Purporting To Limit Party's Right To Preclude Assertion of Class Claims in Consumer Arbitration
By: Louis M. Solomon
Cruz, et al. v. Cingular Wireless, LLC, No. 08-16080 (11th Cir. Aug. 2011) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law] , is among the first Court of Appeals decisions since the U.S.
Supreme Court's decision in AT&T MobilityLLC
(ATTM) v. Conception, 131 S.Ct. 1740 (2011) [enhanced version / unenhanced version ],
to address the issue whether a state law imposing limits on a contracting party's
ability to prevent class actions in arbitration was preempted by federal law.
The international practice issues arising here are several and important.
Recall that the Supreme Court decision
analyzed a California law that at the end of the day "classified most
collective-arbitration waivers in consumer contracts as unconscionable". The
Supreme Court held that such laws - when applied in a way special to arbitration
agreements (i.e., by "defenses that apply only to arbitration of that derive their
meaning from the fact that an agreement to arbitrate is at issue") - "stand as an
obstacle to the accomplishment and execution of the" Federal Arbitration Act, 9
U.S.C. sec. 1, et seq, and, as such were preempted by the FAA.
In the current case, the Eleventh Circuit
found that, under Conception, the class action wavier in the arbitration
agreements before it were also enforceable and that, insofar as Florida law would
invalidate these agreements as contrary to public policy, such state law would also
be preempted. The Court of Appeals felt it did not have to reach the actual
issue of whether Florida law would invalidate the class action waivers.
In many respects the issues before the
Eleventh Circuit mirrored those before the Supreme Court in Conception.
However, the arbitration agreements in Cruz contained a so-called "blow-up"
provision, which provided that, if the class action waiver clause was found unenforceable,
"then the entirety of this arbitration provision shall be null and void".
The Court of Appeals did not address the enforceability of the blow-up provision
but merely noted that a contract containing that provision should not in and of
itself be treated differently in terms of the preemption analysis than a contract
not containing a blow-up provision. Nor did the Court of Appeals address the
non-mutuality of the blow-up provision.
The Court of Appeals did make a point
of the fact that the arbitration provision itself guaranteed to the claimant "all
the same remedies available to plaintiffs" under analogous state consumer protection
laws; that "arbitrators can award the same damages and relief that a court
can award"; that a prevailing claimant could recover attorneys' fees; that "there
was no confidentiality rule preventing the Plaintiffs from disseminating information
about their claims to other potential claimants" and that ATTM "agreed to bear all
costs of arbitration regardless of which party prevailed". The Court
of Appeals thus had no occasion to address whether a less-favorable set of provisions
would have been enforceable under state law.
The Eleventh Circuit observed both that,
"We conclude that Florida law does not yield a certain result in this case and cannot
provide an alternative ground for our decision", and also that, "In light of Conception,
our resolution of this case does not depend on a construction of Florida law".
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