(The Return of) Ignatz, by Sam Heldman

Saturday, April 19, 2003

S.Ct. prediction
Tuesday's first case Green Tree Financial v. Bazzle, is a very interesting one about class actions and arbitration. As you have seen if you remember Pacificare v. Book (discussed here earlier, and decided by the Supreme Court shortly thereafter as discussed here), companies that impose arbitration agreements on their customers (or "freely negotiate arbitration agreements with their customers" if you actually believe that version of the story) aren't generally satisfied merely with getting their disputes resolved by arbitrators as opposed to by judges. More than that, the companies are eager to get to arbitration and to make the arbitration more friendly to their interests than litigation would be – by, for instance, limiting the remedies that are available or (as in this case) precluding class actions. This case won't necessarily resolve every issue that arises out of this effort to preclude class actions in arbitrations – this case, as I understand it, does not involve the bottom-line question whether an arbitration agreement is enforceable if it flat-out precludes arbitral class actions by clear language to that effect – but it will clear up some of the confusion in the area.

This case before the Supreme Court actually includes two cases coming up from the lower courts. Both involve consumer claims against Green Tree for violating aspects of South Carolina law. In both instances, the consumers who brought the claims – the Bazzles in one, and Lackey et al. in the other – sought to bring their claims not only on behalf of themselves, but also on behalf of all other consumers who were subjected to the same wrongdoing. (I am inferring, most likely, that the other consumers similarly affected were also subject to arbitration "agreements"). The arbitration "agreements" didn't explicitly rule out class proceedings. In the Lackey case, the arbitrator ruled that the arbitration would proceed on a class basis, and ended up ruling against Green Tree on the merits and awarding relief to the class. In the Bazzle case, before the case went to arbitration a court certified a class, and then sent the class's claims to arbitration, and then the arbitrator ruled in favor of the class. The South Carolina Supreme Court upheld both decisions.

It would be relatively easy to write volumes about this case – particularly if you knew more than I do, which is a pretty good bit but far from everything – so I'll try to keep it short. As for the case where it was the arbitrator who decided that a class action was appropriate, I think that it would be very hard for the Court to hold that this was improper where the arbitration "agreement" did not explicitly rule out class-wide arbitrations. Two big hurdles stand in the way of such a ruling: (1) the Court's usual deference to arbitrators in making the procedural rulings that apply in an arbitration proceeding; and (2) the fact that, according to the South Carolina Supreme Court, Green Tree waived the argument that would be most useful in defeating the arbitrator's ruling, that argument being that the class-wide arbitration somehow deprived absent class members of some portion of their due process rights. But it would be relatively easier for the Court to say, in the Bazzle case, that the court should not have taken upon itself the authority to certify a class – that the Court should have left that up to the arbitrator. That's the easy, and less controversial, way to reverse (in part) in this case. There's some chance, of course, that the Court could reverse both parts of the case and make some ruling that arbitrations should never proceed on a class basis (at least where the "agreement" doesn't explicitly allow it); that would strike me as a very bad ruling, but it's possible. In any event, whether in whole or in part, I'm saying REVERSE.

posted by sam 7:19 AM 0 comments


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