Academic journal article Case Western Reserve Law Review

The Future of Class-Action Waivers in Consumer Contract Arbitration Agreements after DIRECTV, Inc. V. Imburgia

Academic journal article Case Western Reserve Law Review

The Future of Class-Action Waivers in Consumer Contract Arbitration Agreements after DIRECTV, Inc. V. Imburgia

Article excerpt

Contents  Introduction   I. Arbitration and Class Actions      A. The Federal Arbitration Act ("FAA") and Consumer Contracts      B. The Emergence of Class Actions in Arbitration  II. The Disappearance of Class-Arbitration III. The Possible Reemergence of Class Arbitration after       DIRECTV Conclusion 


James Pendergast wanted to contest $20 worth of roaming fees that Sprint had charged him, as these charges were incurred from calls in his own home. (1) Pendergast filed a class action on behalf of Sprint customers who had noticed the same issue only to learn, when his suit was thrown out of a Miami court, that Sprint included an arbitration clause in its form. (2) Pendergast was like many consumers who have no idea they agreed to arbitrate all disputes, as well as waive a right to join any actions, when entering into these types of "take it or leave it" contracts. (3) In this situation, Pendergast's lawyer advised him that winning would require expensive expert analysis, which Pendergast could not risk in arbitration, absent joining a class. (4) Consequently, Pendergast declined to pursue any action to recover the $20, and Sprint was not held to account for its inconsistent roaming charges in the Miami market. (5)

Consumer advocates have long argued that the ability to bring class actions in arbitration is essential to guarding against such corporate malfeasance. (6) Thus, some have noted, with undisguised horror, that with the DIRECTV, Inc. v. Imburgia (7) decision, the Supreme Court has seemingly put the final nail in the class-arbitration coffin, first constructed with the Court's Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (8) holding in 2010. (9) A close examination of the DIRECTV opinion, however, suggests that the Court was more concerned with the California court's blatant disregard of the AT&T Mobility v. Conception (10) holding than in broadening an anti-class arbitration policy. (11) Indeed, in looking closely at the Concepcion line of cases, the DIRECTV holding is far more narrow than most commentary would suggest.

Furthermore, the Consumer Financial Protection Board ("CFPB"), acting under the Congressional mandate provided by section 1028(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, proposed a set of rules that would prohibit financial service providers from putting class action waivers in certain consumer agreements. (12) Some corporate lawyers are reacting with horror at the promulgation of these rules, and multiple legal challenges are likely. (13) Although it is uncertain what a new Court might rule after the 2016 election and subsequent appointment of a 9th justice, the current iteration of the Court is more closely aligned in favor of allowing class-arbitrations than the lopsided DIRECTV majority would otherwise suggest. That balance is unlikely to shift, even if the Senate confirms a candidate in the mold of the late Justice Scalia, as seems likely at the time of publication. (14) This Comment, therefore, posits that the Court could uphold the new CFPB rules against class action waivers, despite the 6 3 DIRECTV decision. (15)

In making that determination. Part I of this Comment will briefly examine the history of arbitration agreements and class-action waivers in consumer adhesion contracts. Part II will discuss how the Stolz-Nielson line of cases, culminating in DIRECTV, have led to an apparent inability of consumers to circumvent class action waivers. Finally, Part III will briefly consider the likely future of such waivers in adhesion contracts, in light of the CFPB rules limiting class action waivers and arbitration clauses in certain financial services contracts.


A. The Federal Arbitration Act ("FAA") and Consumer Contracts

In 1925, Congress enacted the precursor to what is now known as the FAA, in order to enforce commercial arbitral agreements in front of a hostile judiciary. …

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