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Neutral Corner: Reaction to SCOTUS’ recent arbitration decision

February 10, 2016

Neutral Corner: John Van WinkleIn the recent case of DirecTV v. Imburgia, et al., 135 S.Ct. 1547 (2015), the U.S. Supreme Court reaffirmed and even strengthened its previous – and recent – rulings upholding mandatory arbitration clauses in consumer contracts. The court ruled, 6-3, that provisions in arbitration clauses prohibiting class actions would be upheld. The ruling came shortly after a series of articles in The New York Times that chronicled what many observers see as abuses in the mandatory arbitration process in consumer disputes. Interestingly, the November 2015 Times articles were cited by Justice Ruth Bader Ginsburg in her dissent:

“These decisions have predictably resulted in the deprivation of consumers’ rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer protection laws.”

Comments following the DirecTVdecision have been consistent: Unless Congress acts or the makeup of the court fundamentally changes, mandatory arbitration of consumer disputes and the corresponding limitations of some remedies (such as class actions) is here to stay.

Reaction of practitioners to DirecTV v. Imburgia

Editors of Law 360, New York on Dec. 14, 2015, interviewed or solicited comments from lawyers specializing in arbitration. Following are snippets of those comments, without attribution:

“Today’s decision in DirecTV is the latest confirmation that in this Supreme Court, a ban on class wide arbitration is like Superman: bullets keep bouncing off its chest. … The only path to any legal change will be at the federal level, which makes the upcoming battle of Consumer Financial Protection Bureau rulemaking on class action bans extremely significant.”

“Today’s decision underscores that the Supreme Court continues on its strong, pro-arbitration path regardless of the skepticism of state courts. The majority recognized, however, that state courts can invalidate class action waivers if they can find a ground applicable to contracts generally.”

“This decision is of importance … because it mandates that arbitration clauses … can be enforced in consumer (and one would argue, employment) contracts … .”

“This decision may well kill class actions wherever forced arbitration clauses are in the fine print.”

“For now, companies should be careful what they wish for. Corporations imposing arbitration clauses with class waivers may be faced with hundreds of arbitrations on the same issues.”

“The decision very clearly calls into question, and in my view invalidates, a number of state court appellate decisions that have refused to enforce arbitration clauses by refusing to sever allegedly invalid contract provisions that would be severed outside the arbitration context.”

Implications for arbitrators

The recent decisions of the Supreme Court enforcing arbitration clauses generally and also upholding limitations on substantive legal remedies may well add to the difficulty experienced by arbitrators as they attempt to build decisions on firm philosophical foundations. As the procedural and substantive differences between general litigation and arbitration continue to ebb and flow, the question presented is to what extent it is appropriate for arbitrators to view fundamental arbitration issues through the prism of the clear directives from the current Supreme Court. And is the time ripe for the various stakeholders to explore more united and consistent philosophical guidelines for arbitrators? Do the clear current trends invite a role for the Uniform Law Commissioners, and for the private providers, AAA, CPR and JAMS?

In the absence of judicial or institutional directives, arbitrators will be required to continue to weigh issues against his or her perception of philosophical underpinnings.•

John R. Van Winkle, of Van Winkle Baten Dispute Resolution, is a former chair of the American Bar Association’s Section of Dispute Resolution and author of West’s Indiana Rules of Dispute Resolution Annotated. The opinions expressed are those of the author.

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