Because It Interfered With Federal Right, Despite Supreme Court Ruling in Conception
By Louis M. Solomon
H. Cristina Chen-Oster, et al. v. Goldman,
Sachs & Co., et al., 10 Civ. 6950 (S.D.N.Y. July 2011) (Francis, M.J.) [enhanced version available to lexis.com subscribers], denies reconsideration of an earlier decision by that Court
denying a motion to compel arbitration. The earlier decision followed the
Supreme Court's decision in Stolt-Neilsen S.A. v. AminalFeeds International Corp.,
130 S.Ct. 1758 (2010) [enhanced version / unenhanced version available from lexisONE Free Case Law], finding that the silence of an arbitration clause with respect
to class arbitration rendered class arbitration unavailable. The prior decision
also followed the Second Circuit's decision in In re American Express,
634 F.3d 187 (2d Cir. 2011) [enhanced version / unenhanced version ]
(which we posted on), that "the federal common law of arbitrability precludes
enforcement of an arbitration clause when doing so would interfere with a substantive
federal statutory right" - in this case that right being the right to sue for an
alleged "pattern and practice" of discrimination by an employer.
Enter the U.S. Supreme Court's decision
Mobility LLC v. Concepcion, et al., No. 09-893 (U.S. 4/27/11) [enhanced version / unenhanced version ],
where the High Court's again struggled with freedom of contract principles,
this time in the context of state law of unconscionability as applied to the arbitration of
class actions. The Supreme Court held that a state law rendering unenforceable
a contract barring class arbitration was itself preempted.
This decision prompted Goldman Sachs
to seek reconsideration, claiming that Conception is "fundamentally incompatible"
with the Court's ruling here. The Magistrate Judge rejected the argument,
finding no grounds to grant reconsideration. In so deciding, however, the
Court addressed the merits of the issue and reaffirmed its view that Conception,
dealing with preempting state laws, was distinguishable in the case before the Court,
which involved a federal claim. In this context, says the Court, "demands
consideration of a separate issue: whether the FAA's objectives are also paramount
when, as here, rights created by a competing federal statute are infringed by an
agreement to arbitrate". Under current law a plaintiff may not vindicate
that federal claim individually but only in a class context. Insofar
as the arbitration provision precludes class arbitration, therefore, it is
precluding the plaintiff from enforcing a federal right. This, said the Court,
renders the arbitration clause unenforceable.
On May 2, 2011, the Supreme Court
granted a petition for certiorari in Compucredit Corp., et al. v. Wanda Greenwood,
et al., Dkt. No. 10-948 [enhanced version / unenhanced version ],
to review "whether claims arising under the federal Credit Repair Organizations
Act . . . are subject to arbitration pursuant to a valid arbitration agreement"
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