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WASHINGTON — A Supreme Court decision limiting class-action lawsuits was a win for banks and other corporations on Wednesday, but the victory may prove to be short-lived.
April 27 -
Customers of AT&T and other companies that are using arbitration provisions will be able to vindicate their claims in arbitration much more effectively than they can in court.
October 19
A Supreme Court ruling on Tuesday upheld the controversial practice of including mandatory arbitration clauses in credit card contracts.
Credit card lenders and other companies sometimes use mandatory arbitration clauses in contracts to prevent consumers from suing them in court. Consumer advocates have
The court's decision came after customers of CompuCredit Corp. and Columbus Bank and Trust filed a class-action lawsuit against the companies for unlawfully marketing a subprime credit card. The card was advertised as a tool to help rebuild credit and was supposed to have a $300 limit. But critics alleged that fees on the card totaled $257 the first year they had the card.
The 8-1 ruling struck down an earlier appeals court decision that the Credit Repair Organizations Act gives consumers the "right to sue" in court and bars consumers from waiving their rights under the law. CROA outlaws unfair business practices at companies designed to help consumers repair their credit.
The decision is the latest high court decision in support of mandatory arbitration, on the heels of last year's closely-watched decision involving wireless carrier AT&T. In AT&T v. Concepcion, the court voted 5-4 that companies
In its CompuCredit Corp. v. Greenwood decision Tuesday, the court said that CROA does not address whether claims can be arbitrated, which means that mandatory arbitration is enforceable under the Federal Arbitration Act.
"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," Justice Antonin Scalia wrote in the opinion.
"Had Congress meant to prohibit these very common [mandatory arbitration] provisions in the CROA, it would have done so in a manner less obtuse than what respondents suggest," Scalia adds.
Justice Sonia Sotomayor wrote a concurring opinion, joined by Justice Elena Kagan. Justice Ruth Bader Ginsburg was the only dissenter.
Consumers filed a class-action suit against CompuCredit and Columbus Bank in 2008, alleging that the companies unlawfully marketed their subprime Aspire Visa card. Columbus Bank is now a division of Synovus Bank.
The companies responded to the suit by filing a motion to compel arbitration, pointing to the card contract which mandated dispute resolution outside of court.
The district court and the U.S. Court of Appeals for the Ninth Circuit initially denied the motion to compel arbitration, concluding that "Congress meant what it said in using the term 'sue,' and that it did not mean 'arbitrate.'"
