With the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion having left many judges and class action attorneys frustrated with the current state of class action lawsuits, a new decision by the Massachusetts Supreme Judicial Court has reawakened hope for plaintiffs to achieve justice in a court of law. According to the new decision by the Court, a class action ban, as part of an arbitration agreement, is only enforceable if the plaintiff cannot provide compelling evidence that the ban on class actions would prevent them from obtaining a remedy under state law.
The Court recently ruled in two cases where the plaintiffs tried to prove that the class action bans in the relevant arbitration agreements were unenforceable. In Feeney v. Dell Inc., the Court ruled in favor of the plaintiffs, having found that they provided sufficient evidence that the ban on class actions would prevent them from pursuing their claims. In another case, Machado v. Systems4 LLC, the Court upheld the class action ban present in the arbitration agreement, having found that the plaintiffs did not provide sufficient evidence that the ban prevented them from obtaining a remedy under state law.
In its decision in Feeney v. Dell Inc., the Court stated that the Supreme Court’s decision in Concepcion did not provide for a general public-policy-based prohibition on class-actions. Instead, the Court decided that the fact that arbitration procedures must not prevent plaintiffs from attaining justice in a court of law remains despite the Supreme Court’s decision in Concepcion.
The Court further denied that this interpretation applies only to federal statutory rights. Instead, it argued that the Federal Arbitration Act does not deny any remedies available under state law. As a result, a state court cannot prevent the Federal Arbitration Act from achieving its intended goals, simply by deciding that certain provisions of an arbitration agreement are unenforceable if those provisions prevent the assertion of claims provided by relevant state laws.
The court therefore decided that the enforceability of class action bans as part of arbitration agreements would be dependent upon “case-specific factual showings” that the ban would prevent plaintiffs from obtaining remedies which are granted to them by state law. In Feeney v. Dell Inc., a case involving small-dollar claims, the court determined that the class action ban would effectively prevent the plaintiffs from pursuing their claims, as individuals are unlikely to pursue lengthy and often costly litigation for insubstantial amounts. The case of Machado v. System4 LLC, on the other hand, consisted of significantly larger monetary claims, of the sort that individuals are likely to pursue in court, even without the added power of a class action. The court, therefore, determined that, in such a case, the class action ban present in the arbitration agreement remained valid.
The Massachusetts Supreme Judicial Court is not alone in this interpretation of the law. The Missouri Supreme Court and the Second Circuit have also recognized that circumstances exist in which a class action ban cannot be upheld in a court of law. However, the Second Circuit’s decision in Amex that a class action ban which prevents the attainment of rights granted by federal law is unenforceable was just reversed by the Supreme Court. The decision that the Supreme Court has reached in Amex undercuts the reasoning using by the Massachusetts Supreme Judicial Court and allows class-action bans in arbitration agreements all over the nation to preclude class actions from proceeding, even if they are the only means of providing a means for protecting the rights at issue. The Supreme Court has provided businesses with a means of protecting themselves from expensive class action litigation.
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