Ballard Spahr Obtains Ruling That FAA Preempts Pennsylvania Unconscionability Law On Class Action Waivers

Ballard Spahr Obtains Ruling That FAA Preempts Pennsylvania Unconscionability Law On Class Action Waivers


By the Consumer Financial Services Group 

In the first opinion to address the issue following the U.S. Supreme Court's landmark decision in AT&T Mobility LLC v. Concepcion, a Pennsylvania federal district court has held that the Federal Arbitration Act (FAA) preempts Pennsylvania law, refusing to enforce class action waivers in consumer arbitration agreements.

The decision-issued August 12, 2011, by Judge Norma L. Shapiro of the U.S. District Court for the Eastern District of Pennsylvania-in Alfeche v. Cash America International, Inc., et al., holds that borrowers' state law usury and consumer protection act claims must be arbitrated on an individual basis and cannot be pursued as a class action in court.

Ballard Spahr represents the defendants in Alfeche.

Judge Shapiro held that the FAA preempts Thibodeau v. Comcast Corp., 912 A.2d 874 (Pa. Super. Ct. 2006), in which the Pennsylvania Superior Court found that class action waivers are unconscionable under Pennsylvania law and contrary to Pennsylvania public policy. Judge Shapiro concluded that "[t]he case for FAA preemption may be even stronger with Thibodeau compared to Discover Bank" (the California case repudiated by the Supreme Court in Concepcion) because Pennsylvania has a longstanding policy favoring classwide arbitration and "[a] policy favoring classwide arbitration is the policy the Supreme Court [in Concepcion] identified as undermining FAA objectives."

A federal court of appeals panel had previously decided in Gay v. CreditInform, 511 F.3d 369 (3d Cir. 2007), that the FAA preempts Thibodeau, but later Third Circuit panels had characterized that ruling as dictum. Alfeche is the first Pennsylvania decision following Concepcion to address the effect of Concepcion on Pennsylvania law.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs), its guidance in structuring and documenting new consumer financial services products, and its experience with the full range of federal and state consumer credit laws throughout the country. For further information, please contact Alan S. Kaplinsky, Group Chair, at 215.864.8544 or; Jeremy T. Rosenblum, Group Vice Chair, at 215.864.8505 or; Mark J. Levin, 215.864.8235 or; or Martin C. Bryce, Jr., 215.864.8238 or  

Copyright © 2011 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.


Alan S. Kaplinsky
Martin C. Bryce, Jr.
Mark J. Levin
Jeremy T. Rosenblum

Related Practices

Consumer Class Action Litigation
Consumer Financial Services

For more information about LexisNexis products and solutions connect with us through our corporate site.