The Supreme Court has demonstrated once again that it is serious about enforcing arbitration agreements. In CompuCredit Corp. v. Greenwood, 10-948, the Court held that pre-dispute agreements to arbitrate claims under the Credit Repair Organizations Act (CROA) are valid and enforceable. Under this decision, arbitration is available for statutory claims unless Congress clearly indicates otherwise.
In the matter, respondents had applied for and received a credit card. Their applications contained clauses requiring that any dispute be resolved in binding arbitration. Pursuant to the CROA, they also received a written disclosure that said, among other things, "You have a right to sue a credit repair organization that violates the Credit Repair Organization Act." The CROA contains a provision providing that "[a]ny waiver by any consumer of any protection provided by or any right of the consumer under this subchapter" is void. Accordingly, the respondents sought to avoid the application of the arbitration clause by arguing that the CROA's disclosure provision created a non-waivable right to sue in court. The district court and the Ninth Circuit agreed.
The Supreme Court reversed. Writing for the majority, Justice Scalia began by noting the strong federal policy in favor of arbitration, embodied in the Federal Arbitration Act. He then concluded that the CROA does not overcome that strong policy. Although the CROA requires that consumers be informed of their "right to sue," this disclosure was "a colloquial method of communicating to consumers that they have the legal right, enforceable in court, to recover damages from credit repair organizations that violate the CROA." The Court likened this language to the disclosure's notice that the CROA "prohibits deceptive practices," noting that such language did not expand the list of practices enumerated in the statute. Both "right to sue" and "deceptive practices" are imprecise phrases; accordingly, the disclosure did not require that the action be in court. Furthermore, the statute's use of terms such as "action" and "court" in its liability provision did not require a judicial forum. The Court recognized that it was "utterly commonplace" for statutes to use such language in creating legal rights. In light of these points, the CROA's non-waiver provision had no application.
Perhaps most significantly, the Court emphasized that if Congress had meant to prohibit arbitration agreements, it would have spoken "in a manner less obtuse than what respondents suggest." Citing several other federal statutes that expressly precluded predispute arbitration agreements, the Court found it "unlikely" that the use of "right to sue" and "action" signaled an intent to do the same.
Justice Sotomayor concurred, joined by Justice Kagan. She hastened to add that a congressional intent to preclude arbitration could still be found in the legislative history or purpose of the statute, but that respondents in this case had relied only on the statute's text. It remains to be seen how the Court would assess a serious argument to preclude arbitration agreements based on a statute's legislative history.
Winston & Strawn filed an amicus brief in support of the petitioners in this case. A copy of that brief is available here.
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