Supreme Court Rules in Favor of Arbitration–Again

The high court rang in the New Year with another ruling favoring arbitration

The Supreme Court delivered another ruling backing consumer arbitration agreements. (Photo: AP) The Supreme Court delivered another ruling backing consumer arbitration agreements. (Photo: AP)

The Supreme Court rang in the New Year with yet another ruling favoring arbitration.

Last Tuesday, the Supreme Court ruled in Compucredit Corp. v. Greenwood in favor of what the law firm Sutherland Asbill & Brennan says is the latest in a series of opinions that have “come down firmly on the side of the enforceability of consumer arbitration agreements.”

Lining up 8-1 in favor of Compucredit, Sutherland reports in its Legal Alert that the justices rejected a determination by the U.S. Court of Appeals for the 9th U.S. CircuitCourt of Appeals that the provisions of the Credit Repair Organization Act (CROA), which “require that consumers be provided with a disclosure informing them that they ‘have the right to sue’ and prohibit the waiver of ‘any right of [a] consumer under’ the Act, make CROA claims nonarbitrable. The opinion was authored by Justice Antonin Scalia.

Section 2 of the Federal Arbitration Act (FAA), Sutherland says, “has been cited consistently by the court in arbitration-related decisions issued over the past several years for the proposition that the FAA establishes ‘a liberal policy favoring arbitration agreements.’”

This section was cited again by the court as the basis for its holding in its Compucredit ruling, Sutherland says. “Justice Scalia explained that the federal policy favoring arbitration ‘requires courts to enforce agreements to arbitrate according to their terms ... even when the claims at issue are federal statutory claims, unless the FAA’s mandate has been ‘overridden by contrary congressional command.’”

Greenwood, the plaintiff, argued that “the CROA’s disclosure and nonwaiver provisions constitute just such a congressional command. The disclosure provision–Section 1679c(a)–sets forth a disclosure statement that a credit repair organization is required to provide to a consumer before a contract for credit repair services is signed, which includes a sentence that reads, ‘You have a right to sue a credit repair organization that violates the [CROA],’ Suthlerand says.

Sutherland goes on to say that CROA’s “nonwaiver provision–Section 1679f(a)–states that ‘[a]ny waiver by any consumer of any protection provided by or any right of the consumer under [the CROA]–(1) shall be treated as void; and (2) may not be enforced by any Federal or State court or any other person.’ Greenwood argued that Section 1679f(a) and the disclosure statement together create a nonwaivable right to sue in court.

The majority rejected Greenwood’s argument, Sutherland says, finding that the only consumer right created by the CROA’s disclosure provision was the right to receive the disclosure. “The Court explained that the ‘right to sue’ language contained in the CROA disclosure is merely 'a colloquial method of communicating to consumers that they have the legal right, enforceable in court, to recover damages from credit repair organizations that violate the CROA,' and that '[w]hen [Congress] has restricted the use of arbitration in other contexts, it has done so with a clarity that far exceeds’ that language.'”

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