March 01 2012
In Compucredit Corp v Greenwood the Supreme Court held that claims brought under the Credit Repair Organisations Act are arbitrable and that arbitration agreements subject to the act must be enforced.(1) While Compucredit concerned domestic arbitrations, the decision is nevertheless significant for international arbitration practitioners because it serves as a further reaffirmation of the pro-arbitration stance that the Supreme Court has consistently demonstrated over the previous few years.
The Credit Repair Organisations Act is designed to protect consumers who have experienced credit problems as a result of unfair and deceptive credit practices. Under the act, consumers have an unwaivable right to sue credit repair organisations that fail to comply with the act's various requirements.(2)
In Compucredit, two credit organisations issued credit cards to consumers. The credit card agreements under which those cards were issued contained arbitration clauses that provided for "binding arbitration…pursuant to the Code of Procedure of the National Arbitration Forum".(3)
Several recipients of the credit cards at issue filed a putative class action against the card issuers in a federal district court, alleging that the card issuers had violated the act. In response to the lawsuit, the card issuers moved to compel arbitration.
In response to the card issuers' motion to compel arbitration, the card recipients alleged that the arbitration clauses contained in their credit card agreements were unenforceable because the act provides consumers with an unwaivable right to sue in court. The credit card recipients primarily relied on language in the act which states that consumers have a "right to sue", which the consumers interpreted as necessarily meaning a right to sue in court.
The trial court and appellate court agreed with the credit card recipients and denied the card issuers' motion to compel arbitration. The card issuers subsequently sought review in the Supreme Court.
The Supreme Court reversed the lower courts' rulings and remanded the case with instructions to compel the credit card recipients to arbitrate their claims against the card issuers. Consequently, the Supreme Court held that while the act provides consumers with a right to sue, it does not require such claims to be brought in court.
In concluding that claims under the act are arbitrable, the Supreme Court explained that if Congress had intended for the act to override the Federal Arbitration Act, which expressly requires arbitration agreements to be enforced,(4) Congress would have to do so unambiguously. To demonstrate examples of unambiguous statutory language that overrides the Federal Arbitration Act, the Supreme Court cited language from federal statutes stating that "[n]o pre-dispute arbitration agreement shall be valid", and that "arbitration may be used to settle such controversy only if after such controversy arises…all parties consent in writing".(5)
Compucredit is significant for international arbitration practitioners because it reaffirms the pro-arbitration stance that the Supreme Court has consistently demonstrated over the past few years, despite political movements to limit the use of arbitration in the United States. Consequently, the Supreme Court has again reaffirmed parties' right to employ arbitration as a means of private dispute resolution unless specifically forbidden by Congress.
For further information on this topic please contact JP Duffy or Jose Sanchez at DLA Piper by telephone (+1 212 335 4500) or by fax (+1 212 335 4501) or by email (email@example.com or firstname.lastname@example.org).
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