Sixth Circuit Reinforces Arbitrator Authority Over Threshold Issues of Arbitrability
The question of who decides whether a dispute is subject to arbitration—the court or the arbitrator—is one of the most heavily contested procedural issues in modern alternative dispute resolution. While the U.S. Supreme Court has repeatedly affirmed that this question is typically for courts to decide, unless the parties “clearly and unmistakably” agree otherwise, that standard continues to generate debate and interpretation across the federal circuits.
A recent decision from the United States Court of Appeals for the Sixth Circuit, in New Heights Fram I, LLC v. Great American Insurance Company, Case No. 24-1087, addressed this very issue. The court held that the parties’ incorporation of the American Arbitration Association (AAA) rules into their arbitration agreement constituted “clear and unmistakable” evidence that threshold arbitrability questions were delegated to the arbitrator.
The decision provides important guidance for drafters of arbitration agreements and for litigators challenging or defending motions to compel arbitration. Most critically, it reinforces that incorporation of institutional rules like those of the AAA can effectively shift power from courts to arbitrators—even on gateway questions of jurisdiction and arbitrability.
Background: Who Decides Arbitrability?
“Arbitrability” refers to whether a dispute falls within the scope of an arbitration agreement—essentially, whether a matter must be arbitrated or can proceed in court. Courts generally resolve this question unless the arbitration clause clearly and unmistakably delegates that decision to the arbitrator.
This framework was cemented by the Supreme Court’s rulings in cases such as First Options of Chicago, Inc. v. Kaplan, Rent-A-Center v. Jackson, and, more recently, Henry Schein, Inc. v. Archer & White Sales, Inc. In each of these decisions, the Court emphasized that courts decide arbitrability by default but must defer when the agreement shows a clear intent to delegate the issue to the arbitrator.
The Case: New Heights Fram I, LLC v. Great American Insurance Co.
In New Heights, a dispute arose under an insurance agreement that contained an arbitration clause. When a party challenged whether the dispute was subject to arbitration, the question arose: Who should decide arbitrability—the court or the arbitrator?
The Sixth Circuit reviewed the agreement and concluded that the parties had clearly and unmistakably agreed to delegate the arbitrability question to the arbitrator. The court’s reasoning turned on one key element: the arbitration clause referenced the rules of the American Arbitration Association (AAA).
Those rules include provisions that explicitly grant arbitrators the power to decide their own jurisdiction. Specifically, the court cited:
AAA Commercial Rule R-7(a): “The arbitrator shall have the power to rule on his or her own jurisdiction.”
AAA Commercial Rule R-7(b): “The arbitrator shall have the power to determine the existence, scope, or validity of the arbitration agreement.”
AAA Commercial Rule R-7(c): “Any objections to the existence or validity of the arbitration agreement must be raised no later than the filing of the answering statement.”
Based on this language, and consistent with decisions from other circuits, the Sixth Circuit concluded that the incorporation of the AAA rules constituted clear and unmistakable evidence of delegation.
Why the Ruling Matters
This ruling underscores a critical point that often goes overlooked in arbitration litigation: contractual incorporation of institutional rules can have significant procedural consequences. When parties incorporate the AAA’s rules—or similar rules from JAMS, CPR, or ICC—they may inadvertently (or intentionally) cede more control to the arbitrator than they realize.
From a strategic standpoint, this has implications in multiple areas:
Early Challenges to Arbitrability May Be Foreclosed
A party hoping to avoid arbitration entirely may find that their threshold objection must first be addressed by the arbitrator, delaying a court’s involvement or removing it altogether.Scope of Arbitration May Be Broader Than Anticipated
If arbitrators are empowered to define the bounds of their own jurisdiction, more claims may fall within the arbitration clause than the drafting party originally intended.Courts Are Deferential to Delegation Clauses
Federal courts have increasingly held that reference to provider rules is sufficient to constitute a clear delegation—so long as the party resisting arbitration had an opportunity to review those rules.
Circuit Consistency and Judicial Trends
The Sixth Circuit’s decision aligns with a broad consensus across the federal circuits. The First, Second, Fourth, Fifth, Eighth, Ninth, Tenth, Eleventh, and D.C. Circuits have all held that incorporation of the AAA’s rules (or similarly worded provider rules) satisfies the “clear and unmistakable” test for delegating arbitrability to the arbitrator.
While some exceptions exist—particularly in contracts involving unsophisticated parties or ambiguous clauses—the general rule holds strong: incorporation of rules equals delegation, at least when both parties are commercially sophisticated or represented by counsel.
Practical Guidance for Drafting Arbitration Agreements
To avoid surprises, drafters of arbitration clauses should take care to:
Explicitly state who decides arbitrability. If courts are intended to make that determination, say so. If arbitrators are intended to have that power, confirm it clearly.
Understand the implications of rule incorporation. Merely stating that arbitration will be governed by AAA, JAMS, or CPR rules may shift authority to the arbitrator—whether intended or not.
Tailor the clause to the type of dispute. For business-to-business agreements, delegation may be appropriate. For consumer contracts or employment agreements, additional clarity and care may be necessary to ensure enforceability.
Ensure that all parties understand what the agreement entails. Courts continue to scrutinize procedural fairness in arbitration clauses, especially where there is a perceived imbalance of power.
Service Provider Rules Can Shape the Legal Landscape
One of the more nuanced takeaways from the New Heights case is the powerful influence that ADR service provider rules can have on procedural outcomes. These institutional rules are not merely administrative guidelines—they can govern core jurisdictional issues and control how disputes unfold.
In many instances, provider rules may override judicial presumptions, particularly where the agreement delegates key decisions to arbitrators. For this reason, practitioners should become familiar with the contents of AAA, JAMS, and other institutional rule sets, and counsel clients accordingly.
Unlocking Informed and Strategic Dispute Resolution
The New Heights decision highlights how a few lines in an arbitration clause—or a simple reference to a provider’s rules—can significantly affect dispute strategy, timeline, and control. Whether a business is seeking to resolve a commercial conflict, an insurance disagreement, or a complex statutory matter, understanding who decides arbitrability is foundational to designing a fair and effective dispute resolution pathway.
At Nationwide ADR, arbitration services are grounded in clarity, balance, and procedural precision. Whether serving as a neutral in commercial disputes, insurance claims, or employment matters, Nationwide ADR brings experience interpreting and applying provider rules, determining jurisdiction, and helping parties avoid procedural traps.
Backed by deep knowledge of the Federal Arbitration Act and relevant case law, the practice is committed to Unlocking Solutions for Demanding Cases.
To learn more about arbitration services, jurisdictional issues, or customizing ADR strategies for your case or contract, visit NationwideADR.com.