Introduction
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. Continue Reading »
