Feeds:
Posts
Comments

Posts Tagged ‘arbitration waiver’

Those of us who have been following the Supreme Court’s decisions on class actions and arbitration over the past few years may have been a bit surprised when the Court recently upheld an arbitrator’s decision to compel class arbitration in Oxford Health Plans LLC v. SutterOxford Health bucked a trend of decidedly defendant-friendly decisions on issues relating to the interplay between class actions and arbitration.  Today, the Court moved back into more familiar territory in deciding American Express Co. v. Italian Colors Restaurant (“Amex III“).  

The holding in Amex III, as summarized in the syllabus, is that “[t]he FAA does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.”  Thus, just is it had held that state law of unconscionability could not be used to invalidate a class arbitration waiver in AT&T Mobility LLC v. Concepcion, the Court’s holding today limits the use of federal law to invalidate arbitration provisions that preclude class actions. 

Will Amex III finally be the case to end class actions as we know themConcepcion hasn’t, so I doubt Amex III will either.

Read Full Post »

As promised in my post late last week, the Baker Hostetler client alert on last week’s Second Circuit decision in In Re American Express Merchants’ Litigation, No. 06-1871 (2d Cir., Feb. 1, 2012) (Amex III) was released today.  Here is a link to the alert, authored by New York partner Deborah Renner and Columbus associate Jennifer Vessells, and titled Second Circuit Again Holds Class Action Waiver Unenforceable.

Read Full Post »

David Waller, my partner at Baker Hostetler and hospitality lawyer extraordinaire, posted an entry in the firm’s Hospitality Lawg yesterday entitled AT&T Mobility v. Concepcion – Reconsidering Arbitration in the Hospitality Context.  The article offers practical tips from a transactional lawyer’s perspective on how to take advantage of arbitration agreements in light of the  Supreme Court’s decision. 

Although the article is directed at the hospitality industry, the analysis applies equally to many other industries.   One interesting question that Waller poses is: to what extent it is necessary to include the consumer-friendly aspects of the arbitration provision at issue in Concepcion to ensure enforceability of a class arbitration waiver, such as procedures for streamlining the arbitration process, and attorney’s fees and double damages if the claimant receives more than the company’s final settlement offer?

Read Full Post »

In response yesterday’s entry discussing Daniel Fisher’s article on the potential impacts of Concepcion, I got one of the best comments that I’ve ever received on this site.  It comes from Portland complex injury and consumer class action attorney David Sugerman, who blogs at www.davidsugerman.com.  Of course, I disagree with just about every word of it, but with imagery like a bunch of corporate fat cats “fixing to celebrate the opening of the all-you-can-eat trough of greed,” I could not help but re-post it here:

I’m amused. As I said to defense counsel at a large multi-national firm, I guessed that midway through the second glass of champagne, the defense bar realized it had a real problem. He is apparently looking for a new job or to transition into other areas of practice.

Your one concrete example–retail sales–is, as you know, a less viable class because of problems of ascertainment, notice, locating the class, providing notice and obtaining and distributing relief. And not all retail sales cases survive. You likely recall the Gateway case some years ago with the forced mandatory arbitration clause in the paperwork in the box that was deemed accepted upon registration?

I love the concerted talking points in the defense bar that these cases are not done. Those of us who represent consumers know better.

We also know the torrent about to be unleashed when consumers can no longer take concerted action to stop nickel and diming on high-volume, small amount claims. AT&T, Comcast, banks, utilities, credit card companies are fixing to celebrate the opening of the all-you-can-eat trough of greed.

The argument that Congressional or Executive action *might* change things proves too much. Absent such action, consumer class cases are pretty much done. The argument also illustrates the crass overreaching in SCOTUS’ opinion, with views on federalism and statutory construction that are as breathtaking as the Citizens United case.

This is really not a problem for me because I handle a wide range of consumer and plaintiff problems. But my colleagues in high-priced defense firms who defend consumer class actions for a living are likely to have problems.

So no, if I were a high end defense attorney, I wouldn’t take much comfort in Forbes view or the talking points. It’s going to get bleak out there.

Lest you doubt my dire predictions, let’s set a wager for 12 months from the decision on how many consumer class actions have been filed, how many layoffs in the defense industry, or some other agreed-upon metric that we can revisit next year.

Ok, David, friendly banter on.

First, I must say that I don’t know a single defense lawyer who owns a private jet, but I know several plaintiffs’ lawyers who do, so all this talk about “high-priced” defense firms rings a little hollow to me.

Second, defense lawyers will have jobs for as long as there are plaintiffs’ lawyers around to file lawsuits, and somehow I don’t see the plaintiffs’ bar throwing in the towel this easily.  What you may see is simply a shift in the kinds of class actions that get filed in the future, or the industries that are targeted.  I say “targeted” because in my experience trends in consumer class actions are more often driven by the creativity of the entrepreneurial trial bar than by any epidemic of corporate greed.  Don’t get me wrong, I’m not saying there aren’t well-publicized scandals involving an epidemic of corporate greed (See Enron), but they tend to generate securities or ERISA class actions, not consumer class actions.

Finally, I’ll wager you, although not for money.  Only for pride.  (I’m not made of money after all, I’m just a defense lawyer).  I’ll bet that not only don’t we see a decrease, but we’ll actually see an increase in consumer class actions over the next year.  Sort of like the rash of class actions filed just before CAFA took effect.  I’m not sure at this moment how we’ll measure this, but I’d imagine that there’s a consulting firm out there (no doubt worried about the effect Concepcion is going to have on its own bottom line) planning just the kind of research we need.

So, if you’re a consulting firm looking for a project, we’ve got a job for you (pro bono, of course)…

Read Full Post »

In the first of four highly anticipated rulings on class action issues this term, the United States Supreme Court has handed down a major victory for business interests.  In a 5-4 decision in AT&T Mobility LLC v. Concepcion, No. 09-893, the conservative majority held that the Federal Arbitration Act pre-empts state contract law principles in determining the enforceability of a class arbitration waiver–an arbitration agreement that expressly precludes arbitration on behalf of a class.  Here is a link to the slip opinion.  Prior opinions issued by many state courts have found class arbitration waivers unconscionable and have allowed class actions despite the existence of an express agreement in consumer contracts barring them. 

Importantly, Justice Scalia’s majority opinion goes beyond even the question originally presented for review, which was whether the FAA pre-empts state law “when when [class action] procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims.”  Instead, the majority’s decision appears to hold that the FAA preempts state law (and possibly even removes “unconscionability” as a basis for invalidating an arbitration clause even when not based on state public policy) even when the lack of a class action mechanism as a practical matter leaves plaintiffs with no remedy at all.

Justice Thomas’s concurring opinion gives a ray of hope to consumer interests seeking to pursue class action litigation in cases where a class arbitration waiver exists.  Justice Thomas agreed that the FAA preempts state decisions on whether an arbitration clause is unconscionable, but he notes that this decision does not necessarily preclude an argument that no agreement existed in the first instance, such as where the agreement is found to have been entered into as a result of coercion or fraud.  However, although he concedes that unconscionability rising to the level of a complete lack of mutual assent would be a basis to decline to enforce an arbitration agreement, he appears to conclude that unconscionability based purely on public policy would never be a basis to invalidate an arbitration agreement under Section 2 of the FAA, since it would not impact the formation of the arbitration agreement.  See Slip Op. at 4, n.* (Thomas, J., concurring).   So, if there is a ray of hope for plaintiffs, it appears to be a small one.

One big issue left unresolved after the Court’s decision is whether federal courts still have the power to declare class arbitration waivers invalid as a matter of substantive federal law.  For example, in In re American Express Merchants’ Litigation, No. 06-1871-cv, the Second Circuit Court of Appeals recently reaffirmed its decision invalidating a class arbitration waiver after an earlier decision was vacated by the Court to reconsider in light Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010).  In doing so, the court evaluated the validity of a class arbitration waiver “under the federal substantive law of arbitrability,” not under state law contract principles.  See also Gay v. CreditInform, 511 F.3d 369 (3d Cir. 2007); Kristian v. Comcast Corp., 446 F.3d 25, 63 (1st Cir. 2006).  This analysis would not clearly be affected by the holding of the Supreme Court’s decision today, although the tone of the majority’s opinion would seem to call the invalidation of any class arbitration waiver provision into question.

Read Full Post »

Class arbitration waivers are contract provisions that require disputes be submitted to arbitration but also expressly preclude the arbitration from being conducted on a representative or class basis.  Class arbitration waivers have been a hot topic in class action litigation over the past few years, as some courts have found that in certain contexts that the are unenforceable in violation of public policy.

Yesterday, the Second Circuit Court of Appeals issued its decision on remand from the U.S. Supreme Court in In re American Express Merchants’ Litigation, No. 06-1871-cv.  This is the second decision by the Second Circuit in the case finding that the class arbitration waiver provision at issue was unenforceable.  The first decision, In re American Express Merchants’ Litigation, 554 F.3d 300 (2009), was issued by a panel that included future Supreme Court Justice Sonia Sotomayor.  (See this February 2009 CAB entry discussing the decision).  Last May, the Supreme Court granted certiorari, vacated the decision, and remanded for reconsideration in light of its recent decision in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010).

A 2-judge panel, sans now-Justice Sotomayor, issued the decision on reconsideration yesterday.  The court found that Stolt-Nielsen did not change its conclusion.  The rationale is best summarized in the following excerpt:

Stolt-Nielsen states that parties cannot be forced to engage in a class arbitration absent a contractual agreement to do so. It does not follow, as Amex urges, that a contractual clause barring class arbitration is per se enforceable. Indeed, our prior holding focused not on whether the plaintiffs’ contract provides for class arbitration, but on whether the class action waiver is enforceable when it would effectively strip plaintiffs of their ability to prosecute alleged antitrust violations.

Slip op. at 11.

The Court went on to hold that the arbitration provision at issue was not enforceable because, it found, the facts in the record established that having to pursue the antitrust claims at issue in the case would be prohibitively expensive without using the class action device.  Therefore, the court reasoned, the contract provision was void for public policy reasons, as a matter of law.  In rejecting the argument that Stolt-Nielsen prohibits the invalidation of arbitration provisions for public policy reasons, the court stated:

While Stolt-Nielsen plainly rejects using public policy as a means for divining the parties’ intent, nothing in Stolt-Nielsen bars a court from using public policy to find contractual language void. We agree with plaintiffs that “[t]o infer from Stolt-Nielsen’s narrow ruling on contractual construction that the Supreme Court meant to imply that an arbitration is valid and enforceable where, as a demonstrated factual matter, it prevents the effective vindication of federal rights would be to presume that the Stolt-Nielsen court meant to overrule or drastically limit its prior precedent.” (Plaintiffs’ Supp. Brief, p. 7) Following the Stolt-Nielsen decision, our court reached a similar conclusion in considering a different iteration of the issue: whether class action waivers are unconscionable as a matter of state law.

Id. at 21.

The long-term impact of the Second Circuit’s decision is unclear, especially since the Supreme Court’s decision in AT&T Mobility v. Concepcion is expected soon.  (See this November 17, 2010 CAB Entry recapping the oral arguments in AT&T Mobility).  However, AT&T Mobility involves issues of federal preemption and the power of the state courts to find class arbitration waivers unenforceable.  Therefore, even a decision favorable to the defendant in AT&T Mobility may not prevent future federal courts from applying the Second Circuit’s reasoning in invalidating class arbitration waivers.

Read Full Post »