Ninth Circuit Holds That FAA Does Not Permit Non-Mutual Offensive Collateral Estoppel to Invalidate Arbitration Agreements

The Ninth Circuit Court of Appeals has held that arbitrators’ decisions that an arbitration clause is unenforceable may not be used to preclude arbitration in cases involving other plaintiffs in the same putative class action subject to the same arbitration clause that has a delegation clause.

Aya Healthcare Services paired travelling nurses with hospitals. Aya’s employment contracts contained an arbitration clause with a delegation clause. Four nurses sued claiming violations of the Fair Labor Standards Act and related laws. Aya moved to compel arbitration of those claims and the district court granted Aya’s motion. The plaintiffs then challenged the validity of the arbitration clauses in arbitration. Two arbitrators upheld the arbitration clauses while the other two found them unenforceable. The parties moved to confirm their respective arbitral wins. By then, 255 more plaintiffs had opted into the collective action. Aya moved to compel arbitration of the 255 additional claims. The district court denied Aya’s motion, applying collateral estoppel principles to conclude that Aya could not invoke the arbitration clauses in the 255 additional claims in light of the arbitral rulings that the clauses were unenforceable.

The Ninth Circuit reversed. It explained that the Federal Arbitration Act (FAA) does not “contemplate that a non-mutual preclusion doctrine could be deployed to frustrate an arbitration that the parties had agreed to undertake in resolving their disputes” and that the “application of non-mutual offensive issue preclusion would also violate the principle of consent that the FAA incorporates.” In sum, the Ninth Circuit concluded “that the FAA does not permit the application of non-mutual offensive collateral estoppel that would result in the effective invalidation of arbitration agreements.”

O’Dell v. Aya Healthcare Services, Inc., No. 25-1528 (9th Cir. Apr. 1, 2026).