Court Affirms Denial of Defendants’ Motion to Vacate
Arbitrator’s Award Regarding Class Arbitration
Alabama Psychiatric Services, P.C., and Managed Health Care Administration v. Lazenby et al.
Former employees of Alabama Psychiatric Services, P.C. (“APS”), filed a class action against APS and Managed Health Care Administration, Inc. (“MHCA”), in the Jefferson Circuit Court alleging that APS had not paid them for unused vacation time after they lost their jobs when APS ceased operations. APS and MHCA filed a motion to compel arbitration in circuit court pursuant to an employment arbitration policy (“the policy”) that these employees had executed with APS. Because the policy did not expressly mention class arbitration, APS and MHCA asked for the circuit court to determine whether class arbitration was available. However, the circuit court concluded that this question was for the arbitrator to decide and granted the plaintiffs’ motion to compel arbitration.
This case proceeded to arbitration which was governed by the rules of the American Arbitration Association (“AAA”). Under Rule 3 of the AAA’s Supplementary Rules for Class Arbitration, a party may ask the arbitrator for a “clause construction award” determining whether class arbitration is even available as a threshold matter. The arbitrator determined class arbitration was available and issued the plaintiffs their requested clause-construction award (“the award”). APS and MHCA filed a motion to vacate the award which was denied by the circuit court. APS and MHCA appealed.
On appeal, APS and MHCA argued two points before the Alabama Supreme Court. First, they argued that the circuit court erred by failing to apply a de novo standard of review. APS and MHCA contended that the question of whether class arbitration was available was a “question of arbitrability,” which is decided by the court and not the arbitrator. However, the Court focused its analysis on whether or not the parties had contractually agreed to submit the question to the arbitrator. The Court noted that the parties disputed this issue and that the circuit court resolved this issue when it concluded that whether class arbitration was available in this case was for the arbitrator to decide. Because APS and MHCA failed to appeal the circuit court’s order and argued that the parties never agreed to submit this question to the arbitrator, the Court held that further judicial review of this issue was precluded.
Second, APS and MHCA argued that the arbitrator exceeded his powers by concluding that class arbitration was available and contended that the award should be vacated under §10(a)(4) of the Federal Arbitration Act (the “FAA”). The Court noted that because the policy lacked an express reference to class arbitration, it was necessary that the arbitrator interpret the policy to reach a decision. According to the Court, this was all that was required of the arbitrator and whether the arbitrator correctly interpreted the policy was beyond the scope of its review pursuant to §10(a)(4) of the FAA. Thus, the Alabama Supreme Court affirmed.