By Alison Frankel

Dec 18 (Reuters) - What is the best way for more than 100 casinos that signed similar arbitration contracts to litigate their antitrust claims against a company that sells automated card-shuffling machines?

Is it for each of the casinos to arbitrate individually against the company, Light & Wonder LNW.O, in more than 100 separate proceedings before an array of arbitrators who might well reach contradictory conclusions about legal and evidentiary issues?

Or is it for all of the more than 100 casinos to move forward as a class in a single arbitration before one arbitrator who will decide the fate of their theory that Light & Wonder engaged in sham patent litigation to monopolize the market for its machines?

The obvious answer, according to American Arbitration Association arbitrator John Wilkinson, is for the casinos to proceed as a class. In a Dec. 9 ruling made public on Tuesday, Wilkinson certified the casinos as an arbitration class, rejecting Light & Wonder’s arguments that their individual arbitration contracts are too dissimilar to allow the class to be certified.

“Class arbitration is by far the fairest and most efficient method for resolving the antitrust claims of proposed class members,” Wilkinson wrote. The alternative of arbitrating 100 individual cases, he said, “would violate the AAA’s basic rule of offering a cost-effective proceeding and would in no way be justified by ‘individual issues’ recited by [Light & Wonder], which could be easily addressed in a class action context.”

The casinos are now members of what appears to be the first-ever certified antitrust arbitration class — a milestone that is all the more remarkable because it comes after the U.S. Supreme Court more or less obliterated classwide arbitration in its 2019 ruling in Lamps Plus, Inc. v. Varela.

In that decision, you may recall, the justices held that ambiguous arbitration contracts cannot be construed to allow classwide claims. But in the Light & Wonder case, Wilkinson concluded in 2022 that Lamps Plus did not preclude the Akwesasne Mohawk Casino Resort from arbitrating classwide claims because the casino’s arbitration agreement was not ambiguous.

The contract did not specifically address classwide arbitration but contained what Wilkinson described as “exceedingly broad language” directing all disputes to arbitration. The AAA arbitrator, as I’ve previously reported, said the contract language was so broad that it encompassed classwide claims.

Light & Wonder, previously known as Scientific Games, tried to overturn Wilkinson’s 2022 ruling in New York State Supreme Court, where it argued that the arbitrator had “manifestly disregarded” Lamps Plus precedent. New York state trial and appellate courts nonetheless sided with the Mohawk casino and confirmed Wilkinson’s ruling.

After Wilkinson’s 2022 decision, the company brought in Cravath, Swaine & Moore to argue that the arbitration class could not be certified under Lamps Plus precedent. Briefs at AAA are not public. But according to Wilkinson's ruling, Light & Wonder's primary contention was that the language in prospective class members’ arbitration contracts varied, and Mohawk’s lawyers at Cohen Milstein Sellers & Toll failed to show that every absent class member was entitled to classwide arbitration under the specific language of their arbitration contract.

Wilkinson roundly rejected that assertion. It was “based on nothing,” the arbitrator said in the newly-public opinion. “No case law supports this argument, and L&W has not identified even one AAA class arbitration that applies Lamps Plus to the arbitration agreements of absent class members.”

A Light & Wonder spokesperson said the company will appeal Wilkinson’s holding. (That will presumably be another challenge in New York State Supreme Court.) He declined additional comment.

Mohawk counsel Michael Eisenkraft of Cohen Milstein said the decision means casinos will get a fair chance to arbitrate their extremely complex case, despite Light & Wonder's efforts to gum up that process.

“A lot of other countries look at our class system with envy because there’s no other way to bring these cases,” Eisenkraft said. “U.S. defendants keep trying to block class proceedings. What this ruling shows is that when someone doesn’t build a dam, the water flows.”

Light & Wonder is also battling class certification in federal district court in Chicago, where more than 1,000 casinos that did not sign arbitration agreements are litigating antitrust claims that parallel the allegations in the Mohawk arbitration.

In that case, which was actually filed before the Mohawk casino initiated arbitration, plaintiffs lawyers at Hausfeld and the Clifford Law Offices moved for class certification last February.

Defense lawyers at Cravath filed an opposition brief asserting much broader arguments than the company offered in the Mohawk arbitration. Members of the prospective class, the brief said, purchased all sorts of different card shuffling machines at different times. Figuring out if any of them was harmed, the company said, would require an individualized inquiry into each class member’s purchases, which defeats the whole purpose of class certification.

U.S. District Judge John Kness, who denied Light & Wonder’s motion to toss the case on timeliness grounds in 2022, has not yet ruled on class certification or on motions for partial summary judgment from both sides. Plaintiffs' lawyers from Hausfeld did not respond to my query on whether the certification of the arbitration class will impact their pending class certification motion.

At the moment, the class arbitration seems to be moving at a faster pace than the litigation before Kness — just like defendants have predicted in case after case urging courts to bless mandatory arbitration agreements.

Don’t get me wrong: The Mohawk case is an outlier. Most companies have figured out by now, with help from the Supreme Court, how to write contracts that prohibit classwide arbitration. No matter how fairly and efficiently AAA's Wilkinson handles the Mohawk case, I doubt we’ll see defendants suddenly reverse course and embrace class arbitration.

But it’s also possible that the rise of mass arbitration will prompt companies to reconsider their longtime opposition to classwide arbitration. Keep an eye on the Mohawk case. Regardless of the outcome, the classwide arbitration will be a data point worth considering for defendants puzzling out the best way to minimize potential liability.

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Classwide arbitration is not dead yet, as casino antitrust decision shows