Neutrals: Major provider retreats from its class-action wariness with March 10 statement (Web)

Neutrals:  Major provider retreats from its class-action wariness with March 10 statement, and will enforce bars in the future.

On March 10, Jams Inc., an Irvine, Calif., neutrals provider firm, said it was retreating from its new policy that said its arbitrators would decide whether to enforce corporate contracts that bar consumers and their employees from class action arbitrations.

There was major blowback for the November 2004, policy, which said that it was “inappropriate” for companies to use such contracts, even though the policy emphasized that arbitrators would decide whether to enforce the contracts and their class action bars on a case-by-case basis. 

The policy, applying to the providers’ more than 200 neutrals and cases at its 23 offices nationwide, was a reaction to California’s heavily litigated consumer and employment arbitration scene.  In a Jan. 24 National Law Journal article, Jams general counsel John Welsh was quoted as citing the California cases, noting that there was a perception that banning class action arbitration gave companies an unfair advantage in consumer and employee disputes.  “We felt obliged not to be a part of that,” Welsh told the weekly newspaper.

Corporate attorneys, however, were angry because they usually read the four opinions in Green Tree Financial v. Bazzle, 539 U.S. 444 (2003), as authorizing the enforcement of such class prohibitions if they have been used in a contract.

In its March 10 statement, Jams announced it was withdrawing the policy because the “initial statement of the policy suggested to some that Jams had deviated from its core value of neutrality.”  The statement continued:  “We want to reaffirm to all of our constituencies that we have a fundamental responsibility and commitment to absolute neutrality and the highest ethical and professional standards.”

In fact, what works in California didn’t constitute a viable national policy.  The statement said:  “Recent court decisions on the validity of class action preclusion clauses have varied by jurisdiction.  In this legal environment, our attempt, as a national ADR provider, to bring uniformity to the administration of class wide arbitrations stemming from these clauses has created concern and confusion about how the policy would be applied.”

The statement concluded, “Accordingly, we are retracting the previously announced policy and reaffirm that Jams and its arbitrators will always apply the law on a case by case basis in each jurisdiction.” 

As a result, the neutrals will enforce the clauses barring class action arbitration where permitted, and not pass judgment based on the clause’s merits.

The National Law Journal article featured a general counsel strongly criticizing Jams.  John Welsh said in the article that he had been receiving calls from in-house attorneys complaining about the policy.