Introduction
In O’Dell v. Aya Healthcare Services, Inc., No. 25-1528, slip op. at 2-3 (9th Cir. Apr. 1, 2026), the Ninth Circuit overturned a district court ruling that invoked non-mutual, offensive collateral estoppel to deem unconscionable hundreds of separate, bilateral arbitration agreements agreements between a corporate health care provider and its individual, nurse employees. O’Dell, a 3-0 opinion, is of interest to entity and individual parties litigating gateway arbitrability disputes arising out of mass, class, or collective proceedings.
Background
The case concerned wage-related claims asserted by travel-nurse employees against a healthcare provider, Aya Healthcare Services, Inc. (“Aya”). As a condition of employment, Aya required its employees to sign arbitration agreements containing similar terms. The agreements also contained delegation provisions that required an arbitrator, rather than a court, to decide arbitration-agreement validity disputes. Id. at 4-6. (You can read about delegation provisions here and here.)
The district court initially sent four named plaintiffs’ disputes to four separate arbitrations each to be decided by a different, individual arbitrator. The results were evenly split: Two arbitrators held the agreements unconscionable based on their fee allocation and venue provisions; the other two ruled that the agreements were enforceable, determining that a savings clause (presumably providing for severability) cured any unconscionability problem. Id. at 6. The district court confirmed three of the four awards, refusing to confirm one of the awards because of Aya’s alleged failure to pay the arbitration fee. Id.
After 255 additional plaintiffs opted into a Fair Labor Standards Act (“FSLA”) collective action, the district court declined to send their disputes to arbitration. Instead, invoking non-mutual, offensive collateral estoppel, the district court gave preclusive effect to the two arbitral rulings invalidating the agreements, refused to give the same effect to the two rulings upholding the agreements, and held that Aya was barred by collateral estoppel from enforcing the remaining agreements. Id. at 6-7.
The Court did not accord preclusive effect to the two awards that upheld the agreement to arbitrate, dismissing them as not “reasoned” or “thorough.” Id. at 7.
The Court of Appeals for the Ninth Circuit reversed and remanded.
Offensive, Non-Mutual Collateral Estoppel: The Question Presented
The Ninth Circuit considered whether “application of non-mutual offensive collateral estoppel to preclude the enforcement of arbitration agreements is compatible with the Federal Arbitration Act [(the “FAA”)].” Id. at 4. The Court said the answer was no. Id. at 4-5, 12-13.
The Ninth Circuit’s Analysis: Non-Mutual, Offensive Collateral Estoppl is Incompatible with the FAA
The court’s reasoning was straightforward, but its implications are significant. It began with the FAA’s text.
FAA Section 2 provides, in pertinent part, that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. . . . 9 U.S.C. § 2. Under Section 2, “generally applicable contract defenses such as fraud, duress, or unconscionability” are “grounds for revocation.” Slip op. at 8 (quotations and citations omitted) But there were no such grounds here.
The Ninth Circuit explained that non-mutual offensive issue preclusion is not a “generally applicable contract defense” of the kind contemplated by Section 2’s savings clause. O’Dell, slip op. at 8-9 (quotations and citation omitted). For irrespective of whether a case concerns contract enforceability, this preclusion doctrine may, to avoid relitigation, accord certain judgments preclusive effect. “In other words,” said the Court, “the doctrine is not about contracts or contract defenses.” It is a judge-made preclusion doctrine which—if used as it was here—would indirectly but effectively invalidate arbitration agreements that the FAA says should be enforced. Id. at 8-10.
It is not a ground for “revocation”—which is “‘[t]he recall of some power, authority, or thing granted, or a destroying or making void of some deed that had existence until the act of revocation made it void.’” Id. at 9 (quotations and citations omitted). “Revocation” under Section 2 “includes fraud, duress, and unconscionability[,]” but “does not pertain to a deficiency with respect to the formation of contracts. . . that might result in “revocation.” Slip op. at 9 (quotations and citations omitted).
Even assuming “revocation broadly encompasses the indirect but effective invalidation of the agreement through preclusion, And to the extent that “revocation broadly encompasses the indirect but effective invalidation of agreements through preclusion,” the doctrine would “contravene critical features of the FAA.” Slip op. at 9 (quotations and citations omitted).
The Court also considered context, considering Sections 3, 4, 10, and 13 of the FAA. Sections 3 and 4 require courts to stay litigation and compel arbitration in accordance with the parties’ agreement once the making of the agreement is not in issue. 9 U.S.C. §§ 3-4. Section 10 provides limited grounds for vacatur focused on defects in the arbitral process, such as corruption, fraud, or evident partiality. Id. § 10. In the Ninth Circuit’s view, nothing in that statutory scheme suggests that Congress contemplated a non-mutual preclusion doctrine that would frustrate arbitrations the parties had separately agreed to undertake. O’Dell, slip op. at 9-10. The court specifically rejected the employees’ reliance on Section 13, reasoning that Section 13 makes confirmed awards enforceable as judgments, but does not authorize using one confirmed award to abrogate distinct arbitration agreements involving other parties. Id. at 12-13.
Application of Offensive, Nonmutual Collateral Estoppel Violates Arbitration’s First Principle
The FAA’s first principle—consent, not coercion—provided the Court with a second— and perhaps in some ways, more important—rationale. (For a discussion of arbitration’s “first principle,” see here.) The FAA, the panel explained, presupposes that arbitration is a matter of consent, not coercion. Id. at 10-11 (citing Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 681 (2010); Lamps Plus, Inc. v. Varela, 587 U.S. 176, 184 (2019)). The employees’ preclusion theory disregarded this first principle. See slip op. at 10-11. As the Court explained, “[p]recluding an arbitration” to which “the parties agreed. . .— because a different arbitrator in a different proceeding had concluded that an agreement between different parties was unconscionable—would render the parties’ consent meaningless.” Slip op. at 11.
Using Offensive, Non-Mutual Collateral Estoppel to Impose a Bellwether Scheme without Party Consent
The court’s third rationale will likely attract the most attention. The district court’s ruling, the panel said, effectively transformed individualized arbitrations into a binding “bellwether” or class-like device without the parties’ consent. Id. at 5, 11-12. That is significant because Supreme Court precedent has repeatedly held that the FAA does not permit courts or arbitrators to impose class procedures that alter the “fundamental attributes” of arbitration unless there is a contractual basis to do so. See Epic Sys. Corp. v. Lewis, 584 U.S. 497, 507-09 (2018) (quotation and citations omitted); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011); Stolt-Nielsen, 559 U.S. at 684-87. O’Dell extends that line of authority in an important way. It treats offensive non-mutual preclusion, when used to wipe out separate bilateral arbitrations, as another unauthorized claim aggregation scheme that is inconsistent with the FAA’s consent-based, bilateral structure. See O’Dell, slip op. at 11-13.
The Court said “the imposition here [of an aggregation mechanism] is more concerning than in” prior cases. See slip op. at 11. Because in ordinary class proceedings named representative plaintiffs must “adequately represent” class members. Slip op. at 11. Not so here. “Indeed,” said the Court, under the district court’s logic, just one arbitration proceeding would be enough to preclude hundreds (or thousands) of other arbitration proceedings.” Slip op. at 12. “That,” remarked the Court, “is a class action stripped of all its important protective features.” Slip op. at 12. Permitting offensive collateral estoppel to preclude agreed individual arbitrations from taking place “would supplant arbitrations with binding bellwether class actions lacking the procedural safeguards of ordinary class actions.” Slip op. at 12. That would violate the FAA. See Slip op. at 12.
The Court accordingly rejected “this new application of preclusion doctrine as it would be “fundamentally at war with the FAA and undermine Congress’s efforts to protect arbitration from judicial opposition.” Slip op. at 12 (citation omitted).
Implications of the Decision
O’Dell is important for at least three reasons. First, it clarifies that FAA Section 2’s saving clause authorizes only generally applicable contract defenses, not equitable doctrines which apply to litigation generally, as opposed to contract actions specifically. That is especially so, where, as here, the doctrine may, as applied, interfere with arbitration’s key attributes or is otherwise incompatible with arbitration.
Second, O’Dell reminds us that, pursuant to delegation agreements, and in the absence of contractual consent to the contrary, gateway arbitrability disputes are disputes between the parties to the particular individual arbitration agreement at issue. They are, in the absence of an agreement to the contrary, to be decided in an arbitration between those parties, not by proxy using a bellwether aggregation device.
Here, the district court had already enforced the delegation clauses as written by sending the first four validity disputes to arbitration. Id. at 5-6. Once those arbitrations produced mixed results, the district court used the two invalidity awards as a shortcut to avoid further arbitrations. The Ninth Circuit rejected that move. In practical terms, where the parties have agreed to arbitrate gateway validity questions one by one, courts may not convert a few early rulings into a substitute for resolving each of the remaining individual arbitrations. See slip op. at 10-12.
Third, O’Dell has implications for collective, coordinated, and mass arbitration litigation. Plaintiffs’ counsel will often look for ways to convert favorable early rulings into leverage across a broader claimant pool. Defendants, too, sometimes seek global effect from threshold rulings. O’Dell does not foreclose contractual bellwether arrangements or other consensual aggregation mechanisms. But it does show that courts may not impose them through non-mutual offensive issue preclusion when the parties agreed to bilateral arbitration. Id. at 11-13.
Conclusion
O’Dell should be read as an important Ninth Circuit reaffirmation of three connected FAA principles: arbitration agreements must be enforced according to their terms; not all defenses are generally applicable contract defenses, and arbitration remains a matter of consent, not coercion. Where parties agreed to bilateral arbitration, courts may not use non-mutual offensive collateral estoppel to create a de facto class, bellwether, or other aggregation mechanism to which the parties never agreed.
Contacting the Author
If you have any questions about this article, arbitration, arbitration-law, or arbitration-related litigation, then please contact Philip J. Loree Jr., at (516) 941-6094 or PJL1@LoreeLawFirm.com.
Philip J. Loree Jr. is principal of the Loree Law Firm, a New York attorney who focuses his practice on arbitration and associated litigation. A former BigLaw partner, he has 35 years of experience representing a wide variety of corporate, other entity, and individual clients in matters arising under the Federal Arbitration Act, as well as in insurance- or reinsurance-related, and other, matters.
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Tags: Aya Healthcare, Bilateral Arbitration, Collective Action, Concepcion, Delegation Clause, Epic Systems, FLSA, Issue Preclusion, Lamps Plus, non-mutual offensive collateral estoppel, O'Dell, Stolt-Nielsen, Unconscionability
