Fifth Circuit Finds Incorporation of AAA Rules Into Arbitration Agreement Presents “Clear Unmistakable Evidence” of Parties’ Intent To Have Arbitrator Decide Issue of Arbitrability

Carlton Fields
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Carlton Fields

This appeal arises from a class action suit alleging violations of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227. In 2015, plaintiff Manuel Mendoza bought a car from defendant car dealer Fred Haas Motors, and signed an arbitration agreement and a personal information notice. The arbitration agreement was broadly worded, covering “all claims, demands, disputes, or controversies of every kind or nature” relating to the transaction between the parties. Any arbitration was to be conducted pursuant to the provisions of the Federal Arbitration Act and “according to the Commercial Rules of the American Arbitration Association” (AAA Rules).

Years later, in 2019, the plaintiff alleged that the defendant sent four prerecorded voicemail marketing messages to his phone, and filed a class action lawsuit asserting TCPA violations. The defendant moved to compel arbitration based on the arbitration agreement, arguing that the plaintiff’s execution of the personal information notice constituted prior written consent and any dispute over the meaning of the document is subject to arbitration. The defendant also contended that the arbitration agreement delegates questions of arbitrability to the arbitrator.

The U.S. District Court for the Southern District of Texas denied the motion to compel arbitration, and the defendant thereafter filed an interlocutory appeal.

On appeal, the Fifth Circuit reversed and remanded, noting that the issue of whether a particular claim is covered by an arbitration agreement “changes when the parties include a delegation clause giving the arbitrator the primary authority to rule” on that question. The focus then shifts to whether there is “‘clear unmistakable’ evidence” that the parties intended to have an arbitrator make that decision. The Fifth Circuit found that the incorporation of the AAA rules into the arbitration agreement presented that clear unmistakable evidence, particularly where Rule 7(a) provides in relevant part that “the arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect…to the arbitrability of any claim or counterclaim.”

The Fifth Circuit further rejected the plaintiff’s argument that the delegation only related to claims regarding the vehicle transaction, finding that the plaintiff waived this argument by raising this theory for the first time on appeal.

In closing, the Fifth Circuit cautioned that it was expressing “no views on the scope of the arbitration clause or the merits of the underlying dispute,” and was simply respecting the parties’ decision to delegate the threshold issue of arbitrability to the arbitrator.

Mendoza v. Fred Haas Motors, Limited, No. 20-20123 (5th Cir. Sept. 1, 2020).

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