Arguing that the Federal Arbitration Act Requires Enforcement of a Class Action Waiver in a Valid Arbitration Agreement, and that only Congress can Override the FAA’s Mandate in the Arbitration of Federal Statutory Claims
In this case, a resounding victory for NELF and the business community generally, the U.S. Supreme Court, in a 5-3 decision (with Justice Sotomayor recusing herself) agreed with NELF and held that the FAA mandates the enforcement of class action waivers in the arbitration of federal statutory claims. As NELF had argued, the Court also held that courts have no discretion to override the FAA’s mandate when the costs of proving a federal statutory claim on an individual rather than aggregated basis may be prohibitive. The Court reversed the decision of the Second Circuit, which had invalidated a class action waiver in the arbitration of federal antitrust claims under the Sherman Act, based on the plaintiffs’ projected expert costs in proving their case. The Court agreed with NELF that the Second Circuit failed to heed both AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), under which the FAA requires enforcement of class action waivers, and CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012), under which only Congress, and not the judiciary, can override the FAA’s mandate enforcing class waivers with respect to the arbitration of federal statutory claims. Congress has not exercised that power in the Sherman Act at issue here. Thus, the disputed class action waiver in this case must be enforced. The Court also agreed with NELF that the FAA and Concepcion forbid both a per-se rule against class waivers (the issue in Concepcion) and a case-specific invalidation of a class waiver based on the plaintiff’s projected costs of proof (the issue in Amex).
As NELF had also argued, the Second Circuit misinterpreted the Supreme Court’s decisions in Green Tree Fin. Corp. v. Randolph, 531 U.S. 79 (2000), and Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). In those cases, the Court stated that arbitration agreements should be enforced so long as they allow for the vindication of federal statutory rights. Agreeing with NELF, the Court held that, the “vindication” principle discussed in Mitsubi shi and Green Treedoes not consider the inherent costs of proving a claim, whether on an individual or class-wide basis. Those costs would apply as much in court as they would in arbitration. Once again agreeing with NELF, the Court noted that the antitrust laws do not guarantee an affordable procedural path and that the “effective vindication” exception does not refer to the expenses involved in proving a claim. Embracing NELF’s analysis, the Court limited the “vindication of rights” dictum to whether the arbitration agreement forgoes substantive statutory rights and also, possibly, to whether the agreement imposes prohibitive costs that do not apply in court litigation, such as arbitrators’ fees.
In this case, a resounding victory for NELF and the business community generally, the U.S. Supreme Court, in a 5-3 decision (with Justice Sotomayor recusing herself) agreed with NELF and held that the FAA mandates the enforcement of class action waivers in the arbitration of federal statutory claims. As NELF had argued, the Court also held that courts have no discretion to override the FAA’s mandate when the costs of proving a federal statutory claim on an individual rather than aggregated basis may be prohibitive. The Court reversed the decision of the Second Circuit, which had invalidated a class action waiver in the arbitration of federal antitrust claims under the Sherman Act, based on the plaintiffs’ projected expert costs in proving their case. The Court agreed with NELF that the Second Circuit failed to heed both AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), under which the FAA requires enforcement of class action waivers, and CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012), under which only Congress, and not the judiciary, can override the FAA’s mandate enforcing class waivers with respect to the arbitration of federal statutory claims. Congress has not exercised that power in the Sherman Act at issue here. Thus, the disputed class action waiver in this case must be enforced. The Court also agreed with NELF that the FAA and Concepcion forbid both a per-se rule against class waivers (the issue in Concepcion) and a case-specific invalidation of a class waiver based on the plaintiff’s projected costs of proof (the issue in Amex).
As NELF had also argued, the Second Circuit misinterpreted the Supreme Court’s decisions in Green Tree Fin. Corp. v. Randolph, 531 U.S. 79 (2000), and Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). In those cases, the Court stated that arbitration agreements should be enforced so long as they allow for the vindication of federal statutory rights. Agreeing with NELF, the Court held that, the “vindication” principle discussed in Mitsubi shi and Green Treedoes not consider the inherent costs of proving a claim, whether on an individual or class-wide basis. Those costs would apply as much in court as they would in arbitration. Once again agreeing with NELF, the Court noted that the antitrust laws do not guarantee an affordable procedural path and that the “effective vindication” exception does not refer to the expenses involved in proving a claim. Embracing NELF’s analysis, the Court limited the “vindication of rights” dictum to whether the arbitration agreement forgoes substantive statutory rights and also, possibly, to whether the agreement imposes prohibitive costs that do not apply in court litigation, such as arbitrators’ fees.
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