Arbitration And Class Action Waivers Presentation
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Presentation at National Association of Dealer Counsel in Chicago, IL on October 10, 2011
- 1. ARBITRATION ANDCLASS ACTION WAIVERS Presenters Michael Dommermuth McGloin, Davenport, Severson and Snow, P.C. 1600 Stout Street, Suite 1600 Denver, CO 80202 720.536.3550 [email_address] Shawn Mercer Bass Sox Mercer 9104 Falls of Neuse Road, Suite 200 Raleigh, NC 27615 919.847.8632 [email_address] Christian Scali Arent Fox LLP 555 West Fifth Street, 48 thFloor Los Angeles, CA 90013 213.443.7621 [email_address]
- Courts reluctant to enforce for many years
- Supreme Court embraces FAA
STATUTORY HISTORY 3.
- Under FAA class arbitration requires express contractual agreement
STOLT-NEILSEN v. ANIMALFEEDS 4.
- Broadly applied preemption analysis
- State laws that prohibit arbitration
- State laws applied in a fashion that disfavors arbitration
AT&T MOBILITY v. CONCEPCION 5.
- Upheld use of a class waiver
- Switch to class arbitration makes process slower, more costly and more likely to generate procedural morass.
- Class arbitration requires procedural formality
- Class arbitration increases risk to defendants no review forces in terrorem settlement
- Arbitration is poorly suited to high stakes class litigation
AT&T MOBILITY v. CONCEPCION 6.
- Supreme Court will decide
- Kentucky Supreme Court struck down under Kentucky law a no class action arbitration clause
- The plaintiffs in that case are arguing thatConcepciondoes not apply in state court
APPLICATION IN STATE COURT? 7.
- Judicial hostility toward arbitration, generally, and toward class action waivers specifically.
- Tests for enforcement of class action waivers:
- Unwaivable statutory rights
- Federal courts favored arbitration
- To arbitrate injunctive relief claims brought under the CLRA and UCL
- To suggest (without holding) thatGentry Ruleis also preempted by the FAA
- To preempt Californias CLRA anti-waiver provision
CA FEDERAL COURT RESPONSE 9.
- ApplyingGentry Rulewithout holding whetherGentry Ruleis preempted
- Declining to extendAT&T Mobilityto preempt all California law regarding unconscionability, yet enforcing arbitration agreement
CA STATE COURT RESPONSE 10.
- Confusing and vague agreements will still be invalidated (PA, NJ)
- New Jersey case authority holding that class action waivers are unconscionable is preempted(NJ)
- Any unconscionability defense against a class action waiver is preempted (FL)
RESPONSE IN OTHER STATES 11.
- But federal court heldAT&T Mobilitydoes not preclude all unconscionability defenses; it only narrows permissible factors to consider (FL)
- Adhesion contracts not per se unconscionable.Individual claims substantial enough to be pursued under state deceptive practices act because of fee shifting provision (CO)
RESPONSE IN OTHER STATES (cont) 12.
- Arbitration a top priority for certain consumer groups
- Arbitration Fairness Act of 2011
- CFPB to study arbitration agreements
- Requires Bureau to report to Congress
- CFPB, by regulation, may prohibit or impose conditions or limitations on use of arbitration in agreements for consumer financial products or services
SHORT-LIVED VICTORY? 13. SHORT-LIVED VICTORY?
- Direct impact on BHPH operators
- Indirect impact for other dealers
- May depend on future face of CFPB
- Multi-member Commission pushed by industry and supported by Republicans
- May not restrict a consumer from entering into voluntary arbitration after dispute arises
- Much like dealer exemption from FAA
14. SHORT-LIVED VICTORY?
- Enhanced FTC rule-making authority
- FTC likely to wait for CFPB study/action
- Could impact R/O arbitration agreements, etc.
- Class Action Fairness Act (CAFA)
CLASS ACTION WAIVERS 16. ARBITRATION GENERALLY Pros Cons
- Less expensive than lawsuits
- Faster and more efficient
- Less formal less adversarial
- Split baby (Rule 43 fair and equitable)
- No rules of evidence in play
- Stand alone class action waiver?
DRAFTING CONSIDERATIONS 18.
- Consistency with other documents
- Whether to sell if customer refuses to sign