In Chesapeake Appalachia, L.L.C. v. Scout Petroleum, L.L.C., the Third Circuit picked up where it left off after Opalinski v. Robert Half International Inc. Click here for our prior blog on Opalinski. In Opalinski, the Circuit held, for the first time, that “the availability of class arbitration constitutes a ‘question of arbitrability’ to be decided by the courts—and not the arbitrators—unless the parties’ arbitration agreement ‘clearly and unmistakably’ provides otherwise.”
In another published decision, the court in Chesapeake Appalachia addressed the question left open in Opalinski: what must be established to “satisfy the onerous burden of overcoming the presumption in favoring of judicial resolution of the question of class arbitrability.” Chesapeake Appalachia rejected the argument that an arbitration agreement “clearly and unmistakably” provided for the arbitrator to decide this question by incorporating the Rules of the American Arbitration Association (“AAA”). The Court held that simply incorporating the AAA Rules, or the Supplementary Rules, was “not enough” to establish that the agreement “clearly and unmistakably delegate[d] the question of class arbitrability to the arbitrators.”
Chesapeake Appalachia involved oil and gas leases which provided that, “in the event of a disagreement between ‘Lessor’ and ‘Lessee’ concerning “this lease,” performance “‘thereunder,’ or damages caused by ‘Lessee’s’ operations, ‘all such disputes’ shall be resolved by arbitration ‘in accordance with the rules of the American Arbitration Association.'” The lessors sought class arbitration claiming that the AAA’s Supplementary Rules, among others, clearly provided for class arbitration, and that the arbitrator should decide whether the arbitration clause permits class arbitration. The lessee filed a declaratory judgment action seeking a declaration that the district court, and not the arbitrator, must decide and that the leases did not provide for class arbitration. Summary judgment was granted in favor of the lessee and that decision was appealed to the Third Circuit.