Seeking to Enforce Class-Action Waivers in Consumer Arbitration Contracts
The principal legal issue in this putative consumer class action was whether Massachusetts would enforce waivers of class action arbitration included in the service contracts that the plaintiffs had purchased, where the waivers were unquestionably enforceable under the law applicable to the contracts (in this case, Texas law). (The plaintiffs alleged that, in violation of c. 93A, they had been improperly charged Massachusetts sales tax on the purchase of those contracts.) The arbitral panel that initially heard the matter enforced the class action waivers and found for Dell on the plaintiffs’ Chapter 93A claims. The Superior Court affirmed the arbitrators’ decision; on appeal, the Massachusetts Supreme Judicial Court granted direct appellate review.
NELF, joined by co-amicus Associated Industries of Massachusetts, submitted an amicus brief in support of Dell, arguing that, under basic contract law principles, the waivers could only be declared invalid if enforcing them would offend a fundamental Massachusetts public policy. NELF argued that the waivers did not offend a fundamental policy in Massachusetts especially where, as here, the contracts expressly preserved the consumers’ statutory right to recover reasonable attorneys’ fees. NELF also argued that, whether or not the waivers should be enforced, the plaintiffs had failed to state a claim because their complaint had to do with the collection of sales tax, which is not covered by Chapter 93A.
In a decision likely to have a wide impact with respect to consumer sales, the SJC disagreed with NELF on the waiver issue, holding that Massachusetts does have a fundamental public policy in favor of consumer class actions under Chapter 93A and, as a result, waivers of class arbitration in consumer cases are unenforceable in Massachusetts. Nevertheless, despite invalidating the waivers, the SJC agreed with NELF that the plaintiffs had not stated a consumer protection claim. Since plaintiffs complain of Dell’s collection of sales tax, the SJC, based on its precedent that “[w]here a party’s actions are motivated by a ‘legislative mandate, not business or personal reasons’ Chapter 93A does not apply,” remanded the case to the trial court for dismissal without prejudice, providing an opportunity to the plaintiffs to allege, if they could, that there was a “profit-seeking” motive behind Dell’s collection of the tax. The Court noted that the record is currently devoid of any such allegation or fact.
The principal legal issue in this putative consumer class action was whether Massachusetts would enforce waivers of class action arbitration included in the service contracts that the plaintiffs had purchased, where the waivers were unquestionably enforceable under the law applicable to the contracts (in this case, Texas law). (The plaintiffs alleged that, in violation of c. 93A, they had been improperly charged Massachusetts sales tax on the purchase of those contracts.) The arbitral panel that initially heard the matter enforced the class action waivers and found for Dell on the plaintiffs’ Chapter 93A claims. The Superior Court affirmed the arbitrators’ decision; on appeal, the Massachusetts Supreme Judicial Court granted direct appellate review.
NELF, joined by co-amicus Associated Industries of Massachusetts, submitted an amicus brief in support of Dell, arguing that, under basic contract law principles, the waivers could only be declared invalid if enforcing them would offend a fundamental Massachusetts public policy. NELF argued that the waivers did not offend a fundamental policy in Massachusetts especially where, as here, the contracts expressly preserved the consumers’ statutory right to recover reasonable attorneys’ fees. NELF also argued that, whether or not the waivers should be enforced, the plaintiffs had failed to state a claim because their complaint had to do with the collection of sales tax, which is not covered by Chapter 93A.
In a decision likely to have a wide impact with respect to consumer sales, the SJC disagreed with NELF on the waiver issue, holding that Massachusetts does have a fundamental public policy in favor of consumer class actions under Chapter 93A and, as a result, waivers of class arbitration in consumer cases are unenforceable in Massachusetts. Nevertheless, despite invalidating the waivers, the SJC agreed with NELF that the plaintiffs had not stated a consumer protection claim. Since plaintiffs complain of Dell’s collection of sales tax, the SJC, based on its precedent that “[w]here a party’s actions are motivated by a ‘legislative mandate, not business or personal reasons’ Chapter 93A does not apply,” remanded the case to the trial court for dismissal without prejudice, providing an opportunity to the plaintiffs to allege, if they could, that there was a “profit-seeking” motive behind Dell’s collection of the tax. The Court noted that the record is currently devoid of any such allegation or fact.
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