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In the absence of an express provision in the agreement forbidding the consolidation of claims, an arbitrator is allowed to determine whether claims will be consolidated, regardless of whether a party preserves their objection to consolidation, according to a federal court in Indiana.
In Twist v. Arbusto, No. 4:05-cv-0187-JDT-WGH, 2007 WL 1686950 (S.D. Ind. June 8, 2007), Twist sought to compel separate arbitration of investors' securities-related claims, after an arbitrator had previously ordered the claims consolidated.
The Court found that regardless of whether Twist had waived its right to contest arbitration, the consolidation of the claims by the arbitrator could not be appealed or attacked with court action. The Court noted that testimony suggested that the consolidation issue "was deferred to the Arbitrator," and there was no evidence that Twist objected at the time.
Also, Twist filed a motion with the arbitrator to deny the consolidation of claims and "did not object to [the Arbitrator's] authority in its accompanying brief." This led the Court to conclude that "Twist waived its right to contest the arbitrability of th[e] issue."
Once it determined that Twist's actions constituted waiver, the Court held that Twist could not appeal to the Court to overturn the consolidation of claims, and held so regardless of whether that waiver was effective. The Court rejected Twist's argument that consolidation was a "gateway matter," and that district courts were allowed to decide such matters. The Court declared that Seventh Circuit precedent clearly held that consolidation, "in the absence of any express provisions" on the subject, "was a procedural [issue] that should be decided by the arbitrator."
Since the Court held the agreement language "prohibiting the arbitrator from adding to, detracting from, or modifying agreements" did not clearly prohibit consolidation, the Court held that "even if Twist had preserved an objection [to consolidation], it would not be able to overcome the presumption in th[e] circuit in favor of letting the arbitrator decide the issue" when the agreement is silent on that point.
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