In Calderon v. Sixt Rent A Car, LLC, the Eleventh Circuit narrowly interpreted an arbitration clause in a rental car contract the plaintiff entered into on Orbitz.com. The court held that the clause did not apply to a dispute between the plaintiff and the rental car company.

• Plaintiff Philippe Calderon reserved a rental car from Sixt Rent A Car, LLC on Orbitz.com, a third-party reservations site that customers can use to make travel reservations. At the end of the rental, Sixt charged him for vehicle damage that Calderon claimed he was not responsible for. Mr. Calderon filed a putative class action against Sixt, alleging breach of contract and violations of state consumer protection laws.
• Sixt moved to compel arbitration based on an arbitration clause contained in the Terms of Use to which Mr. Calderon had agreed when he clicked the “Reserve Now” button on Orbitz.com. These Terms of Use were included in the contract between Mr. Calderon and Orbitz. The separate contract between Mr. Calderon and Sixt did not contain an arbitration clause. And Orbitz was not named as a defendant in Mr. Calderon’s lawsuit.
• The arbitration clause in the Orbitz Terms of Use provided as follows: “Any and all Claims will be resolved by binding arbitration, rather than in court. … This includes any Claims you assert against us, our subsidiaries, travel suppliers or any companies offering products or services through us, including Suppliers, (which are the beneficiaries of this arbitration agreement).”
  • The question before the court was whether Mr. Calderon’s claims fell within the definition of the term “Claims.” According to the agreement, “Claims” were “any disputes or claims relating in any way to [1] the Services, [2] any dealings with our customer service agents, [3] any services or products provided, [4] any representations made by us [Orbitz], or [5] our Privacy Policy.”
  • The court quickly determined that categories 1, 2, 4 and 5 referred only to interactions between Orbitz and its customers. Thus, whether Mr. Calderon’s dispute fell within the definition of “Claims” turned on whether item 3—pertaining to “any services or products provided”—included only services or products provided by Orbitz, or was broad enough to encompass services or products provided by third parties such as Sixt.
• The Eleventh Circuit concluded that “any services or products provided” was limited to services or products provided by Orbitz, not services or products provided by third parties such as Sixt. The court reached this conclusion for three reasons:
  • First, a common rule of contract interpretation is that “the meaning of particular terms may be ascertained by reference to other closely associated words,” and the other items in the list of the types of disputes that qualify as “Claims” relate only to matters involving Orbitz, not third parties.
  • Second, the Terms of Use require any customer asserting a “Claim” to give Orbitz an opportunity to resolve it before filing suit. This provision would make little sense if "Claims" included disputes with third parties other than Orbitz, because Orbitz would be powerless to resolve them.
  • Finally, as a matter of “common sense,” disputes with third parties other than Orbitz—like Mr. Calderon’s case—often may not involve Orbitz at all, and should not be subject to Orbitz’s mandatory arbitration clause.
• In reaching this conclusion, the Eleventh Circuit acknowledged the Supreme Court’s decision in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983), which held that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” But the court concluded that this rule of construction did not apply, reasoning that it “emanates from the Federal Arbitration Act and thus applies only to ‘arbitration agreement[s] within the coverage of the Act.’”
  • Although Orbitz’s Terms of Use expressly stated that they are “governed by the Federal Arbitration Act,” the Act is limited to “controversies that arise out of the contract containing the arbitration agreement or the transaction evidenced thereby.” But Mr. Calderon’s lawsuit did not “arise out of” the contract he entered into with Orbitz, because the dispute he had with Sixt was not “an immediate, foreseeable result” of Orbitz’s or Mr. Calderon’s performance of their contractual duties. Indeed, Mr. Calderon’s complaint didn’t “name Orbitz as a defendant, identify any wrongdoing by Orbitz, or allege any violation of Orbitz’s Terms of Use by anyone.”
• Judge Newsom wrote a concurring opinion that questioned the origins of the Moses H. Cone canon, asserting that it is “just made up” and should be re-evaluated. Delving into the history of the Federal Arbitration Act, Judge Newsom explained how arbitration contracts used to be “functionally unenforceable” because courts allowed parties to revoke arbitration agreements. As a result, Congress passed the FAA in 1925 to guarantee that written arbitration agreements would be enforceable. But lower courts then went further, borrowing the pro-arbitration canon from a federal labor statute (despite significant differences between that statute and the FAA) and aggressively enforcing the pro-arbitration policy behind the FAA, not its plain text. The Supreme Court then capitalized on these trends in Moses H. Cone to endorse the “pro-arbitration canon in the strongest possible terms,” and lower courts have followed suit. Judge Newsom explained how there are at least three problems with this canon: (1) it is a “substantive canon” that directs courts to “depart from a contract’s most natural interpretation” in favor of a pro-arbitration policy, (2) it is an especially powerful substantive canon that courts readily apply, and (3) it is a “judicial invention.” He concluded that we would be “better off without the Moses H. Cone canon.”
• The court’s opinion is significant in that it represents one of the first Eleventh Circuit opinions considering whether the Federal Arbitration Act, including its strong presumption in favor of arbitration, applies to disputes with only a tangential relationship to the contract containing the arbitration clause. It also represents a potential hurdle to defendants who wish to enforce arbitration provisions contained in third-party affiliates’ contracts. To protect against this, arbitration clauses should be carefully drafted to cover all types of disputes that the company wishes to arbitrate. And, third-party affiliates may wish to consider whether to adopt their own arbitration agreements rather than relying solely on the service provider’s agreement. Additionally, Judge Newsom’s concurring opinion may give litigants a roadmap for challenging the Moses H. Cone canon, perhaps with the goal of seeking certiorari on this issue from the Supreme Court.
• Read the Eleventh Circuit’s opinion here.