Supreme Court Again Denies Challenge to Consumer Arbitration
In yet another opinion expressing the Supreme Court’s favorable position on consumer arbitration, on January 10, 2012, the Court in CompuCredit Corp. v. Greenwood, No. 10-948, held that the Credit Repair Organizations Act, 15 U.S.C. § 1679 et seq. (CROA or the Act) did not preclude enforcement of an arbitration clause in the Respondents’ consumer credit applications. The decision, which may be found here, makes clear that absent a statutory provision expressly restricting or denying arbitration, the Federal Arbitration Act requires enforcement of an arbitration agreement.
In arguing that CROA precluded enforcement of the arbitration provisions in their consumer credit applications, the Respondents focused on three aspects of the Act: (1) its disclosure requirement, which mandates that all credit repair organizations provide a statement that the consumer “has a right to sue” the organization if it violates CROA; (2) a provision of CROA rendering any agreement purporting to waive a consumer’s rights under the Act “void” and unenforceable; and (3) CROA’s civil liability provision, which contains terms such as “action,” “class action,” and “court.” According to the consumer Respondents, the U.S. District Court, and a divided panel of the Ninth Circuit, these provisions indicated that Congress did not intend for claims under CROA to be arbitrable.
The Court, in an opinion by Justice Scalia, disagreed, first taking issue with the premise that CROA’s disclosure requirement provided the Respondents with any right to sue under the Act in a court of law. Rather, the court explained, “the only consumer right it creates is the right to receive the statement[.]” Slip Op. at 4. Relying on Shearson/Am. Express Inc. v. McMahon, 482 U.S. 220, 226 (1987), which held that that Federal Arbitration Act controls, unless it is “overridden by a contrary congressional command,” the Court also reasoned that the terms used in CROA’s civil liability provision “cannot do the heavy lifting” sufficient to make such a showing. Id. at 6. Further reiterating its strong support for arbitration, the Court yet again noted that the Federal Arbitration Act establishes “a liberal policy favoring arbitration agreements” that “requires courts to enforce agreements to arbitrate according to their terms.” Id. at 2.
The Court went on to note that CROA’s enactment in 1996 – at a time when arbitration agreements “were no rarity” – indicated that had Congress intended to limit arbitration under CROA, “it would have done so in a manner less obtuse than what Respondents suggest.” Id. at 8. The Court illustrated this point through references to several other statutes, such as in the Commodity Exchange Act (7 U.S.C. § 26(n)(2)), the Motor Vehicle Franchise Contract Arbitration Fairness Act (15 U.S.C. § 1226(a)(2)), and the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. § 5518(b)). All of these provisions contain language explicitly restricting certain kinds of arbitration.
CompuCredit follows on the heels of the Court’s landmark April 2011decision in AT&T Mobility v. Concepcion, which upheld the validity of arbitration provisions containing class action waivers. These opinions are part of a long trend of the Court validating parties’ agreements to submit claims to arbitration under the Federal Arbitration Act.
© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result. Follow Troutman Sanders on Twitter.