CompuCredit Corporation v. Greenwood Upholds Right To Arbitrate Credit Repair Organizations Act Claims.
Pursuant to the Opinion of the Supreme Court in CompuCredit Corp. v. Greenwood, 565 U.S. ___, 132 S.Ct. 665 (2012), the Ninth Circuit today vacated the district court's decision denying defendants' motion co compel arbitration. Greenwood v. CompuCredit Corp., No. 09-15906 (9th Cir. March 27, 2012). This gives us an opportunity to revisit the Supreme Court case, decided January 10, 2012.
In CompuCredit, plaintiffs/respondents filed a class-action complaint against CompuCredit and Columbus Bank & Trust, alleging violations of the Credit Repair Organizations Act (CROA). Plaintiffs alleged misleading representations that their credit card could be used to rebuild poor credit and also concerning assessment of multiple fees. The plaintiffs, however, had agreed in their applications to be bound by a broadly-drafted arbitration provision.
The CROA includes "right to sue" language, and nonwaiver language of any right of the consumer under the CROA. The issue presented was whether the "right to sue" language and the nonwaiver provision sufficiently evidenced legislative intent to override arbitration of CROA claims.
Justice Scalia, delivering the opinion of the Court, interpreted the "right to sue" language as "mere 'contemplation' of suit in any competent court" – not a guarantee of a right to sue that must override an agreement to arbitrate. The "right to sue" is "a colloquial method of communicating to consumers that they have the legal right enforceable in court . . . " It "may be imprecise, but it is not misleading – and certainly not so misleading as to demand, in order to avoid that result, reading the statute to contain a guaranteed right it does not in fact contain." Tough luck, plaintiffs.
Justices Sotomayor and Kagan concurred in the judgment – though they thought that it was a closer case, and that perhaps lay readers of limited economic means and inexperienced in credit matters might actually believe that a "right to sue" really meant a "right to sue."
However, because they believed the language of the CROA could be interpreted either way, the parties’ arguments were "in equipoise". Translation: plaintiffs lose, because they "bear the burden of showing that Congress disallowed arbitration of their claims" – and plaintiffs didn’t carry their burden.
Justices Sotomayor and Kagan seemed more concerned about mounting a strategic rearguard action, because they wanted to make it very clear that they "do not understand the majority opinion to hold that Congress must speak so explicitly in order to convey its intent to preclude arbitration of statutory claims." In other words, in a future case, legislative intent could be discovered in the history or purpose of the statute.
Justice Ginsburg dissented: "I would hold that Congress, in an Act meant to curb deceptive practices, did not authorize credit repair organizations to make a false or misleading disclosure – telling consumers of a right they do not in fact, possess."
Marmet Health Care Center, Inc. v. Brown.
In the next case, the United States Supreme Court delivered a smack. Marmet Health Care Center, Inc. v. Brown, 565 U.S. ___ (2012). In the first paragraph, the Court stated: "Here, the Supreme Court of Appeals of West Virginia, by misreading and disregarding the precedents of this Court interpreting the FAA, did not follow controlling federal law implementing that basic principle." "That basic principle" is that state courts must enforce the FAA with respect to arbitration agreements covered by the FAA.
To add to the effrontery, "the state court found unpersuasive this Court's interpretation of the FAA, calling it 'tendentious,' . . . and 'created from whole cloth'. . . . " Apparently the judges in West Virginia did not want the United States Supreme Court to have the final word on the interpretation of the FAA. But as Justice Jackson observed: "We are not final because we are infallible, we are infallible because we are final."
The West Virginia Supreme Court had "concluded that the FAA does not pre-empt the state public policy against predispute arbitration agreements that apply to claims of personal injury or wrongful death against nursing homes." However, under the FAA, state law is not allowed to prohibit arbitration of a particular type of claim, making the analysis here straightforward.
This is not necessarily the end of the case, because the United States Supreme Court remanded so that the West Virginia court will consider, "whether, absent that general public policy, the arbitration clauses . . . are unenforceable under state common law principles that are not specific to arbitration and pre-empted by the FAA."
Unconscionability could be a sound basis for holding an arbitration clause unenforceable under state law. However, the West Virginia Supreme Court better not hold that the clause is "unconscionable" because it violates the state's public policy against arbitrating personal injury or wrongful death claims against nursing homes if it wants its decision to withstand renewed scrutiny of the United States Supreme Court.
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