Class Actions, COVID-19, and Class-Action Waivers: The Triple Whammy

Earlier this year, we posted a three-part series on the Coronavirus and Class Action litigation.  More recently, and almost a month ago, we posted an article on class action waivers and arbitration.  As luck would have it, the United States District Court for the Central District of California has afforded us an opportunity to address both issues in a single, connected article.

On October 20, 2020, Judge Klausner issued his order in Archer, et al. v. Carnival Corporation.  No. 2:20-cv-04203, Doc. 92 (“Order”).  This Order is the first of its kind related to COVID-19 and the cruise industry.  As we stated in our prior post, the cruise industry was the initial focal point for significant class action litigation arising out of COVID-19.

In this Order, Judge Klausner provided the cruise industry with some reprieve as it related to Robert Archer’s attempt to represent a class.  The Order held that the class-action waiver found in Mr. Archer’s Passage Contract was valid and enforceable.  Specifically, the Order applied the “two-pronged reasonable communicativeness test” to determine under “federal common law and maritime law” whether the passengers were contractually bound by the class action waiver included in their Carnival cruise ticket.

The first prong of the reasonable communicative test analyzes the “physical characteristics of the ticket,” including “size of type, conspicuousness and clarity of notice on the face of the ticket, and the ease with which a passenger can read the provisions in question.”   Upon review, the Court determined the “Passage Contract [was] sufficiently conspicuous . . . [and] available to passengers in several ways”:

First, the Booking Confirmation PDF linked to the Passage Contract. Second, if a passenger opened the Cruise Personalizer, the Passage Contract would show up in a dialog box. Finally, the Passage Contract was also available on Princess Cruises’ website. Once a passenger opens the Passage Contract, the first paragraph warns passengers ‘IMPORTANT NOTICE TO GUEST’ and encourages the passenger that it is important for them to read Section 15, which limits the passenger’s right to sue. The title of Section 15 clearly states that in all-caps it includes a class-action waiver.  Subsection C states, ‘WAIVER OF CLASS ACTION’ and unambiguously indicates that the passenger is waiving her right to pursue a class or collective action against Princess Cruises.”

Under the second prong, the Court evaluated certain extrinsic factors related to the passenger’s ticket purchase—i.e., “[P]assenger’s familiarity with the ticket, the time and incentive under circumstances to study the provisions of the ticket, and any other notice that the passenger received outside of the ticket.”  Again, the Court determined that passengers had sufficient opportunity to review the Passage Contract’s terms:

Princess Cruises sent the Booking Confirmation Email and the Booking Confirmation PDF—each of which linked to the Passage Contract—to Plaintiffs upon booking. Passengers were also required to affirmatively select that they had read and accepted the passage contract. At any point, the passenger could print out the contract and peruse its terms. Plaintiffs have presented no evidence that Defendants took away their opportunity to review the contract before, during, or after the cruise.

In addition to the two prongs of the reasonableness communicativeness test, the Order also discussed three additional points favoring preservation of class-action waivers.  First, the Court held that the Passenger Contract satisfied any scrutiny for fundamental fairness because “Plaintiffs [did] not provide any evidence of bad-faith motive, fraud, overreaching, or that the waiver discourages passengers from pursuing legitimate claims.”   Second, the Court held that “[c]lass-actions waivers in the cruise ship context are not unconscionable.”   Third, and finally, the Court held that the “class-action waiver is not void as a matter of public policy.”

In the end, Archer serves as a reminder of the import of class-actions waivers.  As we stated in our prior article, we believe it is important to consider whether to employ a class-action waiver divorced from an arbitration agreement:

By employing a class action waiver, a corporate defendant can prevent a class action without the risk of mass arbitration filings that often require the defendant to pay a significant sum in filing fees. If mass filings do occur in either state or federal courts, the corporate defendant can take advantage of various consolidation methods for streamlined discovery and will not be on the hook for the filing fees of these cases at the outset.”

Ultimately, Archer confirms this consideration and lends further credence to the fact that a class-action waiver, in and of itself, is a powerful tool that should be considered and thoughtfully implemented.

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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