Facts
- Consumers (the Bazzles, Lackey, and the Buggses) entered mobile-home loan contracts with Green Tree governed by South Carolina law.
- Each contract contained an arbitration clause governed by the Federal Arbitration Act (FAA), providing that disputes “shall be resolved by binding arbitration by one arbitrator” selected by Green Tree with the borrower’s consent and granting the arbitrator “all powers provided by the contract and by law.”
- Borrowers sued in South Carolina state court, alleging Green Tree violated a state-law disclosure requirement regarding the right to choose attorneys and insurance agents.
- In two separate actions, state trial courts certified classes, compelled arbitration, and later confirmed arbitral awards granting classwide damages and attorney’s fees.
- The South Carolina Supreme Court consolidated the cases and held that because the contracts were silent about class arbitration, they authorized class arbitration.
- Green Tree sought U.S. Supreme Court review, arguing that the contracts and the FAA did not permit class arbitration.
Issues
- Whether the question whether the parties’ arbitration agreements permit class arbitration is to be decided by a court or by an arbitrator.
- Whether contract “silence” about class procedures authorizes classwide arbitration under the FAA and the parties’ agreements.
Decision
- The Court vacated the South Carolina Supreme Court’s judgment and remanded.
- A four-Justice plurality concluded the arbitrator, not a court, should decide whether the contracts allow or forbid class arbitration because it is a matter of contract interpretation concerning the form of the arbitral proceeding.
- The plurality declined to decide whether these particular contracts, properly interpreted, permit or prohibit class arbitration.
- Justice Stevens concurred in the judgment, supplying the vote for the vacatur and remand, but did not fully join the plurality’s reasoning.
- Dissents argued the availability of class arbitration is a “gateway” question for courts given its substantial effect on the nature of arbitration.
Legal Principles
- When parties agree to arbitrate, disputes about “what kind of arbitration proceeding the parties agreed to” may be treated as procedural and interpretive questions for the arbitrator, absent clear contractual allocation to courts.
- A court errs by deciding the class-arbitration authorization question itself when the issue turns on interpreting the arbitration agreement’s scope and procedural form.
- The FAA’s emphasis on enforcing arbitration agreements as written does not, by itself, resolve whether contractual silence authorizes class arbitration; that interpretive question may be committed to the arbitrator.
Conclusion
The Court vacated and remanded because the dispositive question was who decides whether the contracts permit class arbitration; the plurality treated that question as one for the arbitrator to resolve in the first instance rather than for the state court to decide.