Dale v. Comcast Class Action Defense Case: Georgia Federal Court Grants Defense Motion To Compel Arbitration Under Agreement Barring Class Action Lawsuits Holding Arbitration Clause Unconscionable And Dismisses Class Action Complaint

Arbitration Clause Barring Class Action Lawsuits in Contract Governed by Federal Arbitration Act (FAA) Valid and Enforceable Georgia Federal Court Holds, Agreeing with Defense that Arbitration Agreement was not Unconscionable

Plaintiffs filed a putative class action in Georgia state court against their cable television company alleging that it overcharged them for cable television services in violation of the federal Cable Communications Policy Act, 47 U.S.C. § 522 et seq. Dale v. Comcast Corp., 453 F.Supp.2d 1367, 1370 (N.D. Ga. 2006). Defense attorneys removed the action to federal court and moved to compel arbitration under a clause governed by the Federal Arbitration Act (FAA) that arbitration clause required customers to bring claims only in an individual capacity, thereby precluding participation in class action lawsuits, id., at 1374. Specifically, the arbitration clause provided, ” ALL PARTIES TO THE ARBITRATION MUST BE INDIVIDUALLY NAMED, THERE SHALL BE NO RIGHT OR AUTHORITY FOR ANY CLAIMS TO BE ARBITRATED OR LITIGATED ON A CLASS ACTION OR CONSOLIDATED BASIS OR ON BASIS INVOLVING CLAIMS BROUGHT IN PURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF THE GENERAL PUBLIC (SUCH AS A PRIVATE ATTORNEY GENERAL), OTHER SUBSCRIBERS, OR OTHER PERSONS SIMILARLY SITUATED.” Id. The district court granted the defense motion.

Comcast provides its customers with a “subscriber agreement” at the time it installs service, and “on an annual basis, [it] disseminates notices of its policies and practices to its subscribers by including them in the subscribers’ monthly bills.” Dale, at 1371. Notice of the arbitration clause was provided to customers in December 2004 via “a billing stuffer entitled ‘Important Notices to Our Customers: Your Local Cable Company’s Policies & Practices,'” id., and noted that this complied with federal law, id., at 1372 n.2. For new customers, Comcast provided notice of the arbitration agreement at the time service was installed, and new Comcast customers signed forms agreeing to be bound to the terms of the subscriber agreement. Id., at 1371. The district court found that “plaintiffs were given copies of the Subscriber Agreement containing the arbitration provisions at the time of installation of their service” and that “when defendant amended the Subscriber Agreement, it notified plaintiffs that the changes would not take effect for thirty days and that plaintiffs could cancel their service if they objected to the changes.” Id., at 1377 n.4. Defense attorneys moved to compel arbitration and to dismiss the class action allegations.

In analyzing the defense motion, the federal court held that while it was obligated to determine the validity of the arbitration clause under state contract laws, Dale, at 1371-72, “as the FAA is ‘preemptive of state laws hostile to arbitration,’ the court should take into consideration the federal policy favoring arbitration,” id., at 1372 (citing Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367-68 (11th Cir.2005)). The district court first rejected plaintiffs’ claim that they never entered into an arbitration agreement with Comcast. Id. Comcast established that it sent the notices in the regular course of business, and that plaintiffs’ paid their December 2004 bills evidencing that they received the billing statements. Based on the evidence presented, the federal court concluded “that plaintiffs’ denials and/or conclusory declarations that they do not recall receiving copies of the arbitration provisions are insufficient to defeat defendant’s motion to compel.” Id.

Arbitration Class Action Court Decisions Uncategorized

Konig v. U-Haul Class Action Defense Case: California Court Denies Defense Motion To Compel Arbitration Under Agreement Barring Class Action Lawsuits Holding Arbitration Clause Unconscionable

California Court Holds that Arbitration Clause Barring Class Action Lawsuits in Contract Governed by Federal Arbitration Act (FAA) is Enforceable Because Not Substantively Unconscionable

Plaintiff filed a putative class action against his former employer in California state court for unfair business practices and violations of the state labor laws alleging that U-Haul misclassifies employees, fails to pay them overtime, and fails to provide meal and rest breaks. Konig v. U-Haul Co. of California, ___ Cal.App.4th ___, 52 Cal.Rptr.3d 244, 246 (Cal.App. December 19, 2006). Defense attorneys moved to compel arbitration and to dismiss the class action allegations based on an arbitration clause governed by the Federal Arbitration Act (FAA) under which employees “waive any right to join or consolidate claims in arbitration with others or to make claims in arbitration as a representative or as a member of a class or in a private attorney general capacity,” _id._, at 247. (The arbitration policy and its class-action waiver provision are quoted in pertinent part in the Note below.) The trial court granted the defense motions, finding that the class action waiver was not substantively unconscionable because plaintiff had not demonstrated that the litigation governed by the arbitration clause involved “predictably . . . small amounts.”

The procedural posture of the case is interesting. In November 2005, the defense moved to compel arbitration and to dismiss the class action claims. Konig, at 247. At oral argument, “the trial court requested supplemental briefing on class action waivers in the employment context,” id., at 248. In January 2006, the Court of Appeal issued its opinion in Gentry v. Superior Court, 135 Cal.App.4th 944 (Cal.App. 2006), affirming a trial court order that enforced an arbitration clause containing a class action waiver. In March 2006, the trial court relied on Gentry in finding U-Haul’s arbitration clause enforceable, unaware that the California Supreme Court would grant review of Gentry the following month, rendering the case noncitable under California law. Id. As the Court of Appeal explained at page 248, “the trial court ruled that plaintiff did not prove that there were predictably [small] amounts of damages plus a negative impact on his ability to pursue his statutory claims such that the arbitration agreement was substantively unconscionable.” In so ruling, the trial court relied on the fact that plaintiff admitted his personal damage claim exceeded $25,000, id., at 246-47. The trial court dismissed the class action claims and compelled arbitration as to the balance of the complaint.

Arbitration Class Action Court Decisions Uncategorized

Winig v. Cingular Wireless-Class Action Defense Cases: California Federal Court Denies Defense Motion To Compel Arbitration Under Agreement Barring Class Action Lawsuits Holding Arbitration Clause Unconscionable

California Court Holds that Arbitration Clause Barring Class Action Lawsuits in Contract Governed by Federal Arbitration Act (FAA) Unconscionable and that FAA does not Preempt State Law Against Class Action Waivers

Plaintiff filed a putative class action against his cellular telephone provider – for, inter alia, violations of the Federal Communications Act, and California’s unfair competition laws (UCL) and Consumers Legal Remedies Act (CLRA) – alleging that it charged his cell phone calls to himself (primarily to check his voicemail) against his “limited number of ‘anytime minutes’” instead of treating them as part of his “unlimited free ‘mobile to mobile’ calls,” contrary to promises made to him by Cingular representatives when he entered into the service contract. Winig v. Cingular Wireless LLC, ___ F.Supp.2d ___, 2006 WL 2766007, *1 (N.D. Cal. September 27, 2006). Defense attorneys moved to compel arbitration under a clause governed by the Federal Arbitration Act (FAA), _id._; that arbitration clause required customers to bring claims only in an “individual capacity,” thereby precluding participation in class action lawsuits, _id._, at *3. The district court denied the motion.

Arbitration Class Action Court Decisions Uncategorized

Cingular Class Action Defense Case-Stern v. Cingular Wireless: Arbitration Provision Waiving Class Action Remedy Unenforceable California Federal Court Holds

California Federal District Court Holds Arbitration Clause Requiring Arbitration at Customers’ Expense and Waiving Right to Class Action Device to be Unconscionable and Unenforceable

In November 2004, plaintiff signed a service agreement with AT&T Wireless, and received a booklet entitled “Important Information and Service Agreement” that contained in part an arbitration clause governed by the Federal Arbitration Act (FAA) and a class action waiver. Cingular Wireless thereafter acquired AT&T Wireless; its customers also signed service agreements that contained arbitration clauses, but Cingular’s agreement provided that the company would pay the cost of the arbitration unless the customer’s action is frivolous, and that the company would pay the customer’s attorney fees if the arbitrator awarded the amount the customer demanded or more. In December 2005, plaintiff filed a class action lawsuit in California federal court against AT&T and Cingular for violations of the Federal Communications Act, declaratory relief, breach of contract, violations of California’s unfair competition law (UCL), and violations of California’s Consumers Legal Remedies Act (CLRA), based on the allegation that defendants charged customers for services that the customers had not authorized, totaling approximately $9 per month. Stern v. Cingular Wireless Corp., 453 F.Supp.2d 1138, 1141-43 and 1149 (C.D. Cal. July 28, 2006). Defense attorneys moved to compel arbitration and stay the litigation; plaintiff’s lawyer argued that the arbitration clause was unconscionable and unenforceable. The district court denied the defense motion, concluding that the class action waiver was unconscionable.

Arbitration Class Action Court Decisions Uncategorized

Cingular Class Action Defense Case-Kinkel v. Cingular: Illinois Rejects Defense Efforts To Enforce Arbitration Clause Barring Class Action Device And Refuses To Apply Arbitration Terms Effective After Class Action Plaintiff Terminated Service Contract

Court Holds that Arbitration Clause in Effect at Time Class Action Plaintiff Terminated her Service Agreement Governed in Motion to Compel Arbitration, and Class Action Waiver in Wireless Service Provider’s Arbitration Clause Held Unenforceable by Illinois Supreme Court

Plaintiff filed a class action in Illinois state court against her cellular telephone service provider, Cingular Wireless, for alleged violations of the state’s Consumer Fraud and Deceptive Business Practice Act on the ground that the early termination fee is an unlawful penalty. Defense attorneys moved to compel arbitration pursuant to an arbitration clause that provided that “‘no arbitrator has the authority’ to resolve class claims.” Kinkel v. Cingular Wireless LLC, ___ N.E.2d ___, 2006 WL 2828664 (Ill. October 5, 2006) [Slip Opn., at 1]. The trial court refused to compel arbitration. The appellate court held that the arbitration clause was enforceable, but that the prohibition against class action arbitrations was not; accordingly, it reversed the trial court’s ruling. _Id._ The Illinois Supreme Court rejected defense arguments that the class action bar was enforceable and affirmed the decision of the appellate court.

Plaintiff signed a two-year service contract with Cingular in July 2001, but terminated her service in April 2002. Cingular charged her a $150 early-termination fee, in accordance with the terms of the service agreement plaintiff signed when she became a customer. Slip Opn., at 2. Plaintiff filed a class action against Cingular, arguing that the early-termination fee was an illegal penalty and that the class action waiver in the arbitration clause “prevents her and others from ‘effectively vindicating their statutory and common law causes of action and facilitates rather than remedies Cingular’s fraudulent and unlawful conduct.’” Id. The trial court denied a defense motion to compel arbitration; the appellate court found the class-action waiver provision to be unenforceable but severable from the balance of the arbitration clause, and so reversed. Id.

Arbitration Class Action Court Decisions Uncategorized

DirecTV Class Action Defense Case-Cohen v. DirecTV: Class Action Waiver In Arbitration Clause Unconscionable And Unenforceable California Court Holds

In Action Alleging California Consumers Legal Remedies Act (CLRA) and Unfair Business Practices (UCL) Claims, California Court of Appeal Affirms Trial Court Order Denying Defense Motion to Compel Arbitration of Under Arbitration Clause that Prohibited Class Action Litigation

Philip Cohen filed a putative class action in California state court against DirecTV under California’s Consumers Legal Remedies Act (CLRA) and unfair business practices (UCL) on the grounds that DirecTV broadcast to its HDTV customers a “below-standard signal, contrary to its advertisements.” Cohen v. DirecTV, Inc., 142 Cal.App.4th 1442, 1445 (Cal.App. 2006). Defense attorneys moved to compel arbitration; plaintiff’s lawyer argued that the arbitration clause was unconscionable because it prohibited class action litigation of claims, and that the arbitration clause was not binding on plaintiff because of the manner in which it had been added to DirecTV’s customer agreement. The trial court denied the defense motion on the grounds that the arbitration provision was “procedurally and substantively unconscionable, against public policy and unenforceable.” Id., at 1446. DirecTV appealed, and the Court of Appeal affirmed.

Arbitration Class Action Court Decisions Uncategorized

Muhammad v. County Bank-Class Action Defense Cases: FAA (Federal Arbitration Act) Governed Arbitration Clause Forbidding Class Actions Unconscionable New Jersey Supreme Court Holds

New Jersey Supreme Court Holds that Provision in Arbitration Agreement Prohibiting Class Actions is Unconscionable but Severable so that Plaintiff may Pursue Class-Wide Arbitration

A part-time college student filed a class action against a lender for alleged violations of New Jersey consumer-fraud statutes; the defense moved to compel arbitration of plaintiff’s individual claim based on a class-action bar in an arbitration agreement. Muhammad v. County Bank of Rehoboth Beach, Delaware, ___ A.2d ___, 2006 WL 2273448 (N.J. August 9, 2006). The student had received a short-term unsecured loan in the amount of $200 on May 23, 2003, which she promised to repay, together with a “finance charge” of $60, on June 13, 2003. This meant that the annual percentage rate of the loan was 608.33%. Slip Opn., at 4. She extended the loan twice; each extension required an agreement to pay a $60 finance charge. Unable to pay the loan, plaintiff filed a class action against the lender. _Id._, at 8.

The loan application signed by plaintiff contained an arbitration clause requiring that any dispute be arbitrated, and that barred “bring[ing], join[ing] or participat[ing] in any class action,” Slip Opn., at 5-6. Plaintiff also executed a “Loan Note and Disclosure” form that reiterated the prohibition against class actions. Id., at 6-7. The defense moved to compel arbitration; the trial court granted the motion and the appellate court affirmed. Id., at 9-10. The New Jersey Supreme Court addressed “whether a provision in an arbitration agreement that is part of a consumer contract of adhesion is unconscionable and therefore unenforceable because it forbids class-wide arbitration.” Slip Opn., at 2-3.

Arbitration Class Action Court Decisions Uncategorized

Skirchak v. Dynamics Research-Class Action Defense Cases: Employer’s Dispute Resolution Program Barring Class Action Claims For Alleged Violations Of Federal Fair Labor Standards Act (FLSA) Unconscionable Massachusetts District Court Holds

Federal District Court Refuses Defense Motion to Dismiss Class Action and Enforce Arbitration Agreement Holding FAA (Federal Arbitration Act) Provision Barring Class Action FLSA Claims Unconscionable Under Specific Facts of Case

Employees filed a putative class action alleging violations of the federal Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq., for failure to pay overtime. The defense filed a motion to dismiss the class action complaint and to enforce a enforce the company’s “dispute resolution program” governed by the Federal Arbitration Act (FAA) which, in part, barred class actions. Skirchak v. Dynamics Research Corp., Inc., 432 F.Supp.2d 175 (D. Mass. 2006). (This class action defense has been raised in other cases discussed in separate articles.) The district court denied the defense motion, applying the well-settled rule that FAA agreements are subject to the standard defenses available in contract actions, including fraud, duress and unconscionability. Skirchak, at 178 (citing Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652 (1996)).

The court first addressed the language of FLSA itself, and acknowledged that Congress did not expressly guarantee the right to file class actions for FLSA claims. Skirchak, at 179 (citing Kuehner v. Dickinson & Co., 84 F.3d 316, 319-20 (9th Cir.1996)). But the court believed that the fact FLSA provides for collective actions, see 29 U.S.C. § 216, meant that Congress “implicitly” intended to allow such class actions, Skirchak, at 179.

Arbitration Class Action Court Decisions Employment Law Class Actions Uncategorized

Federal Court Order Compelling Arbitration And Granting Class Action Defense Motion To Dismiss TILA Case Is Appealable Under FAA And Plaintiff Did Not Meet Burden Of Establishing Prohibitive Cost of Arbitration-Class Action Defense Cases

Green Tree v. Randolph: U.S. Supreme Court Upholds Order Compelling Arbitration Pursuant to Lender’s Arbitration Provision under Federal Arbitration Act (FAA) Because Plaintiff Did Not Establish that Arbitral Forum would be Prohibitively Expensive: Truth in Lending Act (TILA) Class Action Claims Properly Dismissed

In Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000), the United States Supreme Court addressed two issues: (1) whether a court order granting a defense motion to compel arbitration and dismissing (rather than staying) the plaintiff’s claims is immediately appealable under the Federal Arbitration Act (FAA), 9 U.S.C. § 16(a)(3) as a “final decision with respect to an arbitration”; and (2) whether an arbitration provision that is silent on the question of allocation and amount of arbitration fees and costs is unenforceable for failure to “affirmatively protect a party from potentially steep arbitration costs.” Id., at 82. The putative class action against Green Tree alleged violations of the federal Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq., and arose from a loan to the putative class action representative for the purchase of a mobile home evidenced by a Manufactured Home Retail Installment Contract and Security Agreement that expressly provided for all disputes to be resolved by finding arbitration under the provisions of the FAA. Id., at 82-83 and n.1. Plaintiff asserted that Green Tree violated TILA by failing to disclose a specific insurance requirement as a finance charge; she later added a claim under the federal Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691 et seq. based on the requirement that she arbitrate her statutory claims for relief. The district court granted the class action defense team’s motion to compel arbitration and dismissed plaintiff’s claims with prejudice. The court also denied the plaintiff’s request to certify the case as a class action. Id., at 83.

Arbitration Class Action Court Decisions RESPA/TILA Class Actions Uncategorized

Class Action Defense Cases–Kristian v. Comcast: Class Action Waiver In Arbitration Clause Unenforceable

Arbitration Agreements Retroactive and Enforceable But Class Actions And Attorney Fees Waiver Unenforceable First Circuit Holds

Circuit Courts of Appeal continue to struggle with whether class action waivers in arbitration agreements are enforceable. On April 20, 2006, the First Circuit addressed that issue, and several others, in Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006). Subscribers filed putative class actions against cable TV giant Comcast alleging violations of state and federal antitrust laws. Comcast moved to compel arbitration based on an arbitration clause first added to the subscription service agreements in 2001. This motion was critical to Comcast’s defense of the class action for several reasons, chief among them that the arbitration agreements barred class action arbitration and barred recovery of attorney fees and costs. The district court concluded that the arbitration provisions did not apply retroactively and refused to compel arbitration. Id., at 29-30. The First Circuit Court of Appeals reversed, but severed the class action waiver provision, as well as the provision barring recovery of attorney fees and costs, holding that those provisions “prevent the vindication of statutory rights under state and federal law.” Id., at 29. Kristian spans 40 pages in the Official Reports and so cannot be explored in detail here. It will be discussed at length in a separate article concerning the enforceability of class action waivers in arbitration agreements. We provide here but a brief overview of the highlights of Kristian.

• Comcast provided adequate notice of the arbitration agreements and the provision waiving class actions, provided as a “billing stuffer” with the subscribers’ November 2001 invoices, Kristian, at 30, 36-37. The arbitration provision – including the waiver of class action claims – was set forth in bold face and capital letters, id., at 31-32.

• While none of the plaintiffs’ initial service agreements contained arbitration clauses or the class action waivers, the arbitration agreements nonetheless applied retroactively. Id., at 30, 31-36.

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