Trial lawyers condemned the U.S. Supreme Court’s recent decision in CompuCredit Corp. v. Greenwood. The Court concluded that victims of predatory credit repair organizations who unwittingly sign credit card agreements that contain predispute mandatory arbitration clauses must resolve alleged violations of the Credit Repair Organizations Act (CROA) through binding arbitration. (CompuCredit Corp. v. Greenwood, No. 10-948 (Jan. 10, 2012).)
“With this decision,” said AAJ President Gary Paul, “the U.S. Supreme Court has given corporations a way to escape accountability by forcing consumers into a rigged and biased forced arbitration process, even when Congress expressly provides a remedy in a court of law.”
The Court held 8–1 that Congress did not rule out arbitration for settling CROA violations despite the act’s disclosure provision, which requires credit repair organizations to inform consumers of their “right to sue” for violations of the act; its civil liability provision, which is replete with terms such as “class actions” and “court” that are associated with a trial forum; and its nonwaiver provision, which voids any waivers of rights under the act contained in consumers’ contracts.
Justice Antonin Scalia wrote for the majority, “Interpreting the ‘right to sue’ language in [the act’s disclosure provision] to ‘create’ a right to sue in court not only renders it strikingly out of place in a section that is otherwise devoted to giving the consumer notice of rights created elsewhere; it also renders the creation of the ‘right to sue’ elsewhere superfluous.”
Scalia concluded that because CROA “is silent” on the forum for dispute resolution, the Federal Arbitration Act (FAA) requires the enforcement of arbitration agreements. The Court has previously said in Moses H. Cone Memorial Hospital v. Mercury Construction Corp. that the FAA establishes “a liberal federal policy favoring arbitration agreements.”
John Vail, vice president and senior litigation counsel at the Center for Constitutional Litigation (CCL) in Washington, D.C., rebuffed the notion that Congress created a policy favoring arbitration through the FAA. “It’s the courts that created that policy, not Congress,” he said. CCL had filed an amicus brief on AAJ’s behalf in support of the plaintiffs.
Vail also said, “It’s hard to fathom that Congress, in saying you have the ‘right to sue,’ is really saying you have the right to have a claim of misbehavior hidden behind a wall of secrecy in private arbitration.”
Joseph Peiffer, a trial lawyer in New Orleans, said he was disheartened by the ruling and worries about how it will affect his clients’ ability to obtain justice. “Consumers ought to have a choice as to the forum they pursue their claims in,” he said, contending that arbitration often is a poor substitute for an independent judiciary. “Also, without the ability to contest arbitrators’ decisions in court, there’s no way of holding them accountable.”
As previously reported in Trial News, plaintiffs filed a class action against CompuCredit, alleging violations of CROA and state law. The company moved to compel arbitration under the credit card’s terms and conditions. A district court denied the motion, and the Ninth Circuit upheld that decision, concluding that “Congress meant what it said in using the term ‘sue’” in CROA and that “it did not mean ‘arbitrate.’” The Supreme Court reversed.
“It has become abundantly clear that the Federal Arbitration Act does not work for consumers and employees,” said Paul. “It is time for Congress to pass the Arbitration Fairness Act to protect consumers and employees from these abusive practices.”
The Arbitration Fairness Act (H.R. 1873/S. 987), introduced last May, would invalidate mandatory arbitration clauses in employment, consumer, and unlawful discrimination disputes.