The United States Supreme Court has revisited the issue of whether a statute can override an arbitration clause in a consumer agreement. This time, at issue was the remedial legislation entitled Credit Repair Organization Act (“CROA”), which provides consumers with “the right to sue a credit repair organization” that violates the Act.
We have provided a summary of the facts of CompuCredit v. Greenwood in our previous entry on the topic. Briefly, the case arose out of a class action by a number of consumers who applied for and received a card marketed as a tool to “rebuild poor credit” and “improve credit rating.” The consumers alleged that they were charged fees which had not been disclosed in the promotional materials. Before receiving the card, the consumers received an “Acceptance Certificate,” which included an arbitration agreement. The consumers brought an action in the Federal District Court alleging, inter alia, that the arbitration agreement violated CROA.
The District Court concluded that the arbitration agreement was void. The Court interpreted CROA to prohibit provisions in consumer agreements which disallow waivers of a consumer’s right to sue in a court for CROA violations. The United States Court of Appeals for the Ninth Circuit agreed. The card marketer appealed.
At the Supreme Court, the respondents argued that CROA’s disclosure provision, which required credit repair organizations to provide consumers with a statement that included the sentence “You have a right to sue a credit repair organization that violates the [Act]” gave consumers the right to bring an action in a court of law.
The Supreme Court’s majority opinion, authored by Scalia J., held that neither the language of the mandatory disclosure nor the general scheme of the Act precluded arbitration clauses from being enforced. It held that the formulation “the right to sue” was “a colloquial method of communicating to consumers,” rather than an explicit directive that conflicts be resolved in a court of law and not in arbitration.
The concurring opinion of Sotomayor J. agreed with the majority in the result but observed that the case was “much closer” than the majority opinion suggested. In particular, the concurring justices thought it “plausible” that Congress did intend for the phrase “the right to sue” to mean the “right to sue in court.” Nevertheless, because the disclosure provision itself does not confer a right of action, the appellants were to prevail.
The dissenting opinion of Ginsburg J. held the “right to sue” formulation precluded the enforceability of arbitration clauses. While acknowledging that the majority interpretation “may be comprehensible to one trained to ‘think like a lawyer,’” Ginsburg J. noted that “Congress enacted the CROA with vulnerable consumers in mind – consumers likely to read the words ‘right to sue’ to mean the right to litigate in court, not the obligation to submit disputes to binding arbitration. She thus would have upheld the opinion of the Ninth Circuit.
The appeal resolves a conflict which has arisen at the circuit court level in regards to the interpretation of CROA and will provide another contribution to U. S. Supreme Court’s jurisprudence on the subject of the enforceability of arbitration clauses in the face of apparently conflicting statutory provisions (see, e.g., Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc.; Gilmer v. Interstate / Johnson Lane Corp.; Green Tree Fin. Corp. – Ala. v. Randolph).
In Canada, the appeal’s significance is in its potential to open a rift between Canadian and American judicial interpretation of provisions in consumer protection legislation aimed at disallowing arbitration clauses in consumer agreements. Indeed, in Seidel v. TELUS Communications Inc., the Supreme Court of Canada permitted a consumer class action to proceed in court, in the face of an arbitration clause in a cellular phone service contract, on the basis of its interpretation of the Business Practices and Consumer Protection Act of British Columbia. The majority of the Supreme Court of Canada emphasized that “BCPA is all about consumer protection. As such, its terms should be interpreted generously in favour of consumers” (and, by implication, against the enforcement of arbitration clauses).
This appears to contradict the U. S. Supreme Court’s technical, cautious interpretation of the statutory regime. In contrast to the Supreme Court of Canada in Seidel, the U. S. Supreme Court did not rely upon the consumer protection aims of the statute in order to interpret the provisions of CROA “generously” in favour of litigation. Rather, it sought, and ultimately failed to find, explicit statutory language that would bar arbitration.
Following CompuCredit, the two countries’ approaches to statutory interpretation in this context are not aligned. It appears that American legislatures are required to use more explicit language should they wish to preclude arbitration in a consumer protection statute than their Canadian counterparts.
CompuCredit Corp. v. Greenwood, 565 US __ – Supreme Court 2012
Court Docket No.: 10-948
Date of Decision: January 10, 2012