Arbitration And Class Action Waivers Presentation

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Presentation at National Association of Dealer Counsel in Chicago, IL on October 10, 2011

Transcript

  • 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]

2.

  • Federal Arbitration Act
    • 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.

  • ReversedDiscover Bank
  • Broadly applied preemption analysis
    • State laws that prohibit arbitration
    • State laws applied in a fashion that disfavors arbitration
    • State public policy
    • concerns are
    • irrelevant

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:
    • Unconscionability
    • Unwaivable statutory rights
  • Federal courts favored arbitration

8.

    • 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.

  • Mixed bag
    • 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
    • 1028 Dodd-Frank Act
    • 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.

15.

  • Jury trial waivers
  • Class Action Fairness Act (CAFA)

CLASS ACTION WAIVERS 16. ARBITRATION GENERALLY Pros Cons

  • Deterrence
  • Less expensive than lawsuits
  • Faster and more efficient
  • Class waiver
  • Less formal less adversarial
  • Can be done pro se
  • Limited appeal rights
  • Split baby (Rule 43 fair and equitable)
  • Arbitrator expense
  • No rules of evidence in play

17.

  • Stand-alone?
  • Stand alone class action waiver?
  • Arbitrators specialized
  • How many arbitrators
  • Forum
  • Division of costs?

DRAFTING CONSIDERATIONS 18.

  • What types of disputes
  • Procedural rules
  • Rules of Evidence?
  • Appeal rights
  • Consistency with other documents
  • Whether to sell if customer refuses to sign
  • Severability

DRAFTING CONSIDERATIONS