A. The
Problem and Three Scenarios
1.
How should
arbitration panels treat separate arbitration proceedings involving related
parties and facts where the governing arbitration clause is silent on the
question?
2.
Three scenarios
illustrate the problem. In each case, the agreements at issue contain an
arbitration clause that provides for arbitration of “all disputes arising out
of” the agreement, but is silent on the power of the arbitrator (or court) to
consolidate arbitration proceedings. In the first case, the four shareholders of
Noodles Corporation have separate employment contracts with the company. The
manager of the company terminates the other three members, all of whom file
separate arbitration demands under their respective agreements, which raise
similar claims and turn on the same operative facts. One member moves to
consolidate all three proceedings on grounds of economy. Noodles resists the
motion and points to the separate arbitration provisions. In the second case, 40
homeowners, all of whom bought homes in the same subdivision, file separate
arbitration demands against the builder, Stavanger Homes, claiming similar
construction defects. Several homeowners move to consolidate the cases.
Stavanger opposes the motion because the home models and issues differ. Finally,
all 15 customers of Felsenheimer Bank file separate arbitration demands seeking
$14.50, the sum of unauthorized fees charged to their accounts. Two customers
move to consolidate the cases, but the Bank opposes the motions.
B.
Who Decides the
Question of Consolidation: Court or Arbitrator?
1.
Before the Supreme
Court decision in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938
(1995), most courts determined that courts, not arbitrators, decided the
question of consolidation (or joinder). And, unless the parties clearly
consented to consolidation, the court lacked authority to order consolidation.
Several years ago, in cases governed by the Federal Arbitration Act (FAA), the
question of consolidation (or joinder) was presented to the district court under
section 4 of the FAA (9 U.S.C.A. § 4), which provides that “[a] party aggrieved
by the alleged failure, neglect or refusal of another to arbitrate under a
written agreement for arbitration may petition any United State district court .
. . for an order directing that such arbitration proceed in the manner provided
for in such agreement.” Early interpretations of section 4 held that an
arbitration panel lacked the authority to order consolidation. See,
e.g., Del E. Webb Construction v. Richardson Hospital Authority, 823
F.2d 145, 150 (5th Cir. 1987). Other courts held that consolidation was only
appropriate with the parties’ consent or if the contract expressly provided for
consolidation. See, e.g., Volt Information Sciences, Inc. v.
Board of Trustees of the Leland Stanford Junior University, 489 U.S. 468,
476 (1989)(district courts do not have the power under the FAA to consolidate
arbitrations absent the parties’ consent).
2.
In First
Options v. Kaplan, the Supreme Court took up the question of who should
determine whether a given dispute is arbitrable – the court or the arbitrator.
The Court held that, unless the arbitration agreement clearly leaves the issue
of arbitrability for the arbitrator, the court should resolve the issue.
3.
The question since
First Options has been what qualifies as a question of “arbitrability.” A
new line of cases on consolidation grew out of two Supreme Court decisions,
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) and Green Tree
Financial Corp. v. Bazzle, 539 U.S. 444 (2003). The Howsam Court gave
two examples of a so-called “gate-way dispute” that would raise a question of
arbitrability and thus should be decided by a court: (1) a dispute regarding
“whether the parties are bound by a given arbitration clause”; and (2) “a
disagreement about whether an arbitration clause in a concededly binding
contract applies to a particular type of controversy.” Id. at 84. The
Howsam Court decided that the applicability of a National Association of
Securities Dealers time-limit rule was presumptively for the arbitrator.
4.
The Green Tree
Court considered whether a court or an arbitrator should determine if the
parties’ arbitration agreements allowed for class arbitration. Id. at
447. The Green Tree case concerned contracts between Green Tree, a
commercial lender, and its customers. 539 U.S. at 447. Each customer contract
contained an arbitration clause governed by the Federal Arbitration Act. Id.
Customers of Green Tree filed two separate suits against the company in South
Carolina state court. Id. In both cases, plaintiffs sought, and
eventually were granted, class certification. Id. at 449. On appeal from
the class arbitration awards, which the trial court had confirmed, the South
Carolina Supreme Court found that the parties’ arbitration agreements were
silent on class arbitration, that class arbitration was therefore authorized,
and that the arbitration had properly taken that form. A plurality of the
Supreme Court decided that the issue was for the arbitrator. Id. at
452-53. The plurality recognized that “[i]n certain limited circumstances,
courts assume that the parties intended courts, not arbitrators, to decide a
particular arbitration-related matter.” Id. at 452. However, the
plurality explained: “The question here – whether the contracts forbid class
arbitration – does not fall into this narrow exception. It concerns neither the
validity of the arbitration clause nor its applicability to the underlying
dispute between the parties. Unlike First Options, the question is not
whether the parties wanted a judge or an arbitrator to decide whether they
agreed to arbitrate a matter. Rather the relevant question here is what kind
of arbitration proceeding the parties agreed to. That question . . .
concerns contract interpretation and arbitration procedures. Arbitrators are
well situated to answer that question.” Id. at 452-53 (emphasis in
original).
5.
Without pausing to
consider in detail the opinion and concurrence of the Green Tree Court,
the teaching point from Green Tree and certainly Howsam is that
procedural issues are presumptively for the arbitrator to decide. With that in
mind, and especially over the past two to three years, most post-Howsam
courts have determined that the arbitrator should resolve the question of
consolidation. In a case of first impression, for example, the Seventh Circuit
decided the question in Employers Insurance Company of Wausua v. Century
Indemnity Co., 443 F.3d 573, 577 (Seventh Cir. 2006)(“question whether an
arbitration agreement forbids consolidated arbitration is a procedural one,
which the arbitrator should resolve[]”; agreements there did not discuss who
decides disputes regarding consolidation, “so we presume the arbitrator
decides[]”). Other Courts have so held. See Certain Underwriters at Lloyd’s
London v. Westchester Fire Ins. Co., 489 F.3d 580 (3d Cir. 2007)(Petitioner
sought stay of arbitration against it because six separate contracts, with
separate arbitration provisions, did not provide for consolidation of
arbitration proceedings or consolidation with proceedings under other contracts.
Court held that given the parties’ agreement to arbitrate their disputes,
together with the contractual silence on the consolidation issue, the
longstanding federal policy favoring arbitration meant that the decision whether
to consolidate was a procedural issue for the arbitrator to resolve, citing
Green Tree Financial Corp.); Certain Underwriters at Lloyd’s v. Cravens
Dargan & Co., 197 Fed.Appx. 645, 647 (Ninth Cir. 2006)(Gould, J.
concurring); and, Supermarkets, Inc. v. United Food and Commercial Workers
Union, Local 791, 321 F.3d 251 (First Cir. 2003)(in case involving
collective bargaining agreements, court concluded that putting the decision
whether to consolidate the three proceedings in the hands of the arbitrator
comported with long-standing precedent resolving ambiguities regarding the scope
of arbitration in favor of arbitrability). Overall, at this date, the First,
Third, Fourth, Seventh, and Ninth Circuits, and a district court in the Second
Circuit have held that the issue of consolidation is properly left for the
arbitrator to decide. See Robert W. DiUbaldo, Evolving Issues in
Reinsurance Disputes: the Power of Arbitrators, 35 Fordham Urb. L.J. 83, 88
n. 32 (Jan. 2008) (surveying federal circuits on the question).
6.
Joinder.
Let me take a brief excursion on the related topic of joinder, i.e., whether and
under what circumstances an arbitrator may join non-parties to the arbitration
agreement. The same theme underlying these decisions on consolidation – the
courts’ desire to allow arbitrators to decide how to efficiently proceed
(provided that the process comports with the parties’ express agreement) –
should support the same approach to the question of joinder.
7.
Normally,
non-signatories may not be bound by arbitration agreements. So, the first issue
is whether the parties sought to be joined are governed by an arbitration
agreement. If not, then the arbitrator cannot join the non-party unless there is
some exception to the general rule. Most courts recognize five or six exceptions
to the general rule. For example, a non-signatory may be able to enforce an
arbitration agreement against a signatory where the non-signatory has a close
legal relationship with a signatory of the agreement. Also, a signatory may
enforce an arbitration agreement against a non-signatory if the non-signatory is
a third-party beneficiary or if the doctrine of equitable estoppel applies.
See Bridas S.A.PP.I.C. v. Turkmenistan, 345 F.3d 347, 356 (Fifth Cir.
2003)(describing the traditional six theories for binding a nonsignatory to an
arbitration agreement). A few courts have described an exception under the
successor liability doctrine, but those appear to have been in asset purchase
cases, rather than, say, for example, stock purchases. E.g., Freeman
v. Complex Computing Company, Inc., 119 F.3d 1044, 1048 (2d Cir.
1997)(Second Circuit affirmed the district court’s denial of a motion to compel
arbitration with the nonsignatory purchaser of the signatory’s assets because
the claimed successor liability of the nonsignatory had not been established).
But, assuming that the party sought to be joined has signed an agreement to
arbitrate, then the arbitrator should decide the question of joinder for the
same reasons that the arbitrator should decide the question of consolidation.
8.
Language in the
Arbitration Clause Addressing Consolidation. Let me take one more detour
before turning to the considerations governing consolidation. Your clients may
wish to resolve the consolidation issue with express language in the agreement
such as, for example, a provision like the one found in many reinsurance
contracts: “If more than one reinsurer is involved in an arbitration where there
are common questions of law or fact and a possibility of conflicting awards or
inconsistent results, all such reinsurers will constitute and act as one party
for purpose of this clause.” See Robert M. Hall, Consolidation of
Arbitrations – A New Rule Emerging?, 15-12 Mealey’s Litig. Rep. Reinsurance
13 (2004). If the parties prefer to leave the question up to the arbitrator,
then Mark Lassiter has formulated the following language:
Consolidation of
Separate Disputes. If more than one Party (including any
Related Person) is involved in or with any
related Dispute then:
a.
All Parties and
Related Persons involved will endeavor to agree on a process to
effectuate any consolidation or joinder of any separate Conciliation proceedings
between the Parties. If they are unable to agree, the
AAA shall directly appoint a single
Arbitrator for the sole and limited purpose of deciding whether
separate Arbitration proceedings between the Parties should be consolidated or
joined and, if so, establishing a fair and appropriate process for consolidation
or joinder. The AAA may take reasonable
administrative action to accomplish the consolidation or joinder as directed by
the Arbitrator appointed to determine
consolidation.
b.
The Arbitrator appointed in the immediately preceding
subparagraph may order consolidation of separate Conciliation proceedings
between the Parties as to all or some of their claims if:
i.
there are separate
Conciliation proceedings between the Parties;
ii.
the claims subject
to the separate Conciliation proceedings arise in substantial part from the same
transaction, events or occurrences, or series of related transactions, events or occurrences;
iii.
the existence of a
common issue of law or fact creates the possibility of conflicting decisions in
any separate Arbitration proceedings; and
iv.
prejudice resulting from a failure to consolidate is not
outweighed by the risk of undue delay or
prejudice to the rights of or hardship to
Parties opposing consolidation.
The
Arbitrator appointed in subparagraph (i)
may order consolidation of separate Conciliation proceedings as to some claims
and allow other claims to be resolved in
separate Conciliation proceedings, and may also order consolidation of separate
Conciliation proceedings for some purposes, but not for others (e.g.,
consolidation for discovery purposes only, but not for the conduct of any
arbitration hearings).
C.
How Does the
Arbitrator Decide? The (Few) Rules Governing Consolidation of Different but
Related Cases
1.
The federal and
state rules of civil procedure cover joinder (rules 19 (mandatory) and 20
(permissive)) and consolidation (rule 42(a)), but no arbitral rule directly
addresses either question. The American Arbitration Association has adopted
Supplementary Rules for Class Arbitration (eff. October 8, 2003) under which the
AAA has agreed to administer demands for class arbitration where “(1) the
underlying agreement specifies that disputes arising out of the parties’
agreement shall be resolved by arbitration in accordance with any of the
Associations’ rules, and (2) the agreement is silent with respect to class
claims, consolidation or joinder of claims.” (Supplementary
Rules for Class Arbitration). Those rules address class arbitrations
rather than a request for consolidation or joinder. Still, the considerations
and mechanism outlined in Rules 4, 5, and 6 provide one framework for
resolution. Those rules are as follows:
* * *
4. Class
Certification
(a)
Prerequisites to a Class Arbitration
If the
arbitrator is satisfied that the arbitration clause permits the arbitration
to proceed as a class arbitration, as provided in Rule 3, or where a court
has ordered that an arbitrator determine whether a class arbitration may be
maintained, the arbitrator shall determine whether the arbitration should
proceed as a class arbitration. For that purpose, the arbitrator shall
consider the criteria enumerated in this Rule 4 and any law or agreement of
the parties the arbitrator determines applies to the arbitration. In doing
so, the arbitrator shall determine whether one or more members of a class
may act in the arbitration as representative parties on behalf of all
members of the class described. The arbitrator shall permit a representative
to do so only if each of the following conditions is met:
(1) the
class is so numerous that joinder of separate arbitrations on behalf of all
members is impracticable;
(2) there
are questions of law or fact common to the class;
(3) the
claims or defenses of the representative parties are typical of the claims
or defenses of the class;
(4) the
representative parties will fairly and adequately protect the interests of
the class;
(5)
counsel selected to represent the class will fairly and adequately protect
the interests of the class; and
(6) each
class member has entered into an agreement containing an arbitration clause
which is substantially similar to that signed by the class representative(s)
and each of the other class members.
(b) Class
Arbitrations Maintainable
An
arbitration may be maintained as a class arbitration if the prerequisites of
subdivision (a) are satisfied, and in addition, the arbitrator finds that
the questions of law or fact common to the members of the class predominate
over any questions affecting only individual members, and that a class
arbitration is superior to other available methods for the fair and
efficient adjudication of the controversy. The matters pertinent to the
findings include:
(1) the
interest of members of the class in individually controlling the prosecution
or defense of separate arbitrations;
(2) the
extent and nature of any other proceedings concerning the controversy
already commenced by or against members of the class;
(3) the
desirability or undesirability of concentrating the determination of the
claims in a single arbitral forum; and
(4) the
difficulties likely to be encountered in the management of a class
arbitration.
5. Class
Determination Award
(a) The
arbitrator’s determination concerning whether an arbitration should proceed
as a class arbitration shall be set forth in a reasoned, partial final award
(the “Class Determination Award”), which shall address each of the matters
set forth in Rule 4.
(b) A
Class Determination Award certifying a class arbitration shall define the
class, identify the class representative(s) and counsel, and shall set forth
the class claims, issues, or defenses. A copy of the proposed Notice of
Class Determination (see Rule 6), specifying the intended mode of delivery
of the Notice to the class members, shall be attached to the award.
(c) The
Class Determination Award shall state when and how members of the class may
be excluded from the class arbitration. If an arbitrator concludes that some
exceptional circumstance, such as the need to resolve claims seeking
injunctive relief or claims to a limited fund, makes it inappropriate to
allow class members to request exclusion, the Class Determination Award
shall explain the reasons for that conclusion.
(d) The
arbitrator shall stay all proceedings following the issuance of the Class
Determination Award for a period of at least 30 days to permit any party to
move a court of competent jurisdiction to confirm or to vacate the Class
Determination Award. Once all parties inform the arbitrator in writing
during the period of the stay that they do not intend to seek judicial
review of the Class Determination Award, or once the requisite time period
expires without any party having informed the arbitrator that it has done
so, the arbitrator may proceed with the arbitration on the basis stated in
the Class Determination Award. If any party informs the arbitrator within
the period provided that it has sought judicial review, the arbitrator may
stay further proceedings, or some part of them, until the arbitrator is
informed of the ruling of the court.
(e) A
Class Determination Award may be altered or amended by the arbitrator before
a final award is rendered.
6. Notice
of Class Determination
(a) In any
arbitration administered under these Supplementary Rules, the arbitrator
shall, after expiration of the stay following the Class Determination Award,
direct that class members be provided the best notice practicable under the
circumstances (the “Notice of Class Determination”). The Notice of Class
Determination shall be given to all members who can be identified through
reasonable effort.
(b) The
Notice of Class Determination must concisely and clearly state in plain,
easily understood language:
(1) the
nature of the action;
(2) the
definition of the class certified;
(3) the
class claims, issues, or defenses;
(4) that a
class member may enter an appearance through counsel if the member so
desires, and that any class member may attend the hearings;
(5) that
the arbitrator will exclude from the class any member who requests
exclusion, stating when and how members may elect to be excluded;
(6) the
binding effect of a class judgment on class members;
(7) the
identity and biographical information about the arbitrator, the class
representative(s) and class counsel that have been approved by the
arbitrator to represent the class; and
(8) how
and to whom a class member may communicate about the class arbitration,
including information about the AAA Class Arbitration Docket (see Rule 9).
* * *
2.
Neither
the Federal Arbitration Act nor the Uniform Arbitration Act directly
addresses the questions of consolidation or joinder. On a related issue, few
legislatures have dealt with the problem of multiparty disputes where some
or all of the parties face simultaneous litigation and arbitration. In 1978,
the California legislature led the way in fashioning some response to at
least that problem. Under Cal.C.C.P. §1281.2, the court may stay litigation,
refuse to enforce the arbitration agreement, or order consolidation or
joinder “of all parties in a single action or special proceeding[.]”
3.
In
Arizona, the legislature has taken up but not passed the Revised Uniform
Arbitration Act. That Act contains the only statutory provision that
directly addresses consolidation of separate arbitration proceedings:
SECTION 10. CONSOLIDATION
OF SEPARATE ARBITRATION PROCEEDINGS.
(a) Except as otherwise
provided in subsection (c), upon [motion] of a party to an agreement to
arbitrate or to an arbitration proceeding, the court may order
consolidation of separate arbitration proceedings as to all or some of
the claims if:
(1) there are separate
agreements to arbitrate or separate arbitration proceedings between the
same persons or one of them is a party to a separate agreement to
arbitrate or a separate arbitration proceeding with a third person;
(2) the claims subject to
the agreements to arbitrate arise in substantial part from the same
transaction or series of related
transactions;
(3) the existence of a
common issue of law or fact creates the possibility of conflicting
decisions in the separate arbitration proceedings; and
(4) prejudice resulting from a failure to consolidate is not
outweighed by the risk of undue
delay or prejudice to the rights
of or hardship to parties opposing consolidation.
(b) The court may order
consolidation of separate arbitration proceedings as to some claims and
allow other claims to be resolved
in separate arbitration proceedings.
(c) The court may not order
consolidation of the claims of a party to an agreement to arbitrate if
the agreement prohibits consolidation.
D.
The Classic Case:
Individual Homeowners in the Same Housing Development with Construction Defect
Claims against the Same Developer (but Separate Arbitration Agreements); Ruling
on Motion to Amend Claim and Motion to Reassert Class Claims
About 18 months ago,
certain (unnamed) parties briefed the question of consolidation in a putative
class-action construction defect case in the context of a motion to amend. I
offer the ruling (below) to illustrate how one arbitrator faced the question.
This construction defect
case concerns the YYYYYY residential development in Chandler, Arizona. In June
2006, plaintiffs filed their complaint in superior court. In November 2006,
following motion practice, the parties agreed to refer the putative class action
to arbitration. In their written agreement following that referral, the parties
“agreed to submit the dispute to the Arbitrator for his decision and otherwise
participate in an arbitration proceeding[.]”
In September 2007,
following referral of the case to this tribunal, claimants withdrew their
request for certification of the putative class. On September 6, 2007,
claimants’ counsel wrote to the tribunal in part as follows: “After consulting
with various statistical experts regarding the development of a sampling
protocol, I have come to the conclusion that this is not an appropriate case for
class certification.” In early October 2007, the tribunal set a deadline for
proposed, amended claims. In late October, claimants timely filed the motion to
amend the claim.
Currently, 42 homeowners
bring claims against XXXX. In the proposed, amended claim, claimants drop
several legal claims (e.g., negligence) and state claims for only breach of
implied warranty and equitable tolling or equitable estoppel. At argument, XXXX
agreed that those substantive changes to the claim should be allowed.
The question raised in
the motion to amend is whether an additional 43 homeowners may bring those
revised, substantive claims for breach of implied warranty against XXXX. In
response, XXXX objects that the additional homeowners should not be allowed
because neither the referral to arbitration nor the arbitration agreement allows
for joinder. XXXXX also argues that the controlling federal law does not allow
for joinder in these circumstances. In reply, claimants argue that the governing
rules and most recent federal law provide for joinder.
The Purchase
Agreement, Rules, and Law on Joinder. We start with the controlling
arbitration agreement. Each agreement between the homeowner and XXXXX provides
in part as follows:
Any controversy, claim or dispute
arising out of or relating to this Agreement or Your Purchase of the Home
(other than claims under the Limited Warranty) shall be settled by
arbitration in accordance with the Construction Industry Arbitration Rules
of the American Arbitration Association (“AAA”) and the Federal Arbitration
Act (Title 9 of the United States Code) and judgment rendered by the
arbitrator(s) may be confirmed, entered and enforced in any court having
jurisdiction. As a condition precedent to arbitration, the dispute shall
first be mediated in accordance with the Construction Industry Mediation
Rules of the AAA, or such other mediation services selected by Us. Claims
under the Limited Warranty will be arbitrated in accordance with the
arbitration provision set forth in the Limited Warranty.
Plaintiff’s Response to
Defendants’ Motion to Sever (Exh. A, at 4). In turn, the Construction Industry
Arbitration Rules (CIAR) of the American Arbitration Association (AAA) provide
as follows on this issue:
If the parties’ agreement or the law
provides for consolidation or joinder of related arbitrations, all involved
parties will endeavor to agree on a process to effectuate the consolidation
or joinder. If they are unable to agree, the Association shall directly
appoint a single arbitrator for the limited purpose of deciding whether
related arbitrations should be consolidated or joined and, if so,
establishing a fair and appropriate process for consolidation or joinder.
The AAA may take reasonable administrative action to accomplish the
consolidation or joinder as directed by the arbitrator.
The Commercial
Arbitration Rules of the AAA have no similar rule. Under R-6 of the CIAR, no new
or different claim may be submitted to the arbitrator except with the
arbitrator’s consent.
Here, the question is
joinder rather than consolidation because the claims of the additional
homeowners were pending neither in the superior court (except as proposed
members of the putative class) nor in this proceeding. (A consolidation involves
more than one pending arbitration proceeding.) In any event, the purchase
agreements do not speak to the issue of consolidation or joinder. Instead, under
the purchase agreements, the parties, including the proposed additional
claimants, agreed that the CIAR and the Federal Arbitration Act (FAA) would
govern this proceeding and, by extension, this issue.
We turn next to the
governing rules. The CIAR at R-7 provides that the parties shall attempt to
agree on a process to effectuate the joinder “[i]f the parties’ agreement or the
law provides for consolidation or joinder of related arbitrations[.]” The rule
then confirms that the arbitrator shall decide whether “related arbitrations
should be consolidated or joined[.]” The parties’ agreement does not address
this question directly, so the issue becomes whether the law permits joinder
under these circumstances. More precisely, the question here is whether the
tribunal may or should order the joinder of the additional claimants with
the currently pending arbitration. The tribunal defers the separate question
whether any of the pending, individual arbitration cases should be
consolidated with one another.
Current Federal Law
Regarding the Scope of Arbitral Authority on the Issue of Joinder. These two
motions raise one of the leading issues in arbitration law and on which the U.S.
Supreme Court has spoken on at least two occasions in the last five years. Both
sides agree that after referral the arbitrator decides “what kind of
arbitration proceeding the parties agreed to.” Green Tree Financial Corp.
v. Bazzle, 539 U.S. 444 (2003)(arbitrator should determine whether an
arbitration agreement subject to the FAA permitted or precluded class
arbitration (emphasis in original)).
XXXXX argues that federal
law requires the express agreement of the parties before an arbitrator may order
joinder. Without that agreement, XXXXX contends, the tribunal may not order
joinder here. XXXXX cites several federal court decisions for that proposition.
Those cases hold that courts should not consolidate or join the claims of
different parties before referring those cases to arbitration without the
express contractual agreement of the parties. XXXXX cites, for example, the
decision in Weyerhauser Co. v. W. Seas Shipping Co., 743 F.2d 637 (9th
Cir. 1984).
Claimants cite later
federal court decisions for the proposition that the tribunal may order joinder
absent the express agreement of the parties. For example, in a case construing a
state statute, the First Circuit rejected the rule against joinder. See
New Eng. Energy, Inc. v. Keystone Shipping Co., 855 F.2d 1, 5 (1st Cir.
1988)(silence of arbitration provision on consolidation would not trump state
arbitration statute allowing court to consolidate individual claims for arbitral
resolution). The Seventh Circuit rejected the rule against consolidation of
arbitration claims in Connecticut General Life Insurance Co. v. Sun Life
Assurance Co. of Canada, 210 F. 3d 771, 7765 (7th Cir. 2000). The court in
Connecticut General Life faced the question of consolidation in the
context of a class action. In that case, the court permitted the certification
of classes in arbitration:
[T]he same considerations of
adjudicative economy that argue in favor of consolidating closely related
court cases argue for consolidating closely related arbitrations ...
[P]arties to a contract generally aim at obtaining sensible results in a
sensible way ... To have the identical dispute litigated before different
arbitration panels is a formula for duplication of effort and fertile
source, in this case, of disputes over esoteric issues in the law of res
judicata.
210 F.3d at 774-776.
There is no Arizona law
directly on point. Certainly the contours of the law have changed since the
federal cases cited by XXXXX were decided. Now, after Howsam, Green
Tree, and other federal decisions, the questions of class claims,
consolidation, and joinder are procedural matters for the arbitrator. That is,
the rationale in Green Tree allows the tribunal to decide whether joinder
should be ordered here. The current and proposed claimants have 85 disputes that
are undoubtedly arbitrable; over 40 of those disputes are now before the
tribunal. The question whether the proposed claims should be joined and, later,
then consolidated is for my decision. This is, in other words, one of the
procedural ‘gateway’ matters that the Green Tree court referred to.
Id., at 453 (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S.
79 (2002)).
The Tribunal Should
Exercise its Authority to Order Joinder. The next question is whether the
tribunal should order joinder of the proposed additional claimants even if the
tribunal has the authority to do so. We again start with the agreement. The
intent of the parties in entering into the arbitration agreement presumably
included the efficient, economical resolution of their disputes. Joinder of
arguably related cases before the same arbitrator (even if those cases are not
consolidated (a question for another day, as I noted above)) offers both
efficiency and economy. There should be and I determine that there is no need
for the additional claimants to file their own separate cases with the AAA. In
other settings, third parties may be joined (even against their will) or may
move to join pending litigation. See, e.g., Fed.R.Civ.P. 19(a). The
result should be no different here. Counsel confirm that the very same
arbitration agreements control all of the pending and proposed cases. The same
lawyers would be involved in the pending and new claims. Moreover, the parties
have agreed to share fees, and the AAA does not receive administrative fees in
this ad hoc proceeding, so there seems no practical let alone legal or other
reason to require that the additional claimants first file new cases with the
AAA before the tribunal allows joinder in this proceeding.
The Question of
Futility. Finally, XXXXX argues that the proposed amendment is futile
because some claims are barred by the statute of limitations or statute of
repose. In the complaint, claimants allege that escrow closed on the homes at
issue between July 25, 1997 and June 28, 2001. See Complaint, ¶19. On
February 9, 2005, plaintiffs first discovered the defects. Id., at ¶20.
On November 4, 2005, the first PDA letter “relevant to for [sic] the entire
YYYYY community and most of the claims at the subject homes was sent to
Defendant.” Id., at ¶21. Five letters followed in 2005, 2006, and 2007
“as to all of the represented
homes[.]” Id., at ¶22. I accept those allegations as true for these
purposes.
Plaintiffs filed their
class action complaint in the superior court on June 2, 2006. For these
purposes, I will assume that, under the controlling law, the filing of the class
action complaint tolled the statutes of limitations and repose for all putative
class members. It appears that the proposed, additional claimants qualify as
putative class members. So, even though claimants have now withdrawn their
request for class certification, the statute of limitations was tolled until at
least the date of withdrawal. As a result, and as matters stand now, the
relevant statutes would not bar the claims of those owners who purchased from
XXXXX on or after November 4, 1996. XXXXX may of course raise the statutes of
limitations and repose at any time, but there does not appear to be any basis
for denying the entire motion to amend as futile at this stage.
For all of these reasons,
the tribunal GRANTS the motion to amend. The tribunal DENIES the motion to
reassert class claims as moot. |
