Since the last post dealt with legislative overrides of arbitration agreements, this one will expand on that theme with a preview of an upcoming Supreme Court case. In CompuCredit Corp. v. Greenwood, to be heard on October 11, the Supreme Court will decide whether Congress intended to prohibit arbitration of claims brought under a statute that regulates companies who offer to improve a consumer’s credit rating.
In this case, consumers brought claims under the Credit Repair Organizations Act against the marketer of a credit card that advertised its ability to “rebuild poor credit.” Although the credit card contract had arbitration provisions, the federal district court denied the defendant’s motion to compel arbitration and the Ninth Circuit Court of Appeals affirmed. Both courts concluded that the language of the CROA showed Congress intended to prohibit arbitration of those claims. The Ninth Circuit opinion opened colorfully with a Lewis Carroll quote:
This appeal presents the question, inter alia, as to whether the word “sue,” as used in the Credit Repair Organization Act (“CROA”), means “arbitrate.” Or, perhaps the question is, as Alice put it: “whether you can make words mean so many different things?” We conclude that Congress meant what it said in using the term “sue,” and that it did not mean “arbitrate.”
615 F.3d 1204 (9th Cir. 2010).
At issue is how specific Congress must be in order to preclude arbitration of specific statutory claims. In this case, the question comes down to whether or not three provisions of the CROA show Congress intended to allow claims under the statute to proceed exclusively in court. In the first provision, the statute mandates that credit repair companies advise consumers that “You have a right to sue a credit repair organization that violates the Credit Repair Organization Act.” Second, the statute authorizes civil suits: “Any person who fails to comply with any provision of [the CROA] with respect to any other person shall be liable to such person” for damages. Third, the statute nullifies any contractual waiver of its protections: “Any waiver by any consumer of any protection provided by or any right of the consumer under” the CROA “shall be treated as void.” The consumers successfully argued that the arbitration provision was a “waiver” of their “right to sue” under the statute, and therefore void.
The appellant has some good things going for it: Why would the Supreme Court accept this case if not to reverse? And, to quote the appellant’s brief: “The FAA’s presumption favoring arbitration is so strong that, in the past 25 years, this Court has not once denied enforcement of an agreement to arbitrate a federal statutory claim.” On the other hand, to rule for the appellant, the Court would have to find the plain meaning of a “right to sue” encompasses both arbitration and filing a lawsuit in court. That seems a bit like President Clinton arguing about the meaning of the word “is.” Still, I would put my money on a reversal.
Here are other interesting discussions of the case and the third parties who are weighing in: