3rd Circuit Deals Blow To Class-Arbitration Waivers

Good news for credit-card users. Bad news for the credit-card industry. The 3rd Circuit Court of Appeals held that arbitration clauses may be struck down — as unconscionable — when they prevent the use of class actions in cases where a large group of consumers have claims that would normally yield small sums of money for individuals litigating on their own. From The National Law Journal:The unanimous three-judge panel concluded that state courts as well as federal courts applying state law are free to declare that such class-arbitration waivers are unconscionable — even if the contract included a choice-of-law provision that called for applying the law of a state that is decidedly amenable to such pro-business provisions.The ruling is a victory for attorney F. Paul Bland Jr. of Public Justice in Washington, D.C., and Gary S. Graifman of Kantrowitz Goldhamer & Graifman in Montvale, N.J.Bland hailed the ruling as a major victory for consumers and said it clarified an important area of 3rd Circuit law by underscoring the power of state courts to reject arbitration and anti-class action provisions they deem unconscionable.In the suit, a proposed class of New Jersey consumers claim that American Express cheated them by falsely promising rebates of up to 5 percent of purchases made with the Blue Cash Card, and that, in reality, the rebates proved to be much smaller than originally promised.The 3rd Circuit remanded the case. On remand, the district court judge will have to decide whether New Jersey state courts would deem such a class-arbitration waiver provision unconscionable. ‘We hold that, if the claims at issue are of such a low value as effectively to preclude relief if decided individually, then … the application of Utah law to the class-arbitration waiver is invalid and the class-arbitration waiver is unconscionable,’ U.S. Circuit Judge Franklin S. Van Antwerpen wrote. Given that most of these credit-card disputes involve relatively low-dollar amounts, not worth a single individual’s time, money, or effort, I’m hopeful that the district court judge will find these class-arbitration waivers unconscionable. You can read the rest of the story here link.

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0 thoughts on “3rd Circuit Deals Blow To Class-Arbitration Waivers

  1. Wonder if this will carry over to the onerous provisions of requiring arbitration-Like the part where they can change your terms for no reason and you can’t form a class action against them?

  2. enigma, not sure how far this would be extended. We still need this case to go back through the remand process. Based on what the Circuit said, I’d think that the district judge is going to find that this class-arbitration waiver was unconscionable. But we’ll see.

  3. This is a new era and the solution to the problem, from a debtor’s point of view, is to empower individuals to proceed WITHOUT lawyers. In Jefferson County Kentucky (Louisville), for example, about 75% of all divorce proceedings are brought and concluded with both parties representing themselves without any attorney involved on either side.This is a heavy burden on the courts, since most non-lawyers don’t know beans about the legal process, and they tend to slow things down. If ‘most of these credit-card disputes involve relatively low-dollar amounts, not worth a single individual’s time, money, or effort,’ it is true only if each individual proceeds alone trying to figure out the law and how to proceed by him or her self. In the information age a large group of otherwise disconnected individuals can be provided with the education and tools needed to proceed pro se effectively.Besides, class action lawsuits mostly benefit the class action lawyers.Don’t get me started, but can you imagine what effect 100,000 lawsuits brought in small claims courts across the country would have on any credit card company, no matter how big? It would roll over so fast your head would spin.God bless lawyers. They have their place, but if I remember correctly they also have an ethical obligation to provide legal education to the general public, and to get out of the way where they are not useful.

  4. Tom, you wrote:’but can you imagine what effect 100,000 lawsuits brought in small claims courts across the country would have on any credit card company, no matter how big?’As far as I know, most card issuers allows individuals to sue in small-claims court. But individuals are not availing themselves of that option. I’m thinking that most individuals don’t think it’s worth the hassle. Small claims, indeed. Individuals have been clamoring for class-action ability; this 3rd Circuit decision paves the way. Tom, you might have to rally the troops here. Get individuals educated so that they can go at it alone. Until then, class-action status offers the better solution.Class-actions do enrich the attorneys, too. Can’t dispute that.

  5. Mine was a general rant waiting for an excuse to happen. Most AmEx card holders, I suppose, are in an income bracket where it really isn’t worth their time. This is not the case in all instances.The audience for my suggestion are those who have an income that precludes free legal service representation, but for whom lawyer fees are out of the question. It’s a large group.

  6. Ahh, thanks, Tom. I see what you’re saying. These are the people who are caught in the middle.

3rd Circuit Deals Blow To Class-Arbitration Waivers

Good news for credit-card users. Bad news for the credit-card industry. The 3rd Circuit Court of Appeals held that arbitration clauses may be struck down — as unconscionable — when they prevent the use of class actions in cases where a large group of consumers have claims that would normally yield small sums of money for individuals litigating on their own. From The National Law Journal:The unanimous three-judge panel concluded that state courts as well as federal courts applying state law are free to declare that such class-arbitration waivers are unconscionable — even if the contract included a choice-of-law provision that called for applying the law of a state that is decidedly amenable to such pro-business provisions.The ruling is a victory for attorney F. Paul Bland Jr. of Public Justice in Washington, D.C., and Gary S. Graifman of Kantrowitz Goldhamer & Graifman in Montvale, N.J.Bland hailed the ruling as a major victory for consumers and said it clarified an important area of 3rd Circuit law by underscoring the power of state courts to reject arbitration and anti-class action provisions they deem unconscionable.In the suit, a proposed class of New Jersey consumers claim that American Express cheated them by falsely promising rebates of up to 5 percent of purchases made with the Blue Cash Card, and that, in reality, the rebates proved to be much smaller than originally promised.The 3rd Circuit remanded the case. On remand, the district court judge will have to decide whether New Jersey state courts would deem such a class-arbitration waiver provision unconscionable. ‘We hold that, if the claims at issue are of such a low value as effectively to preclude relief if decided individually, then … the application of Utah law to the class-arbitration waiver is invalid and the class-arbitration waiver is unconscionable,’ U.S. Circuit Judge Franklin S. Van Antwerpen wrote. Given that most of these credit-card disputes involve relatively low-dollar amounts, not worth a single individual’s time, money, or effort, I’m hopeful that the district court judge will find these class-arbitration waivers unconscionable. You can read the rest of the story here link.

This entry was posted in Uncategorized by . Bookmark the permalink.

0 thoughts on “3rd Circuit Deals Blow To Class-Arbitration Waivers

  1. Wonder if this will carry over to the onerous provisions of requiring arbitration-Like the part where they can change your terms for no reason and you can’t form a class action against them?

  2. enigma, not sure how far this would be extended. We still need this case to go back through the remand process. Based on what the Circuit said, I’d think that the district judge is going to find that this class-arbitration waiver was unconscionable. But we’ll see.

  3. This is a new era and the solution to the problem, from a debtor’s point of view, is to empower individuals to proceed WITHOUT lawyers. In Jefferson County Kentucky (Louisville), for example, about 75% of all divorce proceedings are brought and concluded with both parties representing themselves without any attorney involved on either side.This is a heavy burden on the courts, since most non-lawyers don’t know beans about the legal process, and they tend to slow things down. If ‘most of these credit-card disputes involve relatively low-dollar amounts, not worth a single individual’s time, money, or effort,’ it is true only if each individual proceeds alone trying to figure out the law and how to proceed by him or her self. In the information age a large group of otherwise disconnected individuals can be provided with the education and tools needed to proceed pro se effectively.Besides, class action lawsuits mostly benefit the class action lawyers.Don’t get me started, but can you imagine what effect 100,000 lawsuits brought in small claims courts across the country would have on any credit card company, no matter how big? It would roll over so fast your head would spin.God bless lawyers. They have their place, but if I remember correctly they also have an ethical obligation to provide legal education to the general public, and to get out of the way where they are not useful.

  4. Tom, you wrote:’but can you imagine what effect 100,000 lawsuits brought in small claims courts across the country would have on any credit card company, no matter how big?’As far as I know, most card issuers allows individuals to sue in small-claims court. But individuals are not availing themselves of that option. I’m thinking that most individuals don’t think it’s worth the hassle. Small claims, indeed. Individuals have been clamoring for class-action ability; this 3rd Circuit decision paves the way. Tom, you might have to rally the troops here. Get individuals educated so that they can go at it alone. Until then, class-action status offers the better solution.Class-actions do enrich the attorneys, too. Can’t dispute that.

  5. Mine was a general rant waiting for an excuse to happen. Most AmEx card holders, I suppose, are in an income bracket where it really isn’t worth their time. This is not the case in all instances.The audience for my suggestion are those who have an income that precludes free legal service representation, but for whom lawyer fees are out of the question. It’s a large group.

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