Eleventh and Seventh Circuits Hold Class and Collective Arbitration Are Questions of Arbitrability

In two recent precedential decisions, JPay, Inc. v. Kobel and Herrington v. Waterstone Mortgage Corp., the Eleventh and Seventh Circuits, respectively, held that whether an arbitration may proceed on a class-wide basis (or as a collective action when a claimant is seeking relief under the Fair Labor Standard Act) is a “question of arbitrability” to be decided by the courts, unless the parties specifically delegate that responsibility to an arbitrator. The Supreme Court previously noted the lack of a majority decision on the subject in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. and declined to address this question in Oxford Health Plans LLC v. Sutter, leaving the decision to the circuits. In JPay, the dispute arose when two plaintiffs, users of JPay’s fee-for-service amenities to send money to inmates, filed suit alleging the service dissuaded users from sending funds through free paper money orders, and that the fees charged by JPay were “exorbitant” and used to “fund kickbacks to corrections departments.” JPay’s Terms of Service included a provision that the American Arbitration Association (AAA) would arbitrate and govern any disputes, claims, or controversies that arose between the parties and “[t]he ability to arbitrate the dispute, claim or controversy shall likewise be determined in...