JPay, Inc. v. Kobel

• Decision Date: 19 September 2018
• Docket Number: No. 17-13611,17-13611
• Citation: 904 F.3d 923
• Parties: JPAY, INC., Plaintiff - Appellee, v. Cynthia KOBEL, Shalanda Houston, Defendants - Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

904 F.3d 923

JPAY, INC., Plaintiff - Appellee,

v.Cynthia KOBEL, Shalanda Houston, Defendants - Appellants.

No. 17-13611

United States Court of Appeals, Eleventh Circuit.

September 19, 2018

MARCUS, Circuit Judge:

At issue today is a question at the intersection of arbitration and class action jurisprudence, a question that has been expressly left open by the Supreme Court and which comes to this Circuit as a matter of first impression. The parties agree that their disputes will be settled in arbitration, but disagree as to whether that arbitration can proceed on a class basis. Further, they disagree about who -- a court or an arbitrator -- should decide whether the arbitration can proceed on a class basis. We must decide as a matter of first impression whether the availability of a class is a "question of arbitrability" that presumptively goes to a court. If we hold that it is -- and we do so today -- we must then decide whether the terms of the parties' agreement evince a clear and unmistakable intent to overcome that presumption.

Cynthia Kobel and Shalanda Houston sought to compel arbitration on a class basis with JPay, Inc., a Miami-based company that provides fee-for-service amenities in prisons in more than thirty states. JPay asked a district court to put a stop to the class proceeding and to force Kobel and Houston to arbitrate only their own claims. The district court granted summary judgment in JPay's favor, holding that the availability of class arbitration was a "question of arbitrability," which meant that it was presumptively for the court to decide; that nothing in the terms of this agreement rebutted that presumption; and finally that class arbitration was not available under the terms of the agreement. Thus, a court, not an arbitrator, would resolve, and the district court did resolve, whether the arbitration could proceed on a class basis.

After careful review, we are satisfied that the district court correctly determined that the availability of class arbitration is a "question of arbitrability," presumptively for the court to decide, because it is the kind of gateway question that determines the type of dispute that will be arbitrated. Courts cannot assume that parties would want these kinds of questions to be arbitrated unless an agreement evinces a clear and unmistakable intent to send them to arbitration. However, we also conclude that the language these parties used in their contract expressed their clear intent to overcome the default presumption and to arbitrate gateway questions of arbitrability, including the availability of class arbitration.

Accordingly, we vacate the grant of summary judgment to JPay, reverse the denial of Kobel and Houston's motion to compel arbitration, and remand for proceedings consistent with this opinion. See Parnell v. CashCall, Inc., 804 F.3d 1142, 1149 (11th Cir. 2015). The parties agreed, and we are required to give meaning to their agreement and to enforce their will. Thus, an arbitrator will decide whether the arbitration can proceed on a class basis.

I.

JPay's services allow friends and family of inmates around the country to purchase various goods and services on inmates' behalf. These include video chats, music downloads, and, most relevant here, money transfers to inmates' accounts. Cynthia Kobel and Shalanda Houston each used JPay services to send electronic money transfers to inmates. Like all JPay users, they agreed to JPay's Terms of Service, including to the following language, which requires that any dispute that might arise between the company and its users be resolved through arbitration:

In the event of any dispute, claim or controversy among the parties arising out of or relating to this Agreement that involves a claim by the User for less than $10,000, exclusive of interest, arbitration fees and costs, shall be resolved by and through arbitration administered by the American Arbitration Association ("AAA") under its Arbitration Rules for the Resolution of Consumer Related Disputes. Any other dispute, claim or controversy among the parties arising out of or relating to this Agreement shall be resolved by and through arbitration administered by the AAA under its Commercial Arbitration Rules. The ability to arbitrate the dispute, claim or controversy shall likewise be determined in the arbitration. The arbitration proceeding shall be conducted in as expedited a manner as is then permitted by the rules of the American Arbitration Association. Both the foregoing Agreement of the parties to arbitrate any and all such disputes, claims and controversies, and the results, determinations, findings, judgments and/or awards rendered through any such arbitration shall be final and binding on the parties and may be specifically enforced by legal proceedings in any court of competent jurisdiction.

(emphasis added).

On October 16, 2015, Kobel and Houston filed a Demand for Arbitration against JPay with the AAA. They alleged contractual violations and violation of a Florida consumer protection statute. They said that JPay charged "exorbitant transfer fees" for money-transfers, and used these fees to fund kickbacks to corrections departments. Further, they alleged that JPay dissuaded users from sending money through paper money orders -- a free alternative to JPay transfers -- by intentionally making the money order process slow and complicated and by deceptively marketing money orders as unreliable. Kobel and Houston sought to represent a class consisting of "[a]ll natural persons who paid a fee to JPay for electronic money-transfer services and who agreed to arbitrate their claims with [JPay]."

JPay responded by filing a complaint in Florida state court (the Eleventh Judicial Circuit in Miami-Dade County) seeking declaratory relief specifying the parties' rights and duties under the arbitration provision, seeking to stay class arbitration, and seeking to compel bilateral arbitration of the underlying claims. Kobel and Houston removed the case to federal court in the Southern District of Florida, invoking diversity jurisdiction under the Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4. 28 U.S.C. § 1332(d).¹ Kobel and Houston then moved to compel arbitration on the question of whether class arbitration was available under JPay's Terms of Service. Their view was that the parties had expressly agreed to arbitrate whether they were entitled to class relief, and therefore that the district court was required to leave that question to the arbitrator. The appellants also sought to stay the federal court proceedings pending the outcome of that arbitration. JPay, in turn, asked the district court for summary judgment, arguing that while it had agreed to arbitrate with its users on a bilateral basis, it had never consented to arbitrate on a class basis. Further, JPay said that a federal court -- not an arbitrator -- should determine whether class arbitration was available.

The district court denied the motion to compel arbitration, finding that the availability of class arbitration was a substantive "question of arbitrability," presumptively for the court to decide, and that the Terms of Service did not clearly and unmistakably evince an intent to overcome this presumption and to send the question to arbitration. Kobel and Houston appealed that determination to this Court, but we dismissed the interlocutory appeal for lack of jurisdiction. JPay, Inc. v. Kobel, No. 16-12917-EE (11th Cir. Jan. 23, 2017). The district court then granted JPay's motion for summary judgment. It determined that class arbitration was not available under the parties' agreement because the agreement was silent on the availability of class arbitration and the availability of class arbitration could not be implied from the agreement.

Kobel and Houston timely appealed to this Court.

II.

"We review de novo both the district court's denial of a motion to compel arbitration and the district court's interpretation of an arbitration clause." Jones v. Waffle House, Inc., 866 F.3d 1257, 1263 (11th Cir. 2017) (citations omitted).

Arbitration is a matter of contract and of consent. "[A]rbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration." AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648–49, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). The Federal Arbitration Act ("FAA"), Pub. L. No. 68-401, 43 Stat. 883 (1925) (codified as amended at 9 U.S.C. § 1 et seq. ), treats contractual agreements to arbitrate "on an equal footing with other contracts," Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010), and "imposes certain rules of fundamental importance, including the basic precept that arbitration is a matter of consent, not coercion." Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 681, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010) (quotation omitted). The FAA "reflect[s] both a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (quotations and citation omitted). Where the parties have agreed to arbitrate their dispute, the job of the courts -- indeed, the obligation -- is to enforce that agreement. See, e.g., Stolt-Nielsen, 559 U.S. at 682, 130 S.Ct. 1758 ("[T]he central or ‘primary’ purpose of the FAA is to ensure that private agreements to arbitrate are enforced according to their terms." (quotation omitted) ). At the same time, courts may not require arbitration beyond the scope of the contractual agreement, because "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960).

When, despite our best interpretive efforts, a contract is ambiguous...