Trial Practice and Procedure

• Jurisdiction: United States,Federal
• Publication year: 2016
• Citation: Vol. 67 No. 4

Trial Practice and Procedure

John O'Shea Sullivan

Ashby K. Fox

Tala Amirfazli

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Trial Practice and Procedure

by John O'Shea Sullivan^* Ashby K. Fox^** and Tala Amirfazli^***

The 2015 survey period yielded noteworthy decisions relating to federal trial practice and procedure in the United States Court of Appeals for the Eleventh Circuit,¹ several of which involved issues of first impression. This Article analyzes recent developments in the Eleventh Circuit, including significant rulings in the areas of arbitration, appellate practice, civil procedure, and statutory interpretation.

I. Arbitration

A. Whether the Waiver of Right to Compel Named Plaintiffs' Claims to Arbitration in a Putative Class Action Should be Extended to Unnamed Putative Class Members' Claims

In Larsen v. Citibank FSB (In re Checking Account Overdraft Litigation),² the Eleventh Circuit held that a district court lacked

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jurisdiction to decide that a bank's waiver of its right to compel arbitration of the named plaintiffs' claims in a putative class action should be extended to preclude the bank from compelling arbitration of the unnamed putative class members' claims.³ Larsen arose out of five putative class actions filed against Wells Fargo, N.A. and its predecessor, Wachovia Bank, N.A., alleging the banks unlawfully charged them overdraft fees in their checking accounts.⁴ The customer agreements governing the subject checking accounts contained provisions for submitting any dispute arising out of a customer's checking account to binding arbitration.⁵

In a related action arising out of the same facts, Garcia v. Wachovia Corp.,⁶ the Eleventh Circuit held that Wells Fargo⁷ waived its right to compel arbitration of the named plaintiffs' claims in the subject class actions (the Class Actions).⁸ As explained in more detail in Garcia, when the plaintiffs in the Class Actions filed their actions in the United States District Court for the Southern District of Florida, despite being prompted on two separate occasions to file its motion to compel arbitration of the named plaintiffs' claims,⁹ Wells Fargo failed to move

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to compel arbitration.¹⁰ However, after a favorable ruling from the United States Supreme Court,¹¹ Wells Fargo promptly moved to compel arbitration of the named plaintiffs' claims in the Class Actions, despite having actively litigated the Class Actions during the previous year.¹² The district court in Garcia denied the motion and held that Wells Fargo had waived its right to compel arbitration of the named plaintiffs' claims by failing to file a timely motion to compel arbitration, and the Eleventh Circuit affirmed.¹³

On remand, while the named plaintiffs were moving for class certification, Wells Fargo filed conditional motions to dismiss the claims of the unnamed or absent class members in favor of arbitration in the event the district court certified a class.¹⁴ Wells Fargo was essentially notifying the court that it intended to move to compel arbitration for all

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of the claims of the unnamed class members.¹⁵ The district court denied Wells Fargo's conditional motions to dismiss, finding the court lacked jurisdiction to determine whether the putative class members' claims were subject to arbitration and Wells Fargo lacked standing to obtain an order declaring the unnamed members' claims were subject to arbitration.¹⁶ Wells Fargo appealed.¹⁷

The Eleventh Circuit held that "because a class including the unnamed putative class members had not been certified, Article Ill's jurisdictional limitations precluded the District Court from entertaining Wells Fargo's conditional motions to dismiss those members' claims as subject to arbitration."¹⁸ In determining the district court's jurisdictional limits, the Eleventh Circuit explained, "Because a class had not been certified at the time Wells Fargo moved conditionally to compel arbitration of the claims of all unnamed class members, those unnamed

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individuals necessarily remained putative participants in the case."¹⁹ The court further explained that, "[a]bsent class certification, there is no justiciable controversy between Wells Fargo and the unnamed putative class members" because "any claims that they might have against Wells Fargo necessarily exist only by hypothesis."²⁰ Accordingly, the Eleventh Circuit concluded that "the District Court's pronouncement purporting to definitively foreclose the arbitration of the hypothetical claims that might be raised in the future by hypothetical plaintiffs cannot be regarded as anything but an impermissible 'advisory opinion on an abstract proposition of law.'"²¹

The court further held the result was the same for the plaintiffs.²² Because the named plaintiffs sought to defend the district court's denial of the conditional motions to dismiss, the Eleventh Circuit held that "the named plaintiffs lack Article III standing to seek our affirmance of the District Court's provisional holding that if a class is certified, Wells Fargo will be estopped to assert its contractual rights to arbitration."²³ The Eleventh Circuit explained that "the named plaintiffs have no cognizable stake in the outcome" of whether Wells Fargo can compel arbitration of the unnamed class members' claims because the named plaintiffs already received a favorable ruling in Garcia regarding

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whether Wells Fargo waived its rights to compel arbitration against them.²⁴ The Eleventh Circuit thus vacated the district court's order denying Wells Fargo's conditional motions to dismiss, thereby reaffirming the well-established rules regarding a federal court's subject matter jurisdiction and a party's standing to raise arguments on behalf of third parties.²⁵

B. Whether a Plaintiff Properly Challenges an Arbitration Agreement's Validity When He or She Does Not Specifically Challenge the Delegation Provision of the Arbitration Agreement

In Parnell v. CashCall, Inc.,²⁶ the Eleventh Circuit held that when a plaintiff seeks to challenge an arbitration agreement containing a delegation provision, the plaintiff must challenge the delegation provision directly.²⁷ The dispute over arbitration in Parnell arose after the defendant (CashCall) removed the case to the United States District Court for the Northern District of Georgia and moved to compel arbitration in accordance with the parties' agreement. The plaintiff (Parnell) had executed a loan agreement containing an arbitration

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provision.²⁸ The district court denied CashCall's motion to compel arbitration, holding that "Parnell articulated a challenge to the arbitration provision in the parties' contract" and "the arbitration provision was unconscionable."²⁹ CashCall appealed, arguing that, because the arbitration provision contains a delegation provision and because Parnell did not articulate a challenge to the delegation provision specifically, the district court should have granted its motion to compel arbitration and allowed the arbitrator to determine whether the loan agreement's arbitration provision is unenforceable.³⁰

The Eleventh Circuit agreed and reversed, noting that the Federal Arbitration Act (FAA)³¹ requires courts to "treat the delegation provision as valid, enforce the terms of the Loan Agreement, and leave to the arbitrator the determination of whether the Loan Agreement's arbitration provision is enforceable."³² The court explained that because "parties may agree to commit . . . threshold determinations to an arbitrator, such as whether an arbitration agreement is enforceable," the FAA prevents federal courts from reviewing a plaintiff's challenge to the arbitration agreement as a whole when the arbitration agreement contains a delegation provision and the plaintiff fails to challenge the delegation provision specifically.³³ The Eleventh Circuit relied heavily on the United States Supreme Court's holding in Rent-A-Center v. Jackson³⁴ to hold that "absent a challenge to the delegation provision itself, the federal courts must treat the delegation provision 'as valid under § 2, and must enforce it under §§ 3 and 4 [of the FAA], leaving any challenge to the validity of the Agreement as a whole for the arbitrator.'"³⁵

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Further, the Eleventh Circuit, relying on Georgia law of contract interpretation³⁶ and "remaining cognizant of the requirement that a contractual commitment to arbitrate arbitrability must be 'clear and unmistakable,'" held that the loan agreement contains an express delegation provision that "conveys the parties' intent to submit to an arbitrator the threshold issue of arbitrability."³⁷ The arbitration agreement expressly stated that a "[d]ispute includes 'any issues concerning the validity, enforceability, or scope of this loan or the Arbitration agreement.'"³⁸ The court explained that even though the delegation provision was "contained within a sub-provision," the language of the delegation provision "unambiguously commits to the arbitrator the power to determine the enforceability of the agreement to arbitrate."³⁹

Next, relying on the Supreme Court's analysis in Rent-A-Center, the Eleventh Circuit explained that because the loan agreement contained

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a delegation provision, the court would retain jurisdiction only "to review a challenge to that particular provision" and "[a]bsent a direct challenge, [the court] must treat the delegation provision as valid and allow the arbitrator to determine the issue of arbitrability."⁴⁰ The court reasoned that, as with the plaintiff's allegations in Rent-A-Center, all of Parnell's allegations "address the validity of the underlying agreement" and "[a]t no point in his complaint does Parnell specifically challenge the parties' agreement to commit to arbitration the question of the enforceability of the arbitration agreement."⁴¹ Ultimately, the Eleventh Circuit confirmed the well-established principle that if a plaintiff wishes to challenge an arbitration agreement containing a delegation...