Editor's Note :

Editor's Note :

On Monday at 9:30 a.m. we expect the Court to issue orders from the October 31 Conference; we do not expect the Justices to issue any decisions on the merits.
Our list of "Petitions to watch for that Conference is here.

Tom Goldstein Publisher

Posted Thu, October 27th, 2011 9:30 am

The Supreme Court and arbitration

Today in the Community we are discussing the Court’s arbitration jurisprudence.  The Court’s decisions in this area have almost uniformly ruled that an array of claims is subject to arbitration.  Most recently, the Court also held in AT&T Mobility v. Concepcion that a state could not invalidate an arbitration agreement that did not permit classwide arbitration.  Please contribute your thoughts on the Court’s arbitration jurisprudence.


  • Tom Goldstein – 0 Promoted Comments

    In this thread, discuss whether the Supreme Court has read the Federal Arbitration Act too broadly in holding that claims are subject to arbitration or, conversely, whether some lower and state courts have failed to heed the FAA’s mandate.

    • Thomas Carbonneau – 1 Promoted Comment

      Granite Rock Co. v. Int’l Bro. Teamsters is an important case in terms of the doctrine on arbitration. To my knowledge, it is the first case in which the Court acknowledges the unitary character of its decisional law on arbitration. It posits the joinder of the legal principles applying to CBA and FAA arbitration, minimizing—even eliminating—the distinction between the two forms of arbitration. The majority opinion also resolves the issues under consideration by reference to generally applicable principles of arbitration as if a uniform architecture of substantive rules regulates all arbitration matters. The Court substantiates the foregoing development in two footnotes:

      footnote 6: “We, like the Court of Appeals, discuss precedents applying the FAA because they employ the same rules of arbitrability that govern labor cases.… Indeed, the rule that arbitration is strictly a matter of consent—and thus that courts must typically decide any questions concerning the formation or scope of an arbitration agreement before ordering parties to comply with it—is the cornerstone of the framework the Court announced in the Steelworkers Trilogy for deciding arbitrability disputes in LMRA cases.…”

      footnote 8: “that our labor arbitration precedents apply this rule [the finding of a valid agreement to arbitration precedes the application of the presumption of arbitrability] is hardly surprising. As noted above, … the rule is the foundation for the arbitrability framework this Court announced in the Steelworkers Trilogy.… Our use of the same rules in FAA cases is also unsurprising. The rules are suggested by the statute itself.… [Citation to FAA §§2 and 4.]”.

      • roxanne friedman – 4 Promoted Comments

        The fundamental unfairness in the Court’s arbitration jurisprudence is exactly this uniformity. It is just as wrong to treat things that are different the same as it is to treat things which are the same differently.

        Labor arbitration exists within a structure of union representation and collective bargaining surrounded with protection of workers’ rights and a duty to bargain in good faith on both sides of table. Commercial arbitration exists within a structure of negotiated contracts between parties with realistic alternatives to the deal. But when one gets to arbitration as a part of employment contracts, franchise agreements, shrink-wrap licensing, terms of use, and adhesion contracts, one is consigning these lopsided agreements to the see-no-evil-hear-no-evil unexaminable world of arbitration.

        By extending compulsory arbitration to the field of employment discrimination and by eliminating the class action in arbitration (which it is also doing in the federal courts), the Court is leaving consumers and employees at the mercy of the corporations. Since the Burger Court, the primary tactic of the revanchist wing of the Court has been to cut back on remedies much more than it has been to cut back on rights. The Court is considered pro-business not so much because it always (or even where it counts) supports business interests, but because of the cumulative actual effect of its decisions on the ability of consumers and employees to vindicate those rights which they still retain.

    • Hiro Aragaki – 2 Promoted Comments

      A Plea to the Ninth Circuit: Reconcile Cardenas With Broughton and Concepcion

      On December 9, 2011, the Ninth Circuit will hear Cardenas v. AmeriCredit Financial Services, Nos. 10-17292, 10-17435, an important case in the debate on mandatory binding arbitration. Cardenas is poised to resolve a split among lower federal district courts on the issue of whether the U.S. Supreme Court’s recent decision in AT&T Mobility LLC v. Concepcion preempts a vital line of cases in California beginning with Broughton v. CIGNA Healthplans of California, 988 P.2d 67 (Cal. 1999), regarding the nonarbitrability of state public injunction claims.

      In Broughton, a plaintiff and his mother brought a medical malpractice claim against CIGNA in connection with injuries sustained during childbirth. Under the California Legal Remedies Act (CLRA), the plaintiffs had a non-waivable right to compensatory damages and to a public injunction (the latter to prevent alleged continuing deceptive practices by the defendant). The court rightly held that the CLRA was preempted by the Federal Arbitration Act (FAA) to the extent it required a judicial forum for the plaintiffs’ damages claim. But it also held—correctly, in my view—that the statute was *not* preempted as to the public injunction claim.

      The rationale behind Broughton makes perfect sense: Certain structural limitations in the arbitral process make arbitration functionally incapable of supervising and administering public injunctions. For example, although a superior court may exercise continuing jurisdiction over public injunctions, private arbitrators have no such extended jurisdiction and are therefore comparatively ill-suited to monitor on an ongoing basis “the balance between the public interest and private rights as changing circumstances dictate.” In addition, arbitral awards do not have collateral estoppel effect under California law. Thus, if the original plaintiffs were to craft the injunction too narrowly or fail to enforce it, third party beneficiaries seeking to modify the injunction would be required to re-prosecute the underlying claim. The Ninth Circuit has faithfully followed Broughton, and in Cruz v. PacifiCare Health Systems, Inc., 66 P.3d 1157 (Cal. 2003), the California Supreme Court extended Broughton to public injunction claims brought under California’s Unfair Competition Law.

      Recently, AT&T and other defendants have convinced several district courts to hold that Broughton and its progeny are preempted by the FAA. (A notable exception here is Ferguson v. Corinthian Colleges, 2011 WL 4852339 (C.D. Cal. Oct. 6).) Quoting Concepcion, they argue that states “cannot require a procedure that is inconsistent with the FAA [such as the class mechanism in the case of Concepcion or public injunctions in the case of Broughton and Cruz], even if it is desirable for other reasons.” I believe the argument is seriously misguided, and I implore the Ninth Circuit to scrutinize it carefully in Cardenas.

      To begin with, Concepcion does not change the shape of federal arbitration law over the past twelve years in a way that now suddenly calls the Broughton line of cases into doubt. All of the arguments that have recently been renewed against Broughton in the lower federal courts were viable even before Broughton was decided; they were therefore implicitly rejected not just by Broughton but by courts that have considered the matter both within and outside of the Ninth Circuit.

      If anything, Concepcion only strengthens Broughton because it gives credence to the view that the FAA allows arbitration and litigation to be treated differently where they are differently situated—that is, where there are certain “structural” (Concepcion) differences between them. In Concepcion, the Court held that a state unconscionability standard prohibiting class waivers equally in arbitration and litigation could be preempted only as to arbitration if the class remedy were fundamentally incompatible with the arbitral process. Although I disagree with the Court’s eventual conclusion that arbitration and litigation are, in fact, differently situated with respect to that remedy, the more general proposition that things differently situated need not be treated the same seems to me entirely correct (Roxanne Friedman makes a similar point in her response to Professor Carbonneau).

      Broughton follows the same general proposition endorsed in Concepcion. The Broughton court effectively concluded that arbitration and litigation are differently situated in their capacity to issue, enforce, and monitor public injunctions. In this circumstance, the state may validly withhold the public injunction remedy only from arbitration without offending the FAA’s nondiscrimination principle. (I have argued this point in more detail in Part V of Equal Opportunity for Arbitration, 58 UCLA L. Rev. 1189 (2011).)

      True, at first blush Broughton appears inconsistent with the principle that states cannot require a judicial forum for the resolution of cases—or, as the appellant in Cardenas put it, the principle that “the FAA does not permit states to declare that certain types of claims or remedies cannot be arbitrated on grounds of the state’s public policy.” But this principle is predicated on the assumption that arbitration and litigation are *similarly situated* with respect to those claims or remedies—that they are equally capable of vindicating rights under state consumer protection statutes and the like. This follows from the FAA’s general position that “by agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute” but merely engages in a tradeoff between comparable procedural forums.

      But in a post-Concepcion world, the presumption that arbitration and litigation always stand on an “equal footing” is now subject to exceptions. Many of the same concerns that motivated the Concepcion Court to carve out an exception for the class mechanism—for example, concerns about the rights of absent third parties and the complexity of class proceedings—apply equally well to public injunctions. Indeed, the Broughton court’s argument for a public injunction exception may be even stronger insofar as it did not rest on dubious stereotypes about the competence and expertise of arbitrators, or about arbitration’s proper place in dispute resolution. The Court resorted to such outmoded stereotypes in Concepcion even though it has spent the better part of the last thirty years criticizing those very generalizations in order to justify the expansion of federal arbitration law and policy.

      A common counterargument here is that Broughton and its progeny are fundamentally flawed because they confuse the Court’s federal nonarbitrability test with the test for FAA preemption of state law. When the goals of the FAA appear opposed to those of a coequal federal statute, the contradiction is resolved by asking whether there is an “inherent conflict” between the arbitral process and the right guaranteed by the other federal statute. The Broughton court appears erroneously to have transposed this test to the preemption context by relying on an “inherent conflict” between arbitration and the underlying purposes of the CLRA. This has led many to criticize Broughton as perpetuating “the exact same hostility to arbitration that the U.S. Supreme Court has found objectionable in its FAA preemption cases to date.”

      But Broughton made no such mistake. Writing for the majority, Justice Stanley Mosk clearly understood that the nonarbitrability cases on which he drew were dispositive only of conflicts between the FAA and other federal statutes. The point of Justice Mosk’s “inherent conflict” analysis was not to divine a contrary state interest that somehow trumped the FAA; rather, it was to demonstrate that certain structural features of the arbitral process were in unavoidable tension with the CLRA’s goal of guaranteeing a public injunction remedy. This, in turn, showed that the California legislature had legitimate, non-hostile reasons for withdrawing that remedy from arbitration. To put it in the language of Concepcion, the CLRA’s public injunction provision was fundamentally “incompatible” with arbitration, such that withdrawing that remedy only from arbitration did not conflict with the FAA’s overall purposes and objectives.

      When it considers Cardenas this December, the Ninth Circuit should follow its own prior precedent and uphold the reasoning in Broughton. As even arbitration’s staunchest promoters will agree, arbitration and litigation are not and should not be exactly the same. Even though they may be similarly situated for purposes of resolving the vast majority of civil claims, there are sometimes good reasons—reasons that have nothing to do with anti-arbitration hostility—to treat them differently. Wrongly decided as it was, Concepcion merely underscores this basic truth.

  • Tom Goldstein – 0 Promoted Comments

    In this thread, discuss your views of the Court’s decision in Concepcion.

    • Hiro Aragaki – 2 Promoted Comments

      Raining on Scalia’s Parade

      The lynchpin of Justice Scalia’s opinion in AT&T Mobility LLC v. Concepcion was that it is impossible to distinguish the Discover Bank standard from any number of hypothetical state laws that are plainly inimical to the FAA. Scalia offered three principal examples: A rule finding unconscionable any consumer arbitration agreement that (1) “fails to provide for judicially monitored discovery”; (2) “fails to abide by the Federal Rules of Evidence (FRE)”; or (3) “disallow[s] an ultimate disposition by a jury (perhaps termed ‘a panel of twelve lay arbitrators’ to help avoid preemption).” Like the Discover Bank standard, all of these imagined laws treat arbitration and litigation exactly the same. Nonetheless, they seem to have a disproportionately negative effect on arbitration and thus cannot possibly be consistent with the FAA.
      One of the central difficulties presented by Concepcion is how to distinguish the Discover Bank standard from this “parade of horribles.” The Concepcions’ attorney, Deepak Gupta, was asked this question several times during oral argument. But other than to restate the conclusion that the hypothetical laws all “destroy” arbitration while the Discover Bank standard does not, he failed to provide a satisfactory explanation. I’d now like to suggest a possible answer.
      Distinguishing Discover Bank from Scalia’s “parade” requires coming to grips with what I have described as the antidiscrimination model of FAA preemption, a model on which both parties explicitly relied throughout their briefing and during oral argument. The paradigmatic example of discrimination is a law that treat things differently—for example, a law that grants only White persons the right to sit the bar exam. Similarly, in the arbitration context the Court has not hesitated to preempt state laws that “single out arbitration agreements for suspect status,” such as a Montana law that required only arbitration clauses to be printed in underlined capital letters.
      But discrimination can also be accomplished by facially neutral laws that tend to affect one group more than either, either by design or in application. An example of the former is a zoning decision that relies on neutral zoning criteria but that has the effect of denying a request to build low-income, racially integrated housing. An example of the latter is the practice of denying laundry permits to Chinese-owned businesses while granting them to almost all non-Chinese businesses. Both are examples of pretextual discrimination: purposeful discrimination hiding behind ostensibly evenhanded zoning or business permit rules.
      Likewise, Justice Scalia’s hypothetical laws are all examples of pretextual discrimination. Even though they purport to apply the same procedures to arbitration and litigation, the procedures themselves (judge-supervised discovery, juries, and the FRE) are litigation-specific. Holding arbitration to those procedures raises a strong presumption of anti-arbitration hostility because it betrays a kind of litigation “chauvinism”—the idea that only litigation-like discovery, factfinding, and evidentiary rules are adequate. Scalia’s hypothetical laws are difficult to explain other than through lingering yet outmoded presumptions about arbitration’s inferiority as a dispute resolution forum.
      The same is not, however, the case for Discover Bank. Discover Bank does not dictate the particular form that the class mechanism must take in arbitration. It does not necessarily require the wholesale importation of judicial class action procedures such as Rule 23 of the Federal Rules of Civil Procedure (FRCP) and therefore does not betray the same anti-arbitration hostility evident in Scalia’s parade. The most that can be said about the Discover Bank standard is that it mandates the availability of some type of class mechanism suitable to the arbitration context. A more relevant parade of horribles, therefore, would consist of hypothetical laws that declared unconscionable agreements that prohibit any type of discovery (not just judicially-monitored discovery) or evidentiary rules (not just the FRE) in arbitration—even those tailored, like the AAA’s class arbitration rules, specifically to the arbitral context. But it is difficult to appreciate how such laws discriminate against arbitration at all, especially if—like Discover Bank—they impose the same restriction on waivers of the corresponding discovery and evidence rules in courtroom proceedings.
      Another way to state the point is to say that the Court improperly focused on Discover Bank’s effect on arbitration rather than on its purpose. This is a common mistake committed by lower courts when presented with the question of whether the FAA preempts a state law that neither singles out arbitration nor is completely general. Discover Bank may have a greater adverse impact on arbitration than on litigation, but that does not mean it was intended to discriminate against arbitration. Most laws also produce uneven effects on the practices they regulate. True, there is significant disagreement about whether disproportionate effects alone constitute sufficient evidence of discrimination. But as I have elsewhere argued, the FAA’s antidiscrimination regime is (and should be) directed at purposeful discrimination only—at reversing the old common law hostility toward arbitration.
      The basic error of Scalia’s “parade,” and the Concepcions’ inability to expose that error, reflect a larger problem with FAA preemption law that I have attempted to underscore in my own work. The problem is that courts have uncritically deployed a rhetoric of antidiscrimination to justify FAA preemption without understanding and scrutinizing the theoretical framework it presupposes. Concepcion challenged that framework because it was the first case before the Court that involved pretextual discrimination against arbitration (in all of the Court’s prior cases, the state law at issue “singled out” arbitration). But existing FAA preemption law provided little in the way of conceptual tools to meet that challenge. Lacking a robust vocabulary or theoretical model even to name the type of discrimination against arbitration that the FAA forbids, the Court and counsel were left to struggle with the complex question of pretext using only the most rudimentary of concepts (such as the thoroughly unhelpful maxim that arbitration agreements must be “placed upon the same footing as all other contracts”). Given the hopelessly under-theorized state of FAA preemption law, the disappointing outcome in Concepcion should hardly come as a surprise.

  • Tom Goldstein – 0 Promoted Comments

    In this thread, address the major unresolved issues related to arbitration that you think could reach the Court in the next few years.

    • Andrew McBride – 1 Promoted Comment

      A important and recurring, yet unresolved, arbitration-related issue that could reach the Court in the next few years concerns what a district court may do upon finding an issue arbitrable.

      Section 3 of the Federal Arbitration Act (FAA) instructs that, upon finding an issue in litigation arbitrable, a district court “shall . stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.” 9 U.S.C. § 3. Despite the mandatory language of Section 3 (“shall . stay the trial of the action”), there is a deep split over whether the districts courts have discretion to order dismissal when all claims in the litigation are arbitrable. This is an important issue because Section 16 of the FAA expressly authorizes interlocutory appeals of decisions adverse to arbitration, whereas interlocutory appeals of decisions in favor of arbitration are prohibited. See 9 U.S.C. § 16. In other words, parties seeking to enforce an arbitration have an immediate right of review when a district court declines to refer an issue to arbitration, but if a district court stays an action pending arbitration, a party seeking to avoid arbitration must wait until the arbitration is over to appeal.

      This split should be resolved in favor of the courts that interpret Section 3 to require district courts to stay litigation if any or all claims are arbitrable. The text, structure, legislative history, and purpose of the FAA all preclude interpreting Section 3 to afford district courts discretion to dismiss when all claims are arbitrable.

      Text. Congress uses the term “shall” when it intends “to impose discretionless obligations.” Lopez v. Davis, 531 U.S. 230, 241 (2001); see also Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998) (“[T]he mandatory ‘shall’ … normally creates an obligation impervious to judicial discretion.”). By using the term “shall” in Section 3, Congress imposed just such a discretionless obligation on federal district courts to “stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement,” 9 U.S.C. § 3. See Lloyd v. HOVENSA, LLC, 369 F.3d 263, 269 (3rd Cir. 2004) (“[T]he plain language of § 3 affords a district court no discretion to dismiss a case where one of the parties applies for a stay pending arbitration. The directive that the Court ‘shall’ enter a stay simply cannot be read to say that the Court shall enter a stay in all cases except those in which all claims are arbitrable and the Court finds dismissal to be the preferable approach.”)

      Structure. Some have suggested that a district court should be afforded discretion to dismiss when all claims are arbitrable, on the theory that there is nothing left for a district court to do after referring the matter to arbitration. But the structure of the FAA indicates otherwise. Arbitrating parties may return to the district court to “designate and appoint an arbitrator” where there is a dispute regarding the appointment of an arbitrator or the filling of an arbitrator vacancy, 9 U.S.C. § 5; to “compel the attendance” of witnesses who refuse or neglect to obey a summons or to “punish [them] for contempt,” 9 U.S.C. § 7. In addition, after the entry of an arbitral award, the parties may seek relief in the District Court in the form of a judgment confirming the arbitral award or an order vacating or modifying the award. See 9 U.S.C. §§ 9, 10, 11.

      Legislative History. In 1998, Congress added what is now 9 U.S.C. § 16 to the FAA (it was originally codified as 9 U.S.C. § 15) “in order to improve the appellate process in the Federal courts of appeals with respect to arbitration.” Under that Section, “interlocutory appeals are provided for when a trial court rejects a contention that a dispute is arbitrable under an agreement of the parties and instead requires the parties to litigate. In contrast, interlocutory appeals are specifically prohibited in new section 15 when the trial court finds that the parties have agreed to arbitrate and that the dispute comes within the arbitration agreement.” H.R. Rep. 100-889. Courts have properly read this section to “limit appeals from orders directing arbitration.” Bushley v. Credit Suisse First Boston, 360 F.3d 1149, 1153 (9th Cir. 2004) (quoting Augustea Impb Et Salvataggi v. Mitsuibishi Corp., 126 F.3d 96, 98 (2d Cir. 1997)). Interpreting Section 3 to require a stay rather than dismissal limits appeals from orders direction arbitration, consistent with the legislative history.

      Purpose. The two purposes of the FAA are “enforcement of private agreements and encouragement of efficient and speedy dispute resolution.” AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740, 1749 (2011). “Congress’s clear intent, in the Arbitration Act, [was] to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Co., 460 U.S. 1, 22 (1983). The best way to vindicate this intent is to require district courts to stay the litigation even when all claims are arbitrable. Staying the litigation prohibits a party trying to avoid arbitration from seeking an immediate appeal that would delay arbitration and thus ensures that a party seeking arbitration will move “into arbitration as quickly and easily as possible.”

  • Jill Gross – 1 Promoted Comment

    Despite the frequency with which the Court has been deciding FAA cases in the past few terms, many issues are still ripe for decision, particularly those at the “back end” of arbitration (vacatur stage). These include: (1) whether sections of the FAA other than section two apply in state court and thus preempt conflicting state law, such as section ten grounds for vacatur; (2) whether “manifest disregard of the law” survived Hall Street as a valid ground for vacatur within the overall framework of section ten; and (3) whether a party who demonstrates that the high costs of arbitration prevented that party from vindicating his or her statutory rights could be a ground for vacatur.

    With respect to the first issue, I have argued previously that state courts “over-preempt” the FAA by applying FAA grounds for vacatur when they should be applying their own states’ grounds. This “overpreemption” exists in other contexts: sections four, twelve and sixteen are examples. The Court needs to clarify whether only section two, as the primary substantive section of the FAA, preempts conflicting state law, or whether other procedural sections of the Act also preempt conflicting state procedure.

    As to the last two issues, the Court has severely circumscribed the ability of parties to get relief from the courts for arbitration process failures: if it further limits the “manifest disregard” or “vindicating rights” avenues for relief, arbitration may finally fall into disfavor.

  • Terry Moritz – 1 Promoted Comment

    CompuCredit Corp. v. Greenwood will it be AT&T II
    The Supreme Court, in the landmark decision AT&T Mobility LLC v. Conception, 131 S. Ct. 1740 (2011), struck down barriers to waivers of class action based on state “unconscionability” principles. Given that AT&T Mobility arose in the consumer law context, the decision was particularly controversial because the arbitration agreement was within an adhesive contract that gave the consumer little or no bargaining power. Like AT&T Mobility, CompuCredit involves an arbitration dispute in the consumer law context, which could make the Court’s decision just as significant – and potentially as controversial – as AT&T Mobility. The Court heard oral arguments in CompuCredit on October 11, 2011.
    The dispute in CompuCredit arose due to allegations by CompuCredit cardholders that CompuCredit violated the Credit Repair Organization Act (CROA) by failing to include various disclosures in its cardholder agreements as is required by the CROA. The CROA, enacted in 1996, was designed to ensure that consumers are provided with sufficient information to make an informed decision before purchasing credit repair services, and to protect the public from deceptive advertising and business practices by credit repair organizations. 15 U.S.C. 1679(b).
    Specifically, the CROA requires, among other things, that credit repair organizations, such as CompuCredit, provide consumers with the following written statement: “You have a right to sue a credit repair organization that violates the Credit Repair Organizations Act.” 15 U.S.C. 1679(c). The CROA also includes an anti-waiver provision, which states that “[a]ny waiver by any consumer of any protection provided by or any right of the consumer under [the CROA] shall be treated as void.” 15 U.S.C. 1679f(a).
    The central issue in the litigation became whether or not Congress intended to preclude all claims arising out of the CROA from arbitration. Both the district court and the Ninth Circuit held that the CROA’s anti-waiver and disclosure provisions, when taken together, afford consumers a non-waivable right to sue in court, thus voiding the arbitration clause included in the CompuCredit cardholder agreement. The Third and Eleventh Circuits had previously held that the CROA does not preclude the enforcement of agreements to arbitrate disputes arising under the CROA protection laws. Petitioner Brief at 19, citing, e.g., 7 U.S.C. §26(n)(2), 10 U.S.C. §987(e)(3), 12 U.S.C. §5567(d)(2), 15 U.S.C. §1226(a)(2), 15 U.S.C. §1639c(e)(1), 18 U.S.C. §1514A(e)(2).

    Simply put, respondents argue that the phrase “right to sue” affords consumers with a right to sue in court, and that arbitration agreements between consumers and credit repair organizations are, in turn, a violation of the anti-waiver provision of the CROACompuCredit argues that the “right to sue” language in the disclosure provision merely establishes grounds for liability for CROA violations; it does not, however, create an exclusively judicial remedy. The purpose of the phrase “right to sue” in the disclosure provision was merely intended to inform consumers of their right to initiate a legal process to resolve a CROA dispute, which includes arbitration. Petitioner Brief, page 36-37. At oral argument, Justice Ginsburg voiced concerns that the interpretation of the phrase “right to sue” by “an ordinary person not schooled in the law” would mean “a right to sue in court.” In response, CompuCredit reminded the Court that workers in ADEA cases receive a right-to-sue letter, which the Court has previously found to be simply a reference to the worker’s cause of action in the event of discrimination. Oral Argument Transcript, page 5, lines 15-21.
    How Might the Court Decide?
    Based on the Justices’ focus during the oral arguments, the Court’s decision will likely hinge on whether the Court agrees with CompuCredit’s position that the phrase “right to sue” is synonymous with “cause of action.” In fact, respondent’s attorney conceded that if the statute stated “you have a cause of action,” respondents would lose their argument. Oral Argument Transcript, page 32, lines 1-2. Given the Court’s long-standing preference to enforce agreements to arbitrate federal statutory claims, and the Court’s recent decision in AT&T Mobility to enforce an arbitration agreement in an adhesive consumer contract, it seems more likely than not that the Court will find that the CROA does not bar arbitration agreements.

    • Cliff Palefsky – 1 Promoted Comment

      The oral argument in Greenwood was interesting in several respects. First, they seem to be focusing on whether the “right to sue” means the same as having a “cause of action”. That’s not really the right question because the fundamental right that is being lost is the right to have the law applied correctly. You might have the right to bring a cause of action in arbitration but that is of little import if the arbitrator isn’t bound to follow the law. The focus on the allegedly ‘procedural’ right to trial by jury is distracting the court from the real defining characteristic of arbitration and the real substantive and appelllate rights being “waived”. And of course, the right to sue in a public court with a minimal filing fee cannot be fairly equated with the ability to file an arbitration that requires the party to pay thousands of dollars in arbitrator fees. The right to an essentially free court is being waived. Few consumers and certainly someone needing credit can hardly afford the huge fees associated with arbitration.

      And I thought the very best question of the argument was asked by Justice Sotomayor who made the point that the CROA permits and contemplates class actions and in light of Concepcion class actions cannot be pursued in arbitration. That point, so eloquently made, should end the discussion. The difference between a right to sue in court and the right to bring a cause of action in arbitration, involves the waiver of the ‘right’ to bring a class action as contemplated by the statute in addition to the waiver of the right to have the law enforced correctly.

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