Hospitality Companies Get Green Light On Arbitration
Our last blog post pointed to the importance of an upcoming decision by the U.S. Supreme Court in CompuCredit Corp. v. Greenwood. Specifically, we wondered whether the Court would extend the reasoning in AT&T Mobility v. Concepcion so that the Federal Arbitration Act would apply to federal statutes as well as state law? Or would the decision in effect create a class of nonarbitrable federal claims?
We got the answer (sooner than this blogger expected). The Court ruled, in an 8-1 decision, that if federal statute provides for a private right of action and even for class actions, but is silent as to whether these claims can proceed in arbitration, the FAA is not trumped.
In so ruling, the Court was not persuaded by plaintiffs’ arguments that the federal statute at issue - the Credit Repair Organizations Act, 15 U.S.C. § 1679 et seq.
- Required defendant’s to specifically disclose to consumers “You have a right to sue a credit repair organization that violates the Credit Repair Organization Act.”
- Stated that “Any waiver by any consumer of any protection provided by or any right of the consumer under this subchapter—(1) shall be treated as void; and (2) may not be enforced by any Federal or State court or any other person.”
Writing for the majority, Justice Scalia stated that the notice language fell short of giving the plaintiffs’ a specific right to be in court, and, in any event, noted that “we have repeatedly recognized that contractually required arbitration of claims satisfies the statutory prescription of civil liability in court.” Justice Scalia then wrote:
Because the CROA is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms.
This holding is a significant companion to the decision in AT&T Mobility v. Concepcion. The most immediate impact may be on the NLRB’s decision in D.R. Horton and Michael Cuda, as the NLRA does not contain any provision that expressly bars the use of arbitration agreements.
With the CompuCredit decision on the books, hospitality companies should strongly consider the broader use of arbitration clauses in their contracts with both consumers and employees. Failure to make such changes could prove to have a significant downside, as demonstrated by our post on the result in Jock v. Sterling Jewelers.