Individual arbitration is plaintiff’s “only remedy, illusory or not” — Third Circuit

[author: Liz Kramer]

The earthquake that was the Concepcion decision (in April of 2011) is still sending aftershocks throughout the judicial system.  In last week’s ruling, the Third Circuit compelled individual arbitration in Homa v. American Express Co., 2012 WL 3594231(3d Cir. Aug. 22, 2012), a case in which the parties have been fighting about whether the plaintiff must arbitrate individually, or may bring a class arbitration, since 2007.

The plaintiff in this case sought to represent a class of AmEx cardholders alleging false marketing.  However, the arbitration clause in his credit card agreement explicitly waived any right to a class arbitration.  The plaintiff brought his case in NJ federal court court and argued that the class action waiver was unconscionable under a 2006 decision from New Jersey’s high court.  The plaintiff then rode this procedural roller coaster: the federal district court granted AmEx’s motion to compel individual arbitration (down); the Third Circuit reversed, based on the New Jersey state precedent and remanded for careful application of the Jersey law (up!); on remand, the parties conducted additional discovery (whee!);  AmEx then successfully moved to stay the case pending the Supreme Court’s Concepcion decision (car stuck upside down on loop); after Concepcion, the district court reinstated its initial ruling, and, in this opinion, the Third Circuit affirmed the mandate for individual arbitration (full stop; ride over).

The Third Circuit quoted its 2011 opinion in Litman, explaining the holding of Concepcion: “a state law that seeks to impose class arbitration despite a contractual agreement for individualized arbitration is inconsistent with, and therefore preempted by, the FAA.”

In response to the evidence the plaintiff had developed showing that enforcing the arbitration clause “would make it impossible for any person . .. to effectively vidicate his substantive statutory rights,” the court was apologetic, but firm: “Even if [plaintiff] cannot effectively prosecute his claim in an individual arbitration that procedure is his only remedy, illusory or not.”  In a footnote, the court backpedaled a bit “We are not implying that we believe that we are reaching an unfair result…we merely are recognizing that other persons might think that we are doing so.”  The Third Circuit thus joined a growing number of courts who apologetically enforce SCOTUS’s arbitration decisions.

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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