Class Action Arbitration After Dell Webb, 0916 SCBJ, SC Lawyer, September 2016, #24
Author | Michael S. Cashman and Thomas M. Cull, J. |
Michael S. Cashman and Thomas M. Cull, J.
Introduction
Agreeing
to arbitrate disputes, in lieu of traditional litigation, is
not a new phenomenon. As consumers, we all contractually
agree to arbitrate disputes on an almost daily basis. While
everyone may not read through the entire contact, mandatory
arbitration clauses are frequently included when we sign up
for credit cards, buy songs online or purchase a cell phone.
Consumer contracts have contained mandatory arbitration
clauses for decades. Increasingly, however, courts have
confronted a new issue in consumer contracts— class
arbitration. While courts have issued various decisions on
the issue over the last 15 years, class arbitration has
assumed particular importance as of late. The Fourth
Circuit’s 2016 decision Dell Webb Communities, Inc.
v. Carlson
In its
March 2016 decision, the Fourth Circuit changed course in its
approach to class action arbitration, rejected its prior
holding in Davis v. ECPI, and declined to follow a
2003 Supreme Court plurality decision in Green Tree
Financial Corp. v. Bazzle.
While
the Dell Webb decision represents a course change
from prior Fourth Circuit case law, it is consistent with
another circuit’s recent treatment of the issue.
Earlier this year, the Third Circuit issued a decision in
Chesapeake Appalachia, LLC v. Scout Petroleum,
LLC,
Arbitration and arbitrability
Under
the Federal Arbitration Act (FAA), arbitration agreements
that implicate interstate commerce are enforceable
“save upon such grounds as exist at law or in equity
for the revocation of any contract.”
While courts are empowered to settle disputes by both a state and federal constitution and legislation, an arbitrator derives authority only through contract. That is, the arbitrator may only resolve the issues that he is authorized to resolve under the arbitration agreement. Courts retain jurisdiction to decide all other matters. Accordingly, courts have historically divided threshold questions into two categories: questions of arbitrability and procedural issues.
With respect to arbitrability, courts decide whether a party is contractually bound to arbitrate and, if so, whether the arbitration...
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