Following on the heals of its pro-arbitration decision in Concepcion from earlier this year, the United States Supreme Court ruled today that a federal statute that provides for a private right of action and even for class actions, but is silent as to whether these claims can proceed in arbitration, does not trump the Federal Arbitration Act. See CompuCredit Corp. v. Greenwood, 566 U.S. __ (2011).
As the U.S. Supreme Court has stated on numerous occasions, there is “a liberal federal policy favoring arbitration.” Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). In CompuCredit Corp. v. Greenwood, No. 10-948 (U.S. Jan. 10, 2012), the Court trotted out that old refrain again today, holding that the fact that a federal statute provides for a private right of action—while silent on the issue of whether claims under the statute can be pursued in arbitration—does not mean that the plaintiffs can get out of their agreement to arbitrate with the defendant. The plaintiffs were unhappy with the agreement for a credit card they entered into. They argued that the Credit Repair Organizations Act (CROA), 15 U.S.C. § 1679 et seq., specifically provided a requirement for the defendant to disclose to consumers that “You have a right to sue a credit repair organization that violates the Credit Repair Organization Act.” 15 U.S.C. § 1679c(a). The CROA also provides that “Any waiver by any consumer of any protection provided by or any right of the consumer under this subchapter—(1) shall be treated as void; and (2) may not be enforced by any Federal or State court or any other person.” 15 U.S.C. § 1679f(a).
The Ninth Circuit held that the disclosure and non-waiver provisions acted in tandem to permit a consumer “to bring an action in a court of law,” 615 F.3d 1204, 1208 (9th Cir. 2010), and thus the arbitration clause in the plaintiffs’ contracts was unenforceable.
As it did earlier this term in AT&T Mobility LLC v. Concepcion, 563U.S. __ (2011), the Supreme Court once again rejected the Ninth Circuit’s reasoning. The notice provision, Justice Scalia wrote for the majority, does not give a right to be in court. It merely gives the right to a disclosure of rights that a party might otherwise have. Even the CROA’s references to a private right of “action,” or references to “class action” and “court,” were not enough to sway the majority. Those terms, it reasoned, were not “sufficient to establish the ‘contrary congressional command’ overriding the FAA. Slip op. at 5-6 (citation omitted). When a federal statute is silent as to whether a claim may be subject to arbitration, “the Federal Arbitration Act requires the arbitration agreement to be enforced according to its terms.” Slip op. at 10.