Please ensure Javascript is enabled for purposes of website accessibility

Arbitration: The CompuCredit Corp. v. Greenwood Weigh-In: Amicus in the Cert Grant (May 27)

The U.S. Supreme Court on May 2 granted cert in CompuCredit Corp., et al., v. Greenwood, et al. (10-948), another arbitration case. The Court will hear this case in the fall, on the use of class arbitration under the Credit Repair Organization Act.

The case comes in the wake of the April 27 decision in AT&T Mobility v. Concepcion, No. 09-893 (details here), which barred nonconsensual class arbitration under the Federal Arbitration Act.

The briefing schedule in the case has not yet been posted by the Court. But two professional organizations, the Consumer Data Industry Association and the DRI–The Voice of the Defense Bar, already have spoken about the case, successfully urging the Court to accept the case.

In their amicus briefs, the groups asked the Court to spell out the available CROA remedies. The act guarantees consumers the right to file suit against so-called credit repair organizations.

In CompuCredit, a company marketing a fee-heavy credit card to people with poor payment histories contends that its contract containing arbitration provides an adequate remedy under the statute.

Here’s what the organizations told the Court.

Brief for DRI – The Voice of the Defense Bar in Support of Petitioners:

DRI–The Voice of the Defense Bar is an international organization of attorneys defending the interests of businesses and individuals. In its friend-of-the-Court brief, DRI urged the Supreme Court to grant review and rule in favor of petitioner in order to reaffirm Congress’s longstanding commitment to arbitration.

DRI argued that the Ninth U.S. Circuit Court of Appeals ruling in Greenwood v. CompuCredit Corp., 615 F.3d 1204 (9th Cir. 2010)(available here), disrupts the well-settled expectation under the Federal Arbitration Act that an agreement to arbitrate is enforceable unless Congress has specifically carved out an exception.

Card holders of CompuCredit’s “Aspire Visa” filed suit in 2008, citing violations of the Credit Repair Organization Act (15 U.S.C. § 1679; available here), despite having signed a contract containing a mandatory arbitration clause.

The petitioners brought a motion to compel arbitration, which a California federal district court denied. The Ninth Circuit affirmed. Both courts relied on the CROA’s mandatory disclosure language that grants the “right to sue,” and provides that any rights granted under the CROA may not be waived. Circuit Judge A. Wallace Tashima dissented, arguing that the right to sue does not necessarily mean the right to sue in court.

Chicago-based DRI urged review for two reasons. First, Congress’s policy in favor of arbitration is reflected in the “settled expectations” of both businesses and consumers. Second, the Ninth Circuit’s CROA interpretation is inconsistent with the statute’s plain language, as well as the Supreme Court’s interpretation of similar laws.

Under FAA Sec. 2, "[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy . . . shall be valid, irrevocable, and enforceable.” DRI argued that the overarching concern when enacting the FAA was to enforce private agreements. Because of this general policy, parties seeking to invalidate their arbitration agreements must show that Congress specifically intended to make an exception. DRI argued that the CROA is not an exception.
The Ninth Circuit’s interpretation of the “right to sue” was incorrect for four reasons, argued DRI. First, the right-to-sue is in the CROA’s mandatory disclosure language. The disclosure language was not meant to confer additional rights, the DRI contends, but merely convey the rights found elsewhere in the statute.

The relevant provision, according to DRI, is that “any person who fails to comply with any provision of [the CROA] with respect to any other person shall be liable to such person.” 15 U.S.C. Sec. 1679g(a).

Therefore, argued DRI, the “right to sue” was the wrong place to start, since the statute doesn’t prevent credit repair firms from requiring arbitration.

Second, even if the mandatory disclosure language conferred a non-waivable right, the CROA does not expressly prohibit parties from defining the forum in which the right to sue may be exercised. Here, the parties defined the forum through an arbitration clause.

Third, even if the right to sue could be read in isolation of the arbitration clause, words not expressly defined in the statute must be given their common meaning. DRI argued that arbitration is included in the common meaning of the word “sue.” The Ninth Circuit, however, used the technical meaning of the word in its analysis.

Fourth, even if “sue” is read in a technical sense, meaning to bring a claim in court, DRI contended that a party is not prevented from bringing affirmative defenses, such as, an agreement to arbitrate.

In support of its conclusion, DRI offered several examples of where the courts have guarded the right to arbitrate against statutes similar to the CROA.

Finally, DRI warned that by affirming the decision below, the Supreme Court would undermine the expectation that commercial contracts will be enforced according to their terms–creating general doubt regarding the question of arbitrability of statutory claims in general.

The counsel of record on the brief is DRI President R. Matthew Cairns. Six attorneys in Winston & Strawn’s Chicago and Washington, D.C., offices also work on the amicus brief.

Brief for Amicus Curiae Consumer Data Industry Association in Support of Petitioners:

The Consumer Data Industry Association is Washington, D.C.-based international trade association that supports companies offering consumer credit information products and services. In its amicus brief, the CDIA urged the Court to rule in favor of petitioner CompuCredit and accept the case.

Here are the four arguments the CDIA made in support of its position:

First, the CDIA argued, similar to the DRI, that the decision below undermines Congress’s intent when passing the Federal Arbitration Act. When deciding arbitration issues, the brief noted, courts should remain mindful of the federal policy favoring arbitration. It states that the Ninth Circuit’s decision, however, has the result the FAA was trying to avoid–hostility toward arbitration.

Second, the CDIA suggested that the Ninth Circuit’s focus was too narrow–concerned with a single sentence in the middle of CROA’s mandatory disclosure language: “You have the right to sue a credit repair organization that violates the Credit Repair Organization Act.”

The Ninth Circuit, the brief noted, interpreted this language as 1) conferring a substantive right to sue and 2) that the exclusive forum is in a court. The non-waiver provision, however, contradicts this interpretation. The relevant sentence reads, “Any waiver by any consumer of any protection provided by or any right of the consumer . . . may not be enforced by any Federal or State court or any other person.” The language “any other person” suggests that the courts are not meant to act as the exclusive forum for CROA claims, according to the brief.

Third, the CDIA argued that the Ninth Circuit’s decision will result in unnecessary strain on the judicial system. Not only could this ruling promote forum shopping among plaintiffs’ class-action attorneys, but it may unfairly burden defendants.

For example, plaintiffs may allege a CROA claim to avoid the consequences of their otherwise valid arbitration clauses. The CDIA warns that defendants would waste valuable resources by being forced to establish that they are not credit repair organizations.

Finally, the Ninth Circuit opinion “harms the very consumers” the CROA attempts to protect, according to the CDIA. Credit repair organizations provide consumers with the knowledge and tools to take control of their credit. These organizations are able to provide these tools to consumers because they can reasonably determine their litigation costs through reliance on arbitration clauses. The Ninth Circuit’s decision would result in a reduction or elimination of information and tools to help consumers’ mange their credit.

The CDIA also made a plea to the Supreme Court to interpret the CROA in a way that will not only protect the consumer, but honor the FAA by enforcing valid arbitration agreements.

Anne P. Fortney, a partner in Washington, D.C.'s Hudson Cook, is counsel of record on the CDIA brief.

--Blaire K. Babcock, CPR Intern