Spirit Airlines, Inc. v. Steven Maizes , 899 F.3d 1230 ( 2018 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-14415
________________________
D.C. Docket No. 0:17-cv-61086-BB
SPIRIT AIRLINES, INC.,
a Delaware Corporation,
Plaintiff - Appellant,
versus
STEVEN MAIZES,
an individual,
VINCENT ANZALONE,
an individual,
LEE TRAYLOR,
an individual,
HOWARD MADENBERG,
an individual,
Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(August 15, 2018)
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Before WILLIAM PRYOR and MARTIN, Circuit Judges, and WOOD, * District
Judge.
MARTIN, Circuit Judge:
This appeal presents the question of whether it is a judge or an arbitrator
who must decide if the arbitration agreement between Spirit Airlines, Inc. and
members of its $9 Fare Club allows for arbitration of claims brought by a class of
claimants. To answer this question, we must, in turn, decide whether the
agreement’s choice of American Arbitration Association rules, standing alone, is
clear and unmistakable evidence that Spirit intended that the arbitrator decide this
question. Following the reasoning of Terminix International Co. v. Palmer Ranch
Ltd. Partnership, 432 F.3d 1327, 1332 (11th Cir. 2005), we conclude that it is, so
the arbitrator will decide. For this reason and a few others we will discuss, we
affirm.
I. Background
On April 12, 2017, Steven Maizes and three other class representatives filed
a claim in arbitration against Spirit Airlines, Inc. on behalf of a class of consumers.
The claim arose out of Spirit’s offer of membership in a club called the “$9 Fare
Club,” for a yearly membership fee of $59.95. Spirit advertised that club members
would “experience the ultimate in cost savings” and could “cancel at any time.”
*
Honorable Lisa Wood, United States District Judge for the Southern District of Georgia,
sitting by designation.
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But the class representatives alleged Spirit broke several promises made in the $9
Fare Club Agreement. The details of these promises, and whether or how they
were broken, are not the subject of this appeal.
Soon after, on May 30, Spirit filed suit against the class representatives in
federal court in the Southern District of Florida. Spirit’s lawsuit sought a
declaration that the agreement’s arbitration clause does not authorize class
arbitration claims. The agreement’s arbitration clause states:
This Agreement and the terms of membership shall be governed and
construed in accordance with the laws of the State of Florida without
giving effect to the choice of law provisions thereof. Any dispute
arising between Members and Spirit will be resolved by submission to
arbitration in Broward County, State of Florida in accordance with the
rules of the American Arbitration Association then in effect.
Notwithstanding the foregoing, nothing in this Agreement is intended
or shall be construed to negate or otherwise affect the consumer
protection laws of the state in which Members reside.
Shortly after Spirit filed its suit, it asked the District Court to impose a
preliminary injunction to stop the arbitration of class claims. The class
representatives, in turn, moved to dismiss Spirit’s lawsuit, saying subject matter
jurisdiction did not exist in federal court. The District Court held a hearing on both
motions. During the hearing, Spirit’s counsel said he would like to have Spirit’s
vice president testify “that there was never an intent to arbitrate more than one
dispute at a time.” Spirit’s counsel said that the vice president’s testimony would
be relevant “[i]f there is an ambiguity as to what’s intended” in the agreement.
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After the hearing, the District Court denied Spirit’s request for an injunction
and dismissed the case. The District Court ruled that the agreement’s choice of
AAA rules incorporated Rule 3 of the Supplementary Rules for Class Actions,
which designates the arbitrator to decide whether the arbitration agreement permits
class arbitration. Because the AAA rules require the arbitrator to decide this
question, the court dismissed the case for lack of jurisdiction. This appeal
followed.
II. Standard of Review
“We review de novo the district court’s grant of a motion to dismiss and
compel arbitration.” Bodine v. Cook’s Pest Control Inc., 830 F.3d 1320, 1324
(11th Cir. 2016).
III. Discussion
Arbitrations routinely generate three categories of dispute. First, there are
the merits of the disagreement. Second, there is a dispute about whether the parties
agreed to arbitrate their disagreement. Third, parties disagree about who gets to
decide whether they agreed to arbitrate their differences. See First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 942, 115 S. Ct. 1920, 1923 (1995).
In First Options, the Supreme Court told us how to go about determining
whether the parties agreed to have a court or an arbitrator decide whether they
agreed to arbitrate the dispute. Id. at 944, 115 S. Ct. at 1924. The Court observed
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that when parties enter into an arbitration agreement, they “often might not focus”
on who should decide whether their agreement to arbitrate extends to a given
dispute. Id. at 945, 115 S. Ct. at 1925. With this in mind, the Court directed lower
courts to never assume the parties agreed to have an arbitrator decide questions of
arbitrability “unless there is clear and unmistakable evidence that they did so.” Id.
at 944, 115 S. Ct. at 1924 (alterations adopted and quotation omitted).
Here, the parties dispute whether the agreement’s choice of AAA arbitration
rules amounts to “clear and unmistakable” evidence of the parties’ intent to have
an arbitrator decide whether the agreement permits class arbitration.1 Spirit points
to opinions from four other circuits to argue that the incorporation of AAA rules,
standing alone, is not enough to overcome the First Options presumption. We have
concluded to the contrary.
Our court’s opinion in Terminix weighs heavily in our consideration. In
Terminix, Palmer Ranch sued Terminix in Florida state court. 432 F.3d at 1329.
Terminix responded by suing Palmer Ranch in federal court to compel it to
1
Neither this circuit nor the Supreme Court has resolved whether the availability of class
arbitration is a question of arbitrability under First Options. See Oxford Health Plans LLC v.
Sutter, 569 U.S. 564, 569 n.2, 133 S. Ct. 2064, 2068 n.2 (2013); S. Commc’ns Servs., Inc. v.
Thomas, 720 F.3d 1352, 1358 n.6 (11th Cir. 2013). But see Green Tree Fin. Corp. v. Bazzle,
539 U.S. 444, 452, 123 S. Ct. 2402, 2407 (2003) (plurality opinion) (stating that class
arbitrability was not a question of “whether they agreed to arbitrate a matter,” but a question of
“what kind of arbitration proceeding the parties agreed to” (emphasis removed)). On appeal, the
class representatives did not dispute Spirit’s argument that the availability of class arbitration is a
question of arbitrability. Because the parties agreed this issue is a question of arbitrability, we
assume it without deciding the issue.
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arbitrate based on agreements between the parties. Id. Palmer Ranch responded
that the arbitration agreements were not enforceable because they eliminated
Palmer Ranch’s statutory remedies and rights under Florida’s Deceptive and
Unfair Trade Practices Act. Id. The District Court agreed with Palmer Ranch,
held the agreements unenforceable, and denied Terminix’s motion to compel
arbitration. Id. at 1329–31.
On appeal, this Court reversed and directed the District Court to grant the
motion to compel arbitration. Id. at 1333. We observed that Rule 8(a) of the AAA
Commercial Arbitration Rules provides that “the arbitrator shall have the power to
rule on his or her own jurisdiction, including any objections with respect to the
existence, scope or validity of the arbitration agreement.” Id. at 1332 (alteration
adopted). Based on Rule 8(a), Terminix held that the parties’ choice of AAA’s
Commercial Arbitration Rules was clear and unmistakable evidence that they
intended an arbitrator to decide whether the arbitration agreements were
enforceable. Id.
The reasoning of Terminix applies here as well. The parties’ agreement
plainly chose AAA rules. Those rules include AAA’s Supplementary Rules for
Class Arbitrations, which, true to their name, supplement the other AAA rules. 2
2
AAA maintains a number of industry specific rules like the “Commercial Arbitration
Rules and Mediation Procedures,” “Consumer Arbitration Rules,” “Labor Arbitration Rules,”
“International Dispute Resolution Procedures,” among others. See Am. Arbitration Ass’n, AAA
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Supplementary Rule 3 provides that an arbitrator shall decide whether an
arbitration clause permits class arbitration. 3 According to Terminix, this is clear
and unmistakable evidence that the parties chose to have an arbitrator decide
whether their agreement provided for class arbitration. 4 See id.
Spirit argues that we should demand a higher showing for questions of class
arbitrability than for other questions of arbitrability. It says this higher burden is
needed because class arbitration dramatically changes what ordinarily goes on in
arbitration. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 686–
Court and Time-Tested Rules & Procedures, https://www.adr.org/active-rules. The effect of
Supplementary Rule 1(a) is to “supplement any other applicable AAA rules.”
3
In full, Supplementary Rule 3 provides:
Upon appointment, the arbitrator shall determine as a threshold matter, in
a reasoned, partial final award on the construction of the arbitration clause,
whether the applicable arbitration clause permits the arbitration to proceed on
behalf of or against a class (the “Clause Construction Award”). The arbitrator
shall stay all proceedings following the issuance of the Clause Construction
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 Clause Construction 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 Clause Construction 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 Clause Construction 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.
In construing the applicable arbitration clause, the arbitrator shall not
consider the existence of these Supplementary Rules, or any other AAA rules, to
be a factor either in favor of or against permitting the arbitration to proceed on a
class basis.
4
The Fifth Circuit has adopted a similar approach. See Robinson v. J & K Admin.
Mgmt. Servs., Inc., 817 F.3d 193, 196 (5th Cir. 2016); Reed v. Fla. Metro. Univ., Inc., 681 F.3d
630, 634–35 (5th Cir. 2012), abrogated on other grounds by Oxford Health Plans, 569 U.S. at
568, 133 S. Ct. at 2068.
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87, 130 S. Ct. 1758, 1776 (2010) (explaining differences between class and
bilateral arbitration). Spirit’s argument has some authority. Four circuits have
held that adoption of the AAA rules is not clear and unmistakable evidence of the
parties’ intent to have an arbitrator decide whether the agreement allows class
arbitration. See Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966, 972–73
(8th Cir. 2017); Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d
746, 762–63 (3d Cir. 2016); Dell Webb Cmtys., Inc. v. Carlson, 817 F.3d 867,
876–77 (4th Cir. 2015); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett,
734 F.3d 594, 599–600 (6th Cir. 2013).
While we respect the work of our sister circuits, we have read Supreme
Court precedent differently. The out-of-circuit cases relied upon by Spirit import
the reasoning of Stolt-Nielsen, 559 U.S. at 684, 130 S. Ct. at 1774–75. See Reed
Elsevier, 734 F.3d at 599 (citing Stolt-Nielsen, 559 U.S. at 684–85, 130 S. Ct. at1774–75); Chesapeake Appalachia, 809 F.3d at 760 (“We nevertheless have
looked to these ‘clause construction’ cases [like Stolt-Nielsen] for guidance in
answering the ‘who decides’ question.”). In contrast, we read Stolt-Nielsen to
address the question of whether an agreement allows class arbitration at all,
separate from the issue of who decides the question to begin with. See 559 U.S. at
684, 130 S. Ct. at 1775. We agree with Spirit that these circuits have created a
higher burden for showing “clear and unmistakable” evidence for questions of
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class arbitrability than for ordinary questions of arbitrability. See, e.g., Catamaran,
864 F.3d at 973 (“The risks incurred by defendants in class arbitration . . . and the
difficulties presented by class arbitration . . . all demand a more particular
delegation of the issue than we may otherwise deem sufficient in bilateral
disputes.”). However, we find no basis for that higher burden in Supreme Court
precedent. 5
At oral argument, Spirit made a new argument based on the last paragraph of
Supplementary Rule 3. This paragraph says “[i]n construing the applicable
arbitration clause, the arbitrator shall not consider the existence of these
Supplementary Rules, or any other AAA rules, to be a factor either in favor of or
against permitting the arbitration to proceed on a class basis.” According to Spirit,
this paragraph means a court should not consider the existence of the
Supplementary Rules when deciding whether the parties empowered the arbitrator
to decide the question of class arbitrability.
5
The reasoning of Stolt-Nielsen lends credence to the idea that the availability of class
arbitration is not presumptively for courts to decide. First Options’s holding that courts
presumably decide questions of arbitrability was based on an empirical claim that parties are not
likely to have focused on the “who decides” question when they reached their agreement. First
Options, 514 U.S. at 944–45, 115 S. Ct. at 1924–25. But it seems to us that if the change from
bilateral to class arbitration is as important as Stolt-Nielsen states, 559 U.S. at 686–87, 130 S. Ct.
at 1776, then we would expect Spirit to have thought about who it wanted to decide that issue
when it drafted the arbitration agreement. In this way, at least for the question of who decides
the availability of class arbitration, Stolt-Nielsen may be at odds with the empirical premise at
the heart of First Options’s holding. We need consider this no further, however, because we
view Spirit’s choice of AAA rules as “clear and unmistakable” evidence that it wanted the
arbitrator to decide whether this agreement permits class arbitration. See Terminix, 432 F.3d at
1332.
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Again, we understand Spirit’s argument to substitute the question of whether
a particular agreement permits class arbitration for the different question of
whether the agreement delegates the decision on that question to the arbitrator. We
read the last paragraph of Supplementary Rule 3 to mean simply that the existence
of the Supplementary Rules has no effect on whether the agreement permits class
arbitration.
Spirit also argues the agreement’s choice of Florida law makes the
agreement ambiguous about whether the Florida Arbitration Code or the AAA
rules apply. In this regard, we look back at the arbitration clause again, this time
with different emphasis:
This Agreement and the terms of membership shall be governed and
construed in accordance with the laws of the State of Florida without
giving effect to the choice of law provisions thereof. Any dispute
arising between Members and Spirit will be resolved by submission to
arbitration in Broward County, State of Florida in accordance with the
rules of the American Arbitration Association then in effect.
Notwithstanding the foregoing, nothing in this Agreement is intended
or shall be construed to negate or otherwise affect the consumer
protection laws of the state in which Members reside.
Spirit says the choice of “the laws of the State of Florida” incorporates the Florida
Arbitration Code. And Florida’s Arbitration Code reserves questions of
arbitrability for courts. See Fla. Stat. § 682.02(2). According to Spirit, the
ambiguity created by the simultaneous incorporation of the Florida Arbitration
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Code and the AAA rules means the District Court must decide whether the
agreement permits class arbitration.
Yet any perceived ambiguity in Spirit’s agreement can be resolved through
normal interpretive methods. See City of Homestead v. Johnson, 760 So. 2d 80, 84
(Fla. 2000) (“[W]e rely upon the rule of construction requiring courts to read
provisions of a contract harmoniously in order to give effect to all portions
thereof.”). The best interpretation of Spirit’s agreement is that Florida law covers
the parties’ substantive rights and duties while the choice of AAA rules covers
dispute resolution procedures. See Mastrobuono v. Shearson Lehman Hutton, Inc.,
514 U.S. 52, 63–64, 115 S. Ct. 1212, 1219 (1995) (giving an arbitration agreement
a similar construction). Thus the agreement is not ambiguous.
Finally, Spirit argues the District Court should be reversed because it did not
apply the correct legal standard and instead decided an issue of fact on the motion
to dismiss. Somewhat relatedly, Spirit says the District Court erred by not
allowing its vice president to testify about Spirit’s intent in choosing the AAA
rules.
There is no merit to these arguments. The arbitration agreement was
attached to Spirit’s complaint, was central to the case, and its authenticity was not
disputed. It was therefore appropriate for the District Court to consider it in
deciding the class representatives’ motion to dismiss for lack of subject matter
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jurisdiction. See Maxcess, Inc. v. Lucent Techs., Inc., 433 F.3d 1337, 1340 n.3
(11th Cir. 2005) (per curiam); see also Fed. R. Civ. P. 10(c) (“A copy of a written
instrument that is an exhibit to a pleading is a part of the pleading for all
purposes.”). And interpretation of the agreement is a question of law, not fact. See
Inetianbor v. CashCall, Inc., 768 F.3d 1346, 1350 (11th Cir. 2014).
Also, by finding the arbitration agreement clearly and unmistakably
evidenced the parties’ intent to arbitrate the class arbitration question, the District
Court implicitly found the agreement is not ambiguous on that issue. See First
Options, 514 U.S. at 944–45, 115 S. Ct. at 1924. As a result, the District Court
was not permitted to rely on testimony from Spirit’s vice president to explain the
agreement’s meaning, and was correct to reject the offer of that testimony. See,
e.g., Lab. Corp. of Am. v. McKown, 829 So. 2d 311, 313 (Fla. 5th DCA 2002)
(“[W]hen the terms and provisions of a contract are unambiguous and complete,
parol evidence is not admissible to define or explain them.” (quotation omitted)).
There was no error in refusing this testimony.
AFFIRMED.
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