Class Action Defense News, Developments and Commentary

Class Action Lawsuit Defense

Home | Class Action Lawsuit Defense

The Supreme Court’s recent decision in <em>CompuCredit Corp. v. Greenwood</em>, 565 U.S. __, 132 S.Ct. 665, 181 L.Ed.2d 586 (2012), found that despite an act requiring a disclosure of a consumer’s “right to sue,” claims under the act would still be arbitrable absent clear congressional intent to the contrary.

Plaintiffs held credit cards marketed and issued by defendants, the applications for which included a binding arbitration clause.  Plaintiffs brought a class action against defendants for violations of the Credit Repair Organizations Act, 15 U.S.C. § 1679 <em>et seq</em>. (CROA). The district court denied Defendants’ motion to compel arbitration finding that Congress intended CROA claims to be non-arbitrable and the Ninth Circuit affirmed.

The Supreme Court reversed on an 8-1 vote and issued an opinion authored by Justice Scalia.  In finding the CROA claims to be arbitrable, Justice Scalia relied on the Federal Arbitration Act’s (FAA) “liberal federal policy favoring arbitration,” even for federal statutory claims, unless the FAA’s mandate has been “overridden by contrary congressional command.”  The CROA includes a disclosure provision that requires a disclosure to consumers informing them of their “right to sue a credit repair organization that violates” the CROA.  However, the disclosure provision only provides consumers the right to receive information related to the consumer protections which are provided elsewhere in the act. This disclosure relates to the CROA’s right to enforce liability for an offending credit repair organization’s failure to comply with the act.  Thus even though the provisions of the act are not subject to waiver, the disclosure provision does not provide an affirmative right to sue that would override the FAA’s mandate.  Furthermore, when the CROA was adopted in 1996 binding arbitration clauses were common and should Congress have felt the need to prohibit these clauses, it would have done so more directly than the language of the CROA.

The lone dissenter, Justice Ginsburg, agreed with the Ninth Circuit and would hold the “right to sue” language in the CROA’s disclosure provision to be non-waivable and thus to disallow the binding arbitration provision.  Justice Ginsburg did not believe that Congress, “in an Act meant to curb deceptive practices,” would authorize credit repair organizations to make a false disclosure by “telling consumers of a right they do not, in fact, possess.”

Supreme Court Allows Arbitration Despite Non-Disclosure of a Customer’s Right to Sue