Trial Practice and Procedure - John O'shea Sullivan and Ashby L. Kent

• Publication year: 2008

Trial Practice and Procedureby John O'Shea Sullivan^* and Ashby L. Kent^**

I. Introduction

The 2007 survey period yielded several noteworthy decisions by the United States Court of Appeals for the Eleventh Circuit relating to federal trial practice and procedure, many of which concerned issues of first impression. This Article analyzes recent developments in the Eleventh Circuit, including significant rulings in the areas of class actions, civil procedure, subject matter jurisdiction, statutory interpretation, and other issues of interest to trial practitioners.

II. Class Actions

A. Whether, and Under What Circumstances, a Class Action Waiver Contained in an Arbitration Provision May Be Deemed Unconscionable and Unenforceable as a Matter of Law

In Dale v. Comcast Corp.,¹ the Eleventh Circuit held that "the enforceability of a particular class action waiver in an arbitration agreement must be determined on a case-by-case basis, considering the totality of the facts and circumstances."² In so holding, the Eleventh Circuit distinguished this case from its prior precedent, in which the court held that arbitration agreements precluding class action relief were valid and enforceable.³

The plaintiffs were Georgia residents and subscribers of the defendant, Comcast Corporation ("Comcast"), a cable television provider. The plaintiffs filed a class action lawsuit against Comcast, alleging violations of state law based on the Cable Communications Policy Act of 1984 (the "Cable Act").⁴ The subscribers alleged that Comcast improperly calculated certain "pass-through franchise fees" and thus charged its customers more than it actually paid in franchise fees based on actual revenues.⁵ Comcast removed the action to the United States District Court for the Northern District of Georgia and filed a motion to compel arbitration and dismiss, arguing that the subscribers' individual claims were governed by written arbitration agreements contained in annual notices that the subscribers received.⁶ The arbitration agreements contained a class action waiver clause prohibiting subscribers from bringing claims on a class action or consolidated basis.⁷ Comcast argued that the subscribers accepted the arbitration agreements, including the class action waivers, by their continued subscription to Comcast's services after receiving the notices. The subscribers disputed having received the notices or having agreed to the arbitration provi- sions and requested a jury trial on the issue of whether they each had entered into an arbitration agreement with Comcast. The subscribers also argued that even if the arbitration provision constituted an agreement to arbitrate, the class action waiver was unconscionable and, therefore, unenforceable.⁸

On September 19, 2006, the district court granted Comcast's motion to compel arbitration and denied the subscribers' request for a jury trial. The district court found that the arbitration provision was binding and that the class action waiver was not unconscionable. The subscribers appealed, arguing that the district court erred in failing to find the class action waiver unconscionable. The Eleventh Circuit had to determine whether the arbitration provision's class action waiver was unconscionable, and thus unenforceable, as a matter of Georgia law.⁹ If the court determined that the class action waiver was unenforceable, then the entire arbitration agreement would be unenforceable pursuant to the arbitration provision's severability clause, thereby allowing the subscribers to maintain their action in federal court.¹⁰

The subscribers argued that Comcast's class action waiver was unenforceable because it was substantively unconscionable under Georgia law.¹¹ The subscribers cited opinions from the United States Supreme Court¹² and the Eleventh Circuit¹³ recognizing that public policy supports the need for class actions for certain types of claims.¹⁴ The subscribers argued that if Comcast's class action waiver was held to be valid, they would effectively be denied any remedy because, even if successful on their claims, the subscribers individually stood to recover only a very small amount.¹⁵ The subscribers also pointed out that even though the arbitration provision required Comcast, upon written request, to advance arbitration filing fees and arbitrator costs and expenses, it nonetheless held the subscribers responsible for additional costs, including attorney fees and expert witness fees. Moreover, if Comcast prevailed, the arbitration provision required the subscribers to reimburse Comcast for advanced fees up to the amount the subscribers would have paid to file the claim in state court. Given the cost of arbitration as compared to the potential recovery, the subscribers argued that a single plaintiff would not proceed to arbitration, and that the class action waiver was unconscionable, because it would "allow Comcast to continue unabated its alleged practice of overcharging customers."¹⁶

Comcast argued that the Eleventh Circuit's decision in Caley v. Gulfstream Aerospace Corp.¹⁷ disposed of the subscribers' substantive unconscionability argument.¹⁸ In Caley the Eleventh Circuit considered whether a dispute resolution policy ("DRP"), which required employees to submit certain employment related claims to arbitration, was unconscionable under Georgia law.¹⁹ The plaintiffs in Caley claimed the DRP was substantively unconscionable because, among other things, it prohibited class actions.²⁰ In Dale the Eleventh Circuit disagreed with Comcast and held that its prior decision in Caley did not require it to conclude that the class action waiver at issue in the instant case was enforceable.²¹ Rather, as the court in Dale observed, the court in Caley determined only that under the specific facts of that case, the DRP prohibiting class actions was enforceable—it did not conclude that every class action waiver was or would be enforceable under Georgia law.²² The Eleventh Circuit also distinguished its holding in Caley on the grounds that Caley did not involve a factual scenario "in which a remedy was effectively foreclosed because of the negligible amount of recovery when compared to the cost of bringing an arbitration action."²³ The court further noted that each of the claims in Caley provided for the recovery of attorney fees, expert costs, or both in the event that the plaintiff prevailed.²⁴

Although the court recognized that it had found arbitration agreements precluding class action relief to be valid and enforceable in at least two other cases, both of those actions were claims for which attorney fees and other costs were recoverable.²⁵ The Eleventh Circuit held that unlike the plaintiffs in those cases, the subscribers in Dale could not recover attorney fees under the Cable Act for the specific violations alleged.²⁶ Although the subscribers had asserted state law claims under which they may have been able to recover attorney fees and costs,²⁷ the Eleventh Circuit held that the potential recovery of attorney fees and litigation costs under Georgia law did "not provide the same incentive for an attorney to represent an individual plaintiff as the automatic, or likely, award of fees and costs available to a prevailing plaintiff for the claims asserted" in the other cases in which the court had enforced class action waiver provisions.²⁸ The court thus found itself "in unchartered territory" and looked to sister circuit decisions addressing the enforceability of class action waivers for guidance.²⁹

The court found the First Circuit's opinion in Kristian v. Comcast Corp. ,³⁰ which addressed the enforceability of arbitration agreements invoked by Comcast against a group of Boston subscribers suing Comcast for violations of state and federal antitrust law, to be instruc-tive.³¹ In Kristian the subscribers argued that the arbitration agreements prevented them from vindicating their statutory rights by prohibiting the use of the class mechanism.³² The First Circuit noted that "the legitimacy of the arbitral forum rests on 'the presumption that arbitration provides a fair and adequate mechanism for enforcing statutory rights.'"³³ The First Circuit further noted that the bar on class arbitration threatened this presumption given the "complexity of an antitrust case generally, and the complexity and cost required to prosecute a case against Comcast specifically."³⁴ The First Circuit struck down the class action waiver, determining that without some form of class mechanism, a consumer antitrust plaintiff would not sue at all and that "Comcast [would] be essentially shielded from private consumer antitrust enforcement liability, even in cases where it ha[d] violated the law."³⁵

Although the subscribers in Dale did not argue that the class action waiver prevented them from vindicating their statutory rights, the Eleventh Circuit nonetheless determined that without the benefit of a class action mechanism, the subscribers would effectively be precluded from suing Comcast for the specific violations of the Cable Act.³⁶ The court stated that it would be difficult for a single subscriber to obtain representation because: (1) the cost of vindicating an individual subscriber's claim, when compared to his or her potential recovery, was too great; (2) the Cable Act did not provide for the recovery of attorney fees or related costs for the violations alleged by the subscribers; and (3) Georgia law allowed fees and costs only to be awarded where bad faith was shown.³⁷ This would allow Comcast to engage in potentially illegal unchecked market behavior, and the court determined that corporations should not be permitted to use class action waivers as a means to free themselves from liability for small value claims.³⁸ In sum, the court held "that the enforceability of a particular class action waiver in an arbitration agreement must be determined on a case-by-case basis, considering the totality of the facts and circumstances."³⁹ The...