WASHINGTON, D.C. - (Mealey's) Because the Credit Repair
Organizations Act (CROA) does not specifically state whether claims brought
pursuant to the act are eligible for arbitration, the Federal Arbitration Act
(FAA) requires an arbitration agreement in a credit card agreement "to be enforced
according to its terms," a split U.S. Supreme Court ruled Jan. 10 (CompuCredit
Corp., et al. v. Wanda Greenwood, et al., No. 10-948, U.S. Sup.; See
October 2011, Page 7) (lexis.com subscribers may access Supreme Court briefs for this case).
Consumers filed a class action lawsuit in the U.S.
District Court for the Northern District of California, naming credit providers
CompuCredit Corp. and Columbus Bank and Trust as defendants. The
consumers allege that the credit providers, who marketed a subprime credit card
under the brand name Aspire Visa, violated the CROA and California's unfair
competition law by charging a number of hidden fees for use of the card.
The credit providers moved to compel arbitration of the
consumer's CROA claims, which the District Court denied, along with the credit
providers' motion for leave to move for reconsideration.
Squarely Divided
The credit providers appealed to the Ninth Circuit U.S.
Court of Appeals, which affirmed in a 2-1 ruling. The credit providers
then appealed to the Supreme Court and filed a petition for writ of certiorari
on Jan. 24.
The question presented to the Supreme Court was:
"Whether claims arising under the Credit Repair Organizations Act, 15 U.S.C. §
1679 et seq., are subject to arbitration pursuant to a valid arbitration
agreement."
Oral argument was heard Oct. 11, and in reversing and
remanding, the majority held that pursuant to the FAA, courts are required to
"enforce arbitration agreements according to their terms."
Federal Statutory Claims
"That is the case even when federal statutory claims are
at issue, unless the FAA's mandate has been 'over-ridden by a contrary
congressional command,'" the majority said.
The majority also rejected the consumers' contention that
"the CROA's disclosure provision - which requires credit repair organizations
to provide consumers with a statement that includes the sentence '"You have a
right to sue a credit repair organization that violates the [Act],"' - gives
consumers the right to bring an action in a court of law; and that, because the
CROA prohibits the waiver of 'any right of the consumer under this subchapter,'
§1679f(a), the arbitration agreement's waiver of the 'right' to bring a court
action cannot be enforced."
"Respondents' premise is flawed. The disclosure
provision creates only a right for consumers to receive a specific statement
describing the consumer protections that the law elsewhere provides, one of
which is the right to enforce a credit repair organization's 'liab[ility]' for
'fail[ure] to comply with[the Act].' That provision does not override the
FAA's mandate. Its mere contemplation of judicial enforcement does not
demonstrate that the Act provides consumers with a 'right' to initial judicial
enforcement," the majority stated.
Consumer Contracts
Moreover, the majority ruled that had Congress intended
to prohibit arbitration in consumer contracts subject to CROA when enacting the
statute, "it would have done so in a manner less obtuse than what respondents
suggest."
Justice Antonin Scalia wrote the majority's opinion and
was joined by Chief Justice John G. Roberts Jr. and Justices Anthony M.
Kennedy, Clarence Thomas, Stephen G. Breyer and Samuel A. Alito Jr.
Justice Sonia Sotomayor wrote an opinion concurring with
the judgment of the majority with regard to the congressional intent but said
that "for the reasons stated by the dissent, I find this to be a much closer
case than the majority opinion suggests."
Justice Elena Kagan joined in Justice Sotomayor's
opinion.
Dissenting Opinion
Justice Ruth Bader Ginsburg issued a dissenting opinion
asserting that "[i]n accord with the Ninth Circuit, I would hold that Congress,
in an Act meant to curb deceptive practices, did not authorize credit repair
organizations to make a false or misleading disclosure - telling customers of a
right they do not, in fact, possess. If the Act affords consumers a nonwaivable
right to sue in court, as I believe it does, a credit repair organization
cannot retract that right by making arbitration the consumer's sole recourse."
The credit providers are represented by McConnell of
Kirkland & Ellis in Washington and Sri Srinivasan of O'Melveny & Myers
in Washington.
The consumers are represented by Nelson of the Public
Citizen Litigation Group in Washington and W.
Lloyd Copeland of Taylor Martino in Mobile,
Ala.
Amicus curiae DRI
- Voice of the Defense Bar is represented by Linda T. Coberly and Tyler G.
Johannes of Winston & Strawn in Chicago, Gene C. Schaerr, Steffen N.
Johnson and Andrew C. Nichols of Winston & Strawn in Washington and DRI
President R. Matthew Cairns of Chicago. Amicus Consumer Data
Industry Association is represented by Anne P. Fortney of Hudson Cook in Washington. Amici
AARP and the National Senior Citizens Law Center are represented by Julie
Nepveu of AARP Foundation Litigation in Washington.
Amicus American Association for Justice is represented by John Vail of
the Center of Constitutional
Litigation in Washington.
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