Magazine article Dispute Resolution Journal

Class-Action Ban Unenforceable

Magazine article Dispute Resolution Journal

Class-Action Ban Unenforceable

Article excerpt

CONSUMER

The 1st Circuit ruled that a waiver of class action arbitration (and waivers of punitive damages and attorneys' fees and costs) were unenforceable in anti-trust arbitrations because they prevented putative class members from vindicating their statutory rights.

Comcast, a cable television provider, sought to compel a putative class of Boston-area subscribers to individually arbitrate state and federal antitrust claims. The 1st Circuit, reversing the district court, held that the plaintiffs could be compelled to arbitrate, but the class action arbitration ban, together with other waivers, raised a question of arbitrability, and because the ban prevented the plaintiffs from vindicating individual statutory rights, it was unenforceable.

The 1st Circuit recognized that the class arbitration waiver did not directly conflict with antitrust statutes. But it did "ostensibly conflict" with Rule 23 (the "class action" rule) of the Federal Rules of Civil Procedure. The court used the term "ostensibly" because only class arbitration was prohibited. But because the contracts mandated arbitration, the court said the ban "effectively foreclosed" the use of all class action mechanisms. The court cited the policy of class actions to overcome the problem that small recoveries remove the incentive for individuals to sue to vindicate their rights. Then it examined the "substantive implications" of the ban in the context of an antitrust case, finding that each individual in the putative class would have to pay large expert and attorneys' fees-much more than the few hundred or thousand dollars each could expect to recover-in order to prosecute an individual antitrust case. …

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