On November 13, Spirit Airlines Inc. filed a petition for writ of certiorari asking the United States Supreme Court to resolve a federal circuit split regarding arbitration of Spirit’s dispute with members of its $9 Fare Club.
In May 2017, members of Spirit’s $9 Fare Club filed a class arbitration claim against Spirit, contending the airline never made a $9 fare available to Club members and that Spirit’s promise of risk-free cancellation from the program, which cost Club members $60 a year, was false. Spirit then filed a lawsuit against the consumers in the Southern District of Florida, seeking a declaratory judgment that the agreement’s arbitration clause did not allow class arbitration claims, which the district court denied. The Eleventh Circuit affirmed the denial this past August and later denied Spirit’s petition for a panel rehearing or rehearing en banc.
Spirit seeks resolution of two issues from the Supreme Court. First, Spirit seeks the Court’s ruling on the threshold a party must meet to establish that an arbitration agreement grants the arbitrator, not the court, the ability to determine the availability of class arbitration. As Spirit points out, “the decision to allow class arbitration is momentous.” Who makes the decision is important because an arbitrator is subject to almost no review, while a court is subject to extensive appellate review. While three federal appellate courts – the Third, Sixth, and Eighth circuits – hold that a party must satisfy a higher burden to establish that an agreement delegates questions of class arbitrability than to establish that it delegates questions of bilateral arbitrability, the Second, Tenth, and Eleventh circuits use the same standard for both.
Spirit contends that the Eleventh Circuit was wrong in holding that an arbitration clause in Spirit’s agreement with the $9 Fare Club members indicated that any dispute must be resolved by arbitration. Spirit points out that class arbitration is slower, costlier, and presents more procedural hurdles, arguing that “the price of a wrong decision to allow class arbitration is steep.”
Additionally, Spirit wants the Court to consider a second issue – whether an arbitration agreement’s reference to the standard arbitration rules of the American Arbitration Association is enough to delegate questions of class arbitrability to the arbitrator. Four circuits (the Third, Fourth, Sixth, and Eighth) hold that an arbitration contract delegates class arbitrability questions to the arbitrator only if the contract says so on its face, and mere reference to the AAA’s rules is not enough. In contrast, the Second, Fifth, Tenth, and Eleventh circuits hold that such a reference is enough.
Spirit argues that the Eleventh Circuit erred in ruling that the choice of having the AAA rules in the agreement was “clear and unmistakable evidence” that the parties intended to have an arbitrator decide whether disputes should be arbitrated.
The consumers’ response to Spirit’s petition for a writ of certiorari is due December 13.