Complex Litigation -- Class Action Waivers
Vol. 31 No. 30 Nat'l L.J. Pg. 23 (April 6, 2009)
5 Pages Posted: 10 May 2013
Date Written: April 6, 2009
Commentary and analysis of two Second and Third Circuit decisions relating to the viability of so-called “class action waivers” included in consumer arbitration clauses. California state and federal courts already have indicated their hostility towards such clauses, applying doctrines of arbitrability and contract unconscionability to override enforcement of such clauses.
In two recent appellate decisions addressing the issue of class action waivers, the East Coast appears to be inching toward the West Coast in its attitudes toward these contractual devices to staunch aggregate class litigation through arbitral tribunals. Homa v. American Express Co., 2009 WL 440912 (3d Cir. Feb. 24, 2009); In re American Express Merchants' Litig., 554 F.3d 300 (2d Cir. 2009).
The Homa and Merchants’ litigations both involved contractual arbitration agreements that included provisions barring class or collective actions. With the increasing prevalence of such waivers in arbitration clauses, the controversy over class action waivers has heated considerably. The Second and Third Circuit have now joined the Ninth Circuit in requiring close analysis of the enforceability of these provisions.
The decisions differ in interesting ways. The Second Circuit denied enforceability under federal substantive principles of arbitrability, while the Third Circuit instead relied on state contract principles and public policy eschewing such waivers. In addition, both decisions focused on the nature of the small claims asserted and the potential inability of the claimants to pursue relief in the absence of a class action procedural mechanism. The courts differed concerning the effect of the possible recovery of treble damages in assessing the enforceability of class action waivers.
Keywords: Class action waivers, classwide arbitration, Federal Arbitration Act, contract unconscionability, class action litigation
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