Third Circuit Confirms the Class Arbitration "Clear and Unmistakable" Standard in Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, Dealing a Blow to Consumers and Employees

Abstract

Whether class action is available in an arbitration proceeding is a highly controversial topic with implications for all parties bound by such clauses. Due to the high stakes of class action arbitrability, it is essential that a neutral decisionmaker determine this question. Whether this decisionmaker is the court or the arbitrator, however, is contested and unresolved by the U.S. Supreme Court. Although undetermined by our highest court, the U.S. Court of Appeals for the Third Circuit has addressed this question. In Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, the Third Circuit affirmed that the availability of class arbitration is a question for the courts, unless there is clear and unmistakable language within the arbitration clause delegating such a power to the arbitrators. Further, the court held that an incorporation of the American Arbitration Association rules is not a clear and unmistakable delegation. Although this opinion incentivizes contract clarity, it also ignores the uneven bargaining power and divergent interests between parties in modern mandatory arbitration agreements, handing a windfall victory for corporations.