CompuCredit Corp. v. Greenwood: New SCOTUS Arbitration Decision May Shed Light on Future of Employment Class Action Waivers

In CompuCredit Corp. v. Greenwood, --- S.Ct. ----, 2012 WL 43514 (1/10/12) the Supreme Court of the United States (SCOTUS) considered whether the Credit Repair Organizations Act (CROA), 15 U.S.C. § 1679 et seq., precludes enforcement of an arbitration agreement in a lawsuit alleging violations of that Act. The plaintiffs filed a putative class action under the CROA, the defendant moved to compel arbitration, the trial court (N.D.Cal., Judge Claudia Wilken) denied the motion, and the Ninth Circuit affirmed. 

In an opinion written by Justice Scalia, the Supreme Court reversed.  First, the CROA's provision requiring credit repair organizations to notify consumers of their right to sue ("You have a right to sue a credit repair organization that violates the Credit Repair Organization Act") is a notification provision, not a private right of action provision (which occurs elsewhere in the CROA) and "does not create a right to initial judicial enforcement."  Slip op. at 4.  

Second, the CROA's non-waiver language ("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") does not prohibit the waiver of one's right to proceed in court because, again, the CROA "does not create a right to initial judicial enforcement."  Ibid.  

Because the CROA "is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms."  Slip op. at 6. 

This brings to my mind the somewhat related issue in the National Labor Relations Board's recent decision in D.R. Horton, Inc. (blogged here).  In D.R. Horton, the Board held that an employer violates Section 8(a)(1) of the National Labor Relations Act (NLRA) when it requires employees covered by the Act, as a condition of employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours, or other working conditions against the employer in any forum, whether arbitral or judicial.  The Board emphasized that its holding did not implicate the Federal Arbitration Act (FAA) because the policy at issue prohibited collective or class actions in any forum, not just in arbitration.  However, even if the NLRA did conflict with the FAA, the FAA would have to yield: 

[U]nder the Norris-LaGuardia Act, a private agreement that seeks to prohibit a “lawful means [of] aiding any person participating or interested in” a lawsuit arising out of a labor dispute (as broadly defined) is unenforceable, as contrary to the public policy protecting employees’ “concerted activities for . . . mutual aid or protection.” To the extent that the FAA requires giving effect to such an agreement, it would conflict with the Norris-LaGuardia Act. The Norris-LaGuardia Act, in turn—passed 7 years after the FAA,—repealed “[a]ll acts and parts of act in conflict” with the later statute (Section 15). 

Would this reasoning hold in the Supreme Court?  Addressing federal laws that prohibit arbitration, Justice Scalia in CompuCredit wrote: 

When [Congress] has restricted the use of arbitration in other contexts, it has done so with a clarity that far exceeds the claimed indications in the CROA. See, e.g., 7 U.S.C. § 26(n)(2) (2006 ed., Supp. IV) (“No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section”); 15 U.S.C. § 1226(a)(2) (2006 ed.) (“Notwithstanding any other provision of law, whenever a motor vehicle franchise contract provides for the use of arbitration to resolve a controversy arising out of or relating to such contract, arbitration may be used to settle such controversy only if after such controversy arises all parties to such controversy consent in writing to use arbitration to settle such controversy”); cf. 12 U.S.C. § 5518(b) (2006 ed., Supp. IV) (granting authority to the newly created Consumer Financial Protection Bureau to regulate predispute arbitration agreements in contracts for consumer financial products or services).

Slip op. at 5.  Justice Sotomayor, joined by Justice Kagan, joined in the result, but added this note: 

The majority opinion contrasts the liability provision of the Act with other, more recently enacted statutes that expressly disallow arbitration. I 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. We have never said as much, and on numerous occasions have held that proof of Congress' intent may also be discovered in the history or purpose of the statute in question.  See ibid. (“If such an intention exists, it will be discoverable in the text of the [statute], its legislative history, or an ‘inherent conflict’ between arbitration and the [statute's] underlying purposes”); Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 227, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) (“If Congress did intend to limit or prohibit waiver of a judicial forum for a particular claim, such an intent ‘will be deducible from [the statute's] text or legislative history,’ or from an inherent conflict between arbitration and the statute's underlying purposes” (quoting Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985); citation omitted)). 

Slip op. at 8.  

If the Supreme Court does eventually take up the Board's decision in D.R. Horton, it is possible that the decision will turn on the question of whether Congress, in enacting the NLRA and the Norris-LaGuardia Act, intended the employee protections of those acts to trump the policies at work in the FAA.  

Until then, the Court's opinion in CompuCredit is available here.