. To resolve the motion, the court must address two questions. The first is “who should decide whether the Agreements [allow for class] arbitration: [this] court, or the arbitrator?” Emp’rs Ins. Co. of Wausau v. Century Indem. Co.,
I. Whether the Court or the Arbitrator Decides the Availability of Class Arbitration
“[Q]uestion[s] of arbitrability ... which include certain gateway matters, such .as whether parties have a valid arbitration agreement or whether a concededly binding arbitration clause applies to a certain type of controversy ... are presumptively for courts to decide,” Oxford Health,
A. Whether the Availability of Class Arbitration Is a “Question of Arbi-trability”
The Supreme Court has “found the phrase [‘question of arbitrability’] applicable in the kind of narrow circumstances where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate.” Wausau,
Bazzle has been cited in only three Supreme Court majority opinions: twice to emphasize that it did not bind the Court as to whether the availability of class arbitration is a question of arbitrability, see Oxford Health,
Nor has the Seventh Circuit decided whether class arbitrability is a gateway issue for the court to decide. In Wausau and BCS Insurance, the Seventh Circuit held that the availability of consolidated arbitration is not a question of arbitrability, but rather a “procedural issue[ ] ... presumptively for the arbitrator to decide.” Wausau,
Several decisions from this District, while acknowledging that Wausau and BCI Insurance do not expressly decide the issue, have nevertheless drawn on those cases to find that class arbitrability is a procedural issue for the arbitrator. See Williams-Bell v. Perry Johnson Registars, Inc.,
In Champ, the Seventh Circuit considered “whéther a district court has authority to certify an individual plaintiff as a class representative for other similarly aggrieved parties whose claims are subject to arbitration.” Id. at 271. Perera, the original plaintiff, brought a class action complaint against Siegel and other defendants. The district court ordered Perera to proceed to arbitration; the court also certified her as a class representative in the arbitration proceedings. Upon the defendants’ motion for reconsideration, the disteict court vacated its prior order and held that it lacked authority to certify class arbitration where the parties had not agreed to class arbitration in their arbitration agreement. Perera then settled, and two putative class members intervened to appeal the order denying certification of a class for arbitration. Among other issues, the defendants challenged the court’s granting of the motion to intervene. Ibid. The Seventh Circuit rejected the intervenors’ argument that their contract with the defendants permitted class arbitration even though the agreement was silent on the issue; in so holding, the court, surveying decisions issued by other circuits, observed that there existed "no meaningful basis to distinguish between the failure to provide for consolidated arbitration and class arbitration.” Id. at 275. Seizing on this language, some of the above-cited decisions from this District reasoned that because Champ cited ease law about consolidated arbitration to illuminate an issue concerning class arbitration, and because Wausau and Blue Cross held that the availability of consolidated arbitration was procedural and thus not a question of arbitrability, class arbitrability must be procedural as well. See Price,
The court respectfully disagrees with that reasoning. Champ did not analogize consolidated arbitration to class arbitration for all purposes; rather, it analogized a contract’s failure to provide for one with a failure to provide for the other. See Champ,
Class actions always have been treated as special. One self-selected plaintiff represents. others, who. are entitled to protection from the representative’s misconduct or incompetence. Often this requires individual notice to class members, a procedure that may be more complex and costly than the adjudication itself. See Eisen v. Carlisle & Jacquelin,417 U.S. 156 ,94 S.Ct. 2140 ,40 L.Ed.2d 732 (1974). As a practical matter the representative’s small stake means that lawyers are in charge, which creates a further need for the adjudicator to protect-the class. Finally, class actions can turn a small claim into a whopping one. Unsurprisingly, Fed. R. Civ. P. 23 imposes stringent requirements on class certification. Consolidation of suits that are going to proceed anyway poses none of these potential problems. That’s whyFed. R. Civ. P. 42(a) leaves to a district judge’s discretion—and without any of Rule 23’s procedures and safeguards— the decision whether to consolidate multiple suits. Just as consolidation under Rule 42(a) does not change the fundamental nature of litigation, so consolidation of the plans’ claims would not change the fundamental nature of arbitration.
In the absence of directly controlling precedent from the Supreme Court or the Seventh Circuit on the issue at hand, this court looks to persuasive authority. The Third, Fourth, and Sixth Circuits have held that class arbitrability is a question of arbitrability, and thus a decision presumptively for the court rather than the arbitrator. See Dell Webb,
In this court’s view, the Third, Fourth, and Sixth Circuits’ view is more consistent with Supreme Court and Seventh Circuit precedent than is the Fifth Circuit’s view. In Stolt-Nielsen, the Supreme Court explained that “class-action arbitration changes the nature of arbitration”:
Consider just some of the fundamental changes brought about by the shift from bilateral arbitration to class-action arbitration. An arbitrator chosen according to an agreed-upon procedure no longer resolves a single dispute between the parties to a single agreement, but instead resolves many disputes between hundreds or perhaps even thousands of parties. Under the [AAA’s] Class Rules, “the presumption of privacy and confidentiality” that applies in many bilateral arbitrations “shall not apply in class ar-bitrations,” thus potentially frustrating the parties’ assumptions when they agreed to arbitrate. The arbitrator’s award no longer purports to bind just the parties to a single arbitration agreement, but adjudicates the rights of absent parties as well. And the commercial stakes of class-action arbitration are comparable to those of class-action litigation, even though the scope of judicial review is much more limited.
559 U.S, at 685, 686-87,
Also pertinent to the discussion is the extremely limited judicial review of arbi-tral decisions, which “makes it more likely that errors will go uncorrected,” including errors in deciding whether the parties had agreed to class arbitration. Concepcion,
In short, the Supreme Court’s decisions since Bazzle have taken pains to emphasize that the distinction between bilateral and class arbitration is one not of degree but of type. Thus, the “Court has given every indication, short of an outright holding, that classwide arbitrability is a gateway question” presumptively for the court rather than for the arbitrator. Id. at 598; se,e also Dell Webb,
Finally, the persuasive value of the Fifth Circuit’s contrary decision in Robinson is quite limited, as the Seventh Circuit in Wausau disapproved of the Fifth Circuit’s
Henderson also contends that the Third, Fourth, and Sixth Circuit decisions are distinguishable because the arbitration clauses in those cases either did not direct the parties to bring their disputes to a specific arbitral forum, see Opalinski,
For. these reasons, the availability of class arbitration is a question of arbitra-bility presumptively for the court, not for the arbitrator.
B. Whether the Arbitration Clause “Clearly and Unmistakably” Provides that the Arbitrator Decides the Availability of Class Arbitration
Questions of arbitrability presumptively for the court can nonetheless be submitted to the arbitrator if “the parties clearly and unmistakably provide[d]” that they should be. Howsam,
Courts “evaluate agreements to arbitrate under the same standards as any other contract,” Tinder v. Pinkerton Sec.,
As noted, the arbitration clause in the Step 1 and Step 2 Agreements states:
This agreement, and all other agreements with Consultants, unless specifically noted otherwise are interpreted in accordance with the laws of the State of Illinois and the County of DuPage. Any and all disputes regarding this or other agreements between Client and Consultants will be subject to binding arbitration and submitted to the AAA (American Arbitration Association) or some other similar organization.
Doc. 33-2 at 2; Doc. 33-4 at 4. The clause does not explicitly refer to class arbitration at all, let alone to who shall decide whether there can be class arbitration. Henderson nevertheless contends that “under traditional contract interpretation rules ... [t]he parties’ contract expresses their intent to have the arbitrator decide the question of classwide arbitration by incorporating the arbitration forum’s rules on the question of class arbitration.” Doc. 80 at 12.
This argument fails to persuade. “For a contract to incorporate all or part of another document by reference, the reference must show an intention to incorporate the document and make it part of the contract.” 188 LLC v. Trinity Indus., Inc.,
Indeed, Henderson has chosen to proceed before the JAMS arbitral forum. Doc. 77-1; Doc. 80 at 12. Thus, even if Henderson were right that JAMS “has a virtually identical rule to [the] AAA” concerning class arbitrability, ibid, the fact that the parties are proceeding under a set of rules different from the AAA rules demonstrates that the arbitration clause does not incorporate the AAA rules, much less incorporate them “clearly and- unmistak
Finally, Henderson contends that the law of the case doctrine precludes Defendants from arguing that the court rather than the arbitrator should decide class arbitrability. Doc. 80 at 2. “The law-of-the-case doctrine generally provides that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.” Musacchio v. United States, — U.S. —,
That argument is frivolous. The court’s opinion on the motion to compel arbitration does not discuss, mention, or even allude to class arbitration. And the court’s minute order denying without prejudice Henderson’s class certification motion states that it “does not speak, one way or the other, to whether class arbitration is permitted or: appropriate.” Doc. 71. The law of the case doctrine does not apply to an issue like this one that the court has not decided. See Roboserve, Inc. v. Kato Kagaku Co., Ltd.,
II. Whether the Parties’ Agreements Make Class Arbitration Available
Having resolved that the availability of class arbitration is a question for the court, not the arbitrator, the court now must address whether the Step 1 and Step 2 Agreements permit class arbitration. As noted, the court applies general principles of state contract law, subject to the Supreme Court’s admonition that “arbitration is a manner of consent, not coercion.” Stolt-Nielsen,
The agreements indisputably do not expressly permit class arbitration. Defendants argue that the agreements do not implicitly permit class arbitration either, contending that they are complete and unambiguous contracts that, through their reference to “this or other -agreements between Client and Consultants,” indicate an agreement to arbitrate disputes only on a bilateral basis. Doc. 77 at 22-25; Doc. 82 at 14-15. Henderson -retorts that the agree
First, Henderson contends that “Defendants do not cite any language in the arbitration provisions of either contract expressly or implicitly limiting class arbitration,” and therefore that Defendants seek “to rewrite the parties’ agreements to include a class arbitration waiver when no such provision actually exists.” Doc. 80 at 18. This argument flatly ignores binding precedent, which holds that silence cannot be taken as evidencing the parties’ agreement to class arbitration. See Concepcion,
Second, Henderson argues that a clause permitting the arbitration of bilateral disputes cannot by itself exclude class arbitration, because otherwise class actions could never “aris[e] out of contract claims.” Doc. 80 at 13; see Harrison v. Legal Helpers Debt Resolution, LLC,
Third, Henderson again contends that the agreements incorporate by reference AAA rules addressing class arbitration. Doc. 80 at 13-14. For the reasons set forth above, this argument misses the mark. Further, as Defendants note, Doc. 82 at 14-15, AAA Supplementary Rule 3 expressly forbids an arbitrator “to consider the existence of these Supplementary
Conclusion
Defendants’ motion to compel Henderson to proceed to arbitration on an individual basis is granted. Henderson must proceed with an individual arbitration and may not pursue class arbitration. This suit remains stayed pending conclusion of the arbitration.