You may have pondered over the question whether a Judge or an Arbitrator decides if a particular dispute is subject to an agreement to arbitrate.
If you have wondered who makes that sort of decision, it’s actually not an open question. The U.S. Supreme Court held twenty years ago that:
[u]nless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.
AT&T Techs. v. Commun. Workers of America, 476 U.S. 643, 649 (1986)(emphasis added).
The Business Court addressed what can be "clear and unmistakable" at the end of last week in Gaylor, Inc. v. Vizor, LLC, 2015 NCBC 98. Plaintiff, a subcontractor on a construction project, was suing the general contractor on the project, Vizor.
The issue before Judge Bledsoe was whether the arbitration should include the resolution of Plaintiff’s unfair and deceptive practices claim. In other words, the question was the "arbitrability" of that claim –whether it should be decided in the Business Court or by the arbitrator.
The subcontract said nothing specifically about the scope of the arbitrator’s authority. It provided that all claims rising out of, or relating to this Agreement or the breach thereof. . . shall be subject to arbitration." But it also said that "[s]uch arbitration shall be conducted in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect." Op. ¶19.
Rule 9(a) of the Construction Industry Arbitration Rules seems to decide the question. It says that "[t]he 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."
This case was decided under the Federal Arbitration Act. The Fourth Circuit, however, has never ruled on whether the incorporation of the AAA’s Construction Industry Rules meets the "clear and unmistakable" standard laid down by the Supreme Court.
Judge Bledsoe neverthelesss boldly went ahead and ruled that the incorporation of the AAA Rules met the "clear and unmistakable" standard. Actually, it’s not so bold of a ruling, because seven federal Circuit Courts had already reached the same conclusion. See United States ex rel. Beauchamp v. Academi Training Ctr., 2013 U.S.. Dist. LEXIS 46433, at *15-16 (E.D. Va. 2013).
You might be thinking that you don’t care much about this decision because you don’t handle construction arbitrations. But you would be wrong. The AAA’s Commercial Arbitration Rules contain a very similar provision. It’s Rule 7, which says 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 or to the arbitrability of any claim or counterclaim.
So if you have a question of the arbitrability of a claim. and the arbitration agreement incorporates the AAA Rules, arbitrability is likely to be resolved by the arbitrator.