In my recent two-part guest post published in Disputing about recent state court decisions striking down mandatory arbitration clauses and class action waivers in consumer, online transactions, I concluded that those courts were “acting in legitimate ways [by requiring contract] disputes to be resolved in ways that provide relief for and deterrence of wrongdoing.”   (Part I here; Part II here)  In particular, I applauded the  New Mexico Supreme Court and the Supreme Judicial Court of the Commonwealth of Massachusetts for making explicit the purely public policy grounds for invalidating mandatory arbitration clauses and class action waivers in consumer transactions.  See  Feeney v. Dell Inc., ___ Mass. ___ (July 2, 2009); Fiser v. Dell Computer Corp., ___ P.3d ___ (N.M. June 27, 2009). The courts concluded that the provisions deprived consumers of any meaningful remedies for the defendants’ alleged breaches of contract and that those provisions were therefore in conflict with strong state policies in favor of consumer protection.

It is worth examining more closely, however, my reasons for believing the courts in these cases were acting in judicially legitimate ways.  It might be suggested, for example, that, if a court could strike these particular provisions down on public policy it had articulated without explicit statutory support, there would be nothing to stop courts from striking down any arbitration provisions on judicially formulated public policy grounds.

These fears are unfounded; the decisions in Feeney and Fiser fall well within the scope of the traditional power of state courts to interpret and develop contract law.  Moreover, these decisions were based on public policy applicable to any contract and therefore were exercises of power expressly reserved to state courts by Congress in the Federal Arbitration Act (the “FAA”). 

No one could plausibly argue that a state court lacks the power to invalidate an arbitration agreement that was obtained under duress, one that was unsupported by consideration, one that violated the statute of frauds, or one that lacked agreement on all material terms.  These grounds for striking down agreements have always been recognized as reasons to override freedom of contract.  Invalidating agreements for contravening judicially announced public policy that has not been pre-empted by federal law is just as legitimate an exercise of state judicial power as invalidating contracts under these and similar conventional contract doctrines.

The Restatement (Second) of Contracts makes this point explicit, stating that courts can invalidate agreements based solely on judicially recognized public policy:

A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such term.  (emphasis added) 

Restatement (Second) of Contracts, § 178.

It is important in this respect to recognize that Restatements are drafted as articulations of existing law, not as recommendations of what the authors believe the law should be.  As the American Law Institute explains:

Restatements are addressed to courts and others applying existing law. They aim at clear formulations of common law and its statutory elements or variations and reflect the law as it presently stands or might plausibly be stated by a court.  Restatement black-letter formulations assume the stance of describing the law as it is. (emphasis added)

Williston’s commentary corroborates the Restatement’s view that courts act legitimately when invalidating contracts contrary to public policy:

Common law, as distinguished from statutory development, forbids the actual performance of certain acts opposed to social welfare and proscribes various types of executory agreements.  Illegal bargains have been classified both by the common law and in statutory enactments as those opposed to positive law, those which are contrary to morality and those which offend public policy.  (footnote omitted; emphasis added).

5 Williston on Contracts § 12:1 (4th ed.).  Thus, “many acts which are themselves neither criminal nor tortious may not be made the subject of a contract . . . .”  Id.

Nonetheless — particularly given political rhetoric that criticizes judicial decisions based on public policy as illegitimate acts of “judicial activism” — courts frequently will avoid discussions of public policy and instead fashion their decisions to fit within expanded and even strained interpretations of conventional legal doctrine.

No doubt sound legal and political strategies drive the preference to articulate decisions in conventional doctrinal terms rather than in judicial formulations of public policy – why risk seeming appearing to tread on the domain of the legislature if you can reach your desired result by applying,  for example, a new interpretation of the venerable doctrine of consideration?

Such strategy seems a compelling explanation for the opinion in Harris v. Blockbuster, Inc. (N.D. Tex. April 15, 2009).  As I discussed in Part II of my Disputing guest post (here),  the court in Harris held that a consumer contract containing a mandatory arbitration and class action waiver was unenforceable as an “illusory” contract because the defendant could have (though it had  not) amended the agreement unilaterally and without notice.  The court’s reasoning seems to stretch near to breaking the conception of illusory obligations.  Since the contract in Harris had not been amended, the defendant’s obligations were in full force and effect at the time of the alleged breach; thus, conventional reasoning would support a conclusion that the defendant’s obligations were not illusory.

That is not to say that the result in Harris was wrong or that the contract was not an illusory one.  But the unilateral right to amend the contract had nothing to do with the contract’s illusory nature.  Even if the contract had not given the defendant a unilateral right to amend, its terms provided the plaintiff with only one avenue of relief for breach —  an individual arbitration proceeding in an inconvenient location.  Any damages awarded for breach were likely to be very low.  Given the expense and risk of seeking that relief and the inability to commence any class action proceeding, no rational plaintiff would have commenced arbitration.  In other words, the terms of the contract posed no real risk to the defendant that its obligations would be enforced by legal process.  Contractual promises which, if breached, pose no threat of liability are the very prototype of illusory promises.

Understanding the real defect of the contract in Harris also reveals that there is no meaningful difference between calling a contract unenforceable because it is “illusory” (a doctrinal argument) and calling it unenforceable because of what the courts in Feeney and Fiser described as public policy arguments – regardless of how one labels the nature of the reasoning, the contracts in all three of those cases were invalid because they provided the plaintiff consumers with no feasible means of enforcing the defendants’ promises.  Why should the law prefer justifications based on strained interpretations of contract theory originating centuries ago over justifications based on the real world consequences underlying that theory?

Even more important to me as a lawyer drafting contracts for clients, I’d far prefer to know what factual and ethical considerations render a  given provision unenforceable than to base my drafting decisions on my ability to parse the semantics of theories originating in times ruled by very different values and institutional practices.  I am not suggesting contract doctrine is not important; nor am I suggesting that I do not need to parse the semantics of common law doctrine.  What I am suggesting is that the law is a means of serving the policies that inform that doctrine. It is the substance, not the form, that matters most.

Thus, the decision by the New Mexico Supreme Court in Fiser in June and the decision by the Massachusetts Supreme Judicial Court in Feeney in July were refreshing in cutting straight to the unjust consequences of mandatory arbitration clauses and class action waivers in consumer transactions.  The decisions made obvious and undeniable that in consumer contracts arbitration is often used not to serve its legitimate purposes but instead to shield sellers of goods and services from most or even all liability for breach of their contractual obligations.

When a legal innovation provides real world advantages it eventually becomes widely accepted.  After its widespread acceptance, people stop questioning the benefits resulting from the innovation, taking for granted that the benefits are the inevitable consequences of the innovation.  At that point, some people begin to exploit the unquestioned acceptance of the innovation, finding ways to use it to advance less scrupulous ends.  Eventually, our legal institutions adjust, begin to distinguish between the productive uses of the innovation and the unscrupulous uses, and curb the use of the unscrupulous uses.

The history of arbitration, like many legal innovations, has thus far followed precisely this historical pattern, Feeney and Fiser are not novel in curbing the abuse of arbitration agreements.  Courts years over the past ten years have struck down mandatory arbitration clauses and class action waivers in consumer transactions on the grounds that they are “unconscionable.”  See, e.g., Scott v. Cingular Wireless, 160 Wash.2d 843, 161 P.3d 1000 (2000)(refusing to enforce mandatory arbitration clause and class action waiver on grounds of unconscionability);  Lowden v. T–Mobile USA, Inc., 512 F.3d 1213, 1218 (9^th Cir. 2007)(same).  Nevertheless, it is only with the opinions in Feeney and Fiser that courts are finally making explicit the practical ways in which arbitration’s purposes are being perverted and grounding their decisions on on the injustice of those perversions.

But it is not only the lucidity with which the courts describe the injustices at issue in Feeney and Fiser that make those decisions judicially legitimate.  For at least 16 years, courts have been willing to strike down arbitration provisions and awards on the basis of judicial articulations of public policy.  In Exxon Shipping Co. v. Exxon Seamen’s Union, 11 F.3d 1189, 1196 (3d. Cir. 1993), for example, the court struck down an arbitration award reinstating an able-minded seaman on an oil tanker who was found to be highly intoxicated while on duty.  The court held that enforcement of the arbitration award was against public policy implicit in, among other sources, federal environmental laws, and stated expressly that the result was appropriate even though the award ordered no conduct that violated any statute, regulation, or other manifestation of positive law.  In Alexander v. Anthony International, L.P., 341 F.3d 256, 270, (3d Cir. 2003), the court refused to enforce agreement to arbitrate requiring 30-day notice, restricting remedies and attorney’s fees, and requirements regarding arbitrator’s fees simply because they were “one sided and unreasonable.”

Finally, there is no compelling reason to interpret the FAA in a way that would foreclose state courts from invalidating mandatory arbitration clauses and class action waivers on public policy grounds.  Congress in enacting the FAA explicitly preempted the power of state courts to invalidate agreements to arbitrate merely only to the extent state policy applies only to agreements to arbitrate.  But Section 2 of the FAA also makes explicitly states that agreements to arbitrate can be invalidated for the same reasons any contracts can be invalidated:

[A]n agreement in writing to submit to arbitration an existing controversy . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (emphasis added). 

Thus, the FAA deprives state courts of the power to invalidate agreements to arbitrate on grounds that apply only to certain contracts, not all contracts.  Thus, for example, in Southland Corp. v. Keating, 465 U.S. 1, 17 (1984), the Supreme Court struck down the California Franchise Investment Law because that statute invalidated franchise agreements merely if they contained mandatory arbitration provisions.  But, under the FAA, a franchise agreement containing a mandatory arbitration provision necessarily is “valid, irrevocable, and enforceable” unless there is some defect in it that would make any contract invalid.  There was no evidence in Southland that any such defect existed.

As explained above, judicial formulations of public policy constitute “grounds . . . in law or in equity for the revocation of any contract.”  Thus, the FAA expressly reserves to the states the power to invalidate arbitration provisions that violate judicially recognized public policy as long as that public policy applies to any contract.  Any contract that provides no feasible remedy for breach is contrary to the very foundation of contract law –   giving the promisee the benefit of his bargain.  Surely, then, the FAA permits striking down consumer transactions that, by means of mandatory arbitration provisions and class action waivers, deprive parties of any meaningful means of enforcing the terms of those transactions. 

In short, courts that have invalidated mandatory arbitration provisions and class action waivers are promoting the very purposes of contract law.  Courts that have faced most squarely the real life injustices caused by such provisions are especially to be commended, and it would be contrary to common or commercial sense to suggest that the mere presence in these contracts of arbitration clauses could mean otherwise.

In part I of a two-part post (here), we summarized the Supreme Judicial Court of Massachusetts’ decision in Feeney v. Dell Inc., ___ Mass. ___, slip op. (July 2, 2009).  The Court there refused to enforce an arbitration agreement in a consumer contract because it contained a class action waiver that the Court found violative of Massachusetts public policy favoring class actions under G.L., c. 93A, and which the Court found not to be severable from the remainder of the arbitration agreement.  The Court also refused to enforce on public policy grounds a choice-of-law clause providing that Texas law – which apparently permits class action waivers — would govern the parties’ agreement.  In this part II we discuss whether the decision comports with the Federal Arbitration Act.

The critical issue in Feeney was whether a state public policy against class action waivers was preempted by the Federal Arbitration Act, the preeminent purpose of which is to enforce according to their terms arbitration agreements falling within its scope.  With all due respect to the SJC, we think Feeney was a tough case and that the preemption issue was a close call.  The Court obviously worked hard to justify the outcome and drilled down on the preemption issue, but at the end of the day its arguments simply proved too much. 

Discussion

As discussed in yesterday’s post, each party agreed with the Dell entities that it would arbitrate its claims, and only its claims, against those entities.  Each party agreed that Texas law – which permits class action waivers – would govern.  The agreements were not unconscionable, entered into under duress or otherwise subject to a defense applicable to contracts generally. 

But the SJC refused to enforce the arbitration agreement, including the choice-of-law clause.  While it went to great lengths in one breath to say that class action arbitration under c. 93A would not offend Massachussets policy, in the next breath it tossed out not only the class action waiver and the choice-of-law clause, but the entire arbitration agreement.  Why?  Because the arbitration agreement and the class action waiver were apparently so inextricably intertwined that the Court could not “sever” the class action waiver from the arbitration agreement itself.  That is another way of saying that the Court, to excise the class action waiver, would have had to rewrite the arbitration agreement to impose class action arbitration on the parties.  And if the Court rewrote the parties’ agreement to permit class arbitration it would have violated the Federal Arbitration Act because it would have imposed on the parties an arbitration procedure to which they never expressly or impliedly agreed.  So instead, the Court said that it would not enforce the arbitration agreement at all, which also violated the Federal Arbitration Act.

The flip side of the Court’s severability analysis was this:  If the Court said the arbitration agreement was severable from the class action waiver, then, under the doctrine of severability the question whether the class action waiver was enforceable would have been for the arbitrators to decide.  The arbitrators had, in fact, already decided that it was enforceable, and, given the Texas choice-of-law provision, the Court could hardly have vacated the arbitrators’ award on excess of powers grounds, or any other ground.  The arbitrators did nothing but enforce all aspects of the parties’ contract, which is exactly what arbitrators are supposed to do.  Had the parties opted to apply Massachusetts law to their contract, then there might have been some basis for the court to vacate the award and remand the matter to a new arbitration panel, provided there was no colorable basis for the award under Massachusetts law.  But that is not what the parties agreed and that is not what happened. 

The analysis and outcome here should give us pause.  The Court was correct when it said that principles of state contract law that “‘arose to govern issues concerning the validity, revocability and enforceability of contracts generally .  .  .  ” are applicable to arbitration agreements under the FAA.  (internal quotation and citation omitted)  Those are the basic state law principles that apply to all contracts.  They are not displaced by the FAA because the purpose of the FAA is to put arbitration agreements on the same footing as ordinary contracts. 

In an exceedingly broad sense the Court was probably correct when it said “the tenet that a contract may be invalidated on grounds that it violates public policy” is a state law principle that is applicable to contracts generally.  But to the extent that states have public policy defenses that apply to contracts across the board, those defenses are usually reflected in the law of contracts.  For example, states generally have a public policy in favor of freedom of contract, but that policy is reflected in state law prohibiting enforcement of contracts entered into under duress or against a party who lacks the capacity to contract.  So if the Dell entities had entered into an arbitration agreement with a minor, or if a representative of Dell procured plaintiffs’ assent to the arbitration agreements by pointing guns at the plaintiffs’ heads, then surely the arbitration agreements would have been unenforceable for public policy reasons reflected in state law applicable to contracts generally. 

But that is as far as it goes.  Typically, a contract is not enforceable on public policy grounds because state law prohibits enforcement of a particular type of contract.  Gambling contracts, contracts that require the performance of an illegal act, and choice of law provisions that purport to require the application of laws that contravene a fundamental public policy of the forum state are a few examples. 

These “public policy” based rules of contract enforcement do not, by definition, apply to contracts generally.  The state public policy prohibition in Feeny  is no exception.  It targets a specialized subset of contracts:  those waiving the class action procedure provided by G.L., c. 93A in both an arbitral or judicial forum.  As a practical matter that subset of contracts consists almost entirely of arbitration clauses.  And while the Court tries to sidestep this fact by pointing out that any contract that purported to waive a party’s resort to class action procedures would violate the policy – even if the parties had not agreed to arbitrate –such contracts, if they exist at all, are, as far as we know, rare indeed.  But in fairness to the SJC we should give the Court the benefit of the doubt and assume that such contracts are common.  Yet even then the public policy prohibition does not apply to contracts generally. 

If readers have lingering doubts consider this.  We do not think anyone versed in Supreme Court precedent concerning FAA preemption of state law would seriously argue that Massachusetts (or any other state) could refuse to enforce an FAA-governed agreement to arbitrate solely on the ground that it had a state public policy against the enforcement of arbitration agreements.  But the Court’s reasoning – that public policy is a defense to the enforcement of contracts generally without regard to what the public policy prohibits – would squarely support such a result.   

At the risk of gilding the lily, there is yet another reason why the Court’s analysis missed the mark.  The parties agreed that Texas law would govern their arbitration agreement and the SJC acknowledged that Texas law “likely” permitted class action waivers.  But the Court refused to enforce that part of the parties’ agreement, not because state law principles applicable to contracts generally required non-enforcement, but because state conflict-of-law rules (which by definition are not applicable to contracts generally) allow the forum state not to enforce the parties’ choice of law on public policy grounds. 

We certainly appreciate that the Court had nothing but good intentions — it wanted to protect an important state public policy favoring class litigation and arbitration in cases governed by c. 93A.  There is nothing wrong with that policy, and it may well be a good one.  But, as important as that policy may be to Massachusetts, and as wise as that policy may be, we believe the federal substantive law of arbitrability trumped it in this case.

The validity of class action waivers in arbitration agreements is a controversial subject at the moment.  There is an obvious tension between the pro-enforcement policies of the Federal Arbitration Act and competing state and federal policies favoring class action arbitration or litigation as a vehicle for vindicating consumer rights.  The United States Supreme Court may provide some hint of where it stands on this issue when it decides the Stolt-Nielsen case (blogged here and here), which raises the related issue whether imposing class action arbitration is consistent with the Federal Arbitration Act when the parties’ contract is silent on that score.  And the Supreme Court may directly address the issue of whether class action waivers comport with federal policy if it decides to grant certiorari in the American Express Merchants’ Litigation (blogged here).  Today we examine a case in which the question was whether a state policy in favor of consumer class actions could trump the enforcement of an arbitration agreement containing a class-action waiver. 

On July 2, 2009, in Feeney v. Dell Inc., ___ Mass. ___, slip op. (July 2, 2009), the Massachusetts Supreme Judicial Court (the “SJC”) ruled that a class action waiver contained in a consumer arbitration agreement violated a fundamental Massachusetts public policy favoring class actions, even though the parties had agreed that Texas law, which allows class action waivers, would govern their agreement.  This violation of Massachusetts public policy, said the Court, rendered the arbitration agreement unenforceable because the class action waiver was unenforceable and could not be severed from the remainder of the arbitration agreement.  But, in an interesting turn of events, the Court dismissed the consumers’ claims with leave to replead, because they failed to state a claim under Mass. G.L., c. 93A, the applicable consumer protection law. 

The case is somewhat different from other decisions voiding class action waivers because the agreement was voided on state public policy grounds, rather than on state unconscionability grounds, and because the court refused to enforce not only the class action waiver but also a choice-of-law clause indicating the parties’ desire that Texas, not Massachusetts, law would govern the class action waiver issue.  The case gives rise to serious questions concerning federal preemption of Massachusetts state policy. 

In this part I of a two-part post, we summarize the Feeny case.  In part II, which will follow tomorrow or the next day, we shall provide our critical analysis.  Because the publicly available copy of the case does not feature official pagination, we have eliminated jump cites, but provide after quotes pertinent information about internal citations, quotations and the like.   

Facts

Dell Catalog Sales Limited Partnership (“Dell Catalog”) and Dell Marketing Limited Partnership (“Dell Marketing”), wholly-owned subsidiaries of Dell Inc. (“Dell”), sold computers and related products to businesses and consumers and, in connection with those sales, sold hardware service contracts.  BancTec, Inc. (“BancTec”), QualxServe LLC or Dell Marketing provided services under those contracts. 

The two plaintiffs purchased Dell computer hardware from Dell Catalog and Dell Marketing, and service contracts administered by either Dell Marketing or BancTec.  Dell Catalog and Dell Marketing collected Massachusetts sales taxes in the amount of $13.65 from one plaintiff and $215.55 from the other. 

The “Terms and Conditions of Sale” applicable to each sales contract contained an arbitration agreement requiring that claims against the Dell entities “arising from or relating to this Agreement” be resolved “exclusively and finally” through arbitration.  The arbitration agreement also provided that arbitration “will be limited solely to the dispute or controversy between customer and [the] Dell [entities].”  This provision effectively barred buyers with claims against the Dell entities from participating in class action arbitration or litigation.  The Terms and Conditions of Sale also provided that “[t]his agreement and any sales thereunder shall be governed by the laws of the state of Texas, without regard to conflicts of laws rules.” 

The plaintiffs commenced a putative class action against Dell Computer Corporation (“Dell Computer”).  The complaint alleged that Dell Computer had a “deliberate and systematic practice” of collecting from plaintiffs and other Massachusetts residents money falsely described as a lawful sales tax on the service contracts, and that this practice violated Mass. G.L., c. 93A and related implementing regulations.  The complaint alleged that the plaintiffs and other Massachusetts residents had been damaged because Dell Computer caused them to pay a “tax” that had not been imposed by Massachusetts taxing authorities.  The plaintiffs sought class certification under c. 93A, § 9(2), which expressly authorizes class actions. 

Dell Computer moved to stay the litigation and compel arbitration under Federal Arbitration Act Sections 3 and 4.  Plaintiffs opposed the motion, claiming that the unilateral bar on class actions was unconscionable.  The trial court disagreed and compelled arbitration. 

The plaintiffs proceeded to arbitration under protest.  An arbitrator from the National Arbitration Forum denied their request for class certification, conducted a consolidated hearing of plaintiffs’ claims, and rendered an award in favor of defendants. 

The plaintiffs moved to vacate the award and defendants cross-moved to confirm.  The trial court denied the motion to vacate and granted the motion to confirm.  The SJC agreed to hear the case on direct review.   

The SJC’s Decision

The SJC reversed the trial court’s decision and held that the class action waiver violated Massachusetts public policy.  The Court found that all three branches of Massachusetts state government had expressed a public policy favoring class actions under G.L., c. 93A.  First, the legislature expressly provided for such class actions under c. 93A, and the legislative history of c. 93A indicated that the statute’s express provision for class actions was designed to allow plaintiffs to vindicate small-dollar claims that might otherwise not be pursued for economic reasons.  Second, the SJC had previously recognized that c. 93A’s provision for class actions was designed to provide an “effective private remedy” for small-dollar consumer claims, and that the requirements for class certification were less onerous than those applicable to ordinary class actions under Massachusetts’ civil procedure code.  Third, the Court noted that the Commonwealth’s attorney general had filed an amicus brief asserting that class action waivers violated public policy in favor of class actions. 

The Court said the right to class action relief was particularly important here, where plaintiffs’ claims were unlikely to be pursued in the absence of such relief, and noted two “additional reasons” why the class action waiver contravened Massachusetts public policy:

First, it undermines the public interest in deterring wrongdoing.  Second, the loss of an individual consumer’s right to bring a class action negatively affects the rights of those unnamed class members on whose behalf the class action would proceed.  In this sense, the right to participate in a class action under G.L., c. 93A is a public – not merely a private – right; it protects the rights of consumers as a whole. 

(citations and parenthetical quotations omitted). 

The Court emphasized that its decision was not predicated on the particular forum chosen – arbitration versus court – but “on a determination that in the circumstances of a case such as this (small value claims sought under our consumer protection statute, G.L., c. 93A), a clause effectively prohibiting class proceedings in any forum violates the public policy of the Commonwealth.”  But the Court, noting that the “contracts at issue here do not contain a severability or savings clause,” held that the class action waiver could not be severed from the arbitration agreement in which it was contained, and therefore found that the entire arbitration agreement was unenforceable.  The Court offered little explanation for this part of its decision, saying that it “did not rest solely on the absence of a savings clause,” and noting that the class action waiver itself was “part of the arbitration provision” and “central to the mechanism for resolving the dispute between the parties.”  (citations and quotations omitted).   The Court’s severability analysis was at odds with its suggestion that its decision was forum neutral.

The Court also had to deal with the parties’ choice-of-law clause, which required the application of Texas law to the class action waiver.  Since Texas law would likely have required the class action waiver to be enforced, and since enforcement of the Texas choice-of-law clause would have violated Massachussets public policy, the Court refused to enforce the clause, invoking the familiar state conflict-of-law rule allowing courts not to enforce choice-of-law clauses where doing so would violate a fundamental public policy of the forum state.     

Finally, the Court addressed the question whether the FAA preempted a defense to enforcement of the arbitration agreement based on Massachusetts public policy.  The Court began its preemption analysis by noting that it “may apply generally applicable State-law contract defenses to .  .  . an arbitration agreement and may invalidate an arbitration agreement on such grounds without contravening the FAA.”  (citations omitted)  It went on to say “[b]ecause the tenet that a contract may be invalidated on grounds that it violates public policy is a principle of State contract law that ‘arose to govern issues concerning the validity, revocability and enforceability of contracts generally,’ our conclusion that the class action prohibition is unenforceable on those grounds is not preempted by the FAA.”  (citations omitted; quoting Perry v. Thomas, 482 U.S. 483, 492-93 n.9 (1987)): 

While the defendants are correct that the FAA prohibits courts from ‘singling out arbitration provisions for suspect status,’ our conclusion does not selectively target arbitration.  The problem with Dell’s terms is not that they compel arbitration but that, by mandating individual arbitration, they compel a procedure for resolving claims that effectively eviscerates the c. 93A right to participate in a class action.  Simply put, a prohibition on class actions ‘has nothing to do with a valid agreement to arbitrate.’   It is the effective ban on class actions – not the mandating of arbitration – that is repugnant to the public policy of the Commonwealth.  Our decision is not, as the defendants argue, ‘tantamount to a policy against arbitration,’ but rather the logical corollary of our fundamental public policy in favor of preserving the ability of consumers and businesses to vindicate their rights under c. 93A. 

(citations omitted; parenthetical quotations omitted)

In part II of this post, we shall discuss whether the Court’s decision is consistent with the Federal Arbitration Act, so stay tuned.  .  .  .