Magazine article Dispute Resolution Journal

U.S. Supreme Court to Settle Split over Class Arbitration

Magazine article Dispute Resolution Journal

U.S. Supreme Court to Settle Split over Class Arbitration

Article excerpt

ADR News

A split between state and federal courts over the pursuit of class arbitrations under arbitration agreements that are silent on the matter will be resolved by the U.S. Supreme Court.

In January the high court said it would review the South Carolina Supreme Court's decision to allow a class arbitration to proceed against Green Tree Financial Corp., despite the absence of any authorizing provision in the arbitration agreement. The opinion followed the reasoning of the Supreme Court of California, to the effect that a court has inherent authority to order a classwide arbitration.

Four federal courts of appeals have ruled otherwise, concluding that the Federal Arbitration Act prohibits a judge from ordering a class arbitration when the parties' agreement is silent on the matter.

The case before the Supreme Court, Green Tree Financial Corp. v. Bazzle, arose from two sets of claims against Green Tree that related to home-financing contracts. In the first case, led by Lynn and Burt Bazzle, the Georgia trial court simultaneously certified a class action against Green Tree and granted the company's motion to compel arbitration on a class basis. Potential claimants could opt out of the proceeding. The arbitrator found in favor of the class and ordered Green Tree to pay 1,899 individuals a total of $14 million for damages and fees. An appeals court affirmed the award in September 2000.

In the second case, led by Daniel Lackey, the trial court refused to enforce the arbitration agreement, but the parties later entered into a consent agreement appointing the same arbitrator that heard the Bazzle's case. …

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