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Supreme Court: More Court Backing for Arbitration in CompuCredit (Jan. 10).

The U.S. Supreme Court issued its second arbitration decision of the 2011-2012 term this morning, offering more evidence of its strong support of the Federal Arbitration Act.

In CompuCredit Corp. v. Greenwood, No. 10-948 (Jan. 10), the Court ruled 8-1 that because the Credit Repair Organizations Act is silent on whether claims under the act can be arbitrated, the FAA requires credit card customers'  arbitration agreement "to be enforced according to its terms."

The result is that consumers who applied for and received so-called credit repair Visa cards and filed suit against CompuCredit and the card issuer must follow arbitration provisions in their credit agreements. 

The cardholders--people seeking to rehabilitate their poor payment histories--had objected to high fees that they claimed ran counter to CROA.

Despite the arbitration clause in their credit agreement, the plaintiffs filed suit in court against CompuCredit and the card issuers.  They cited the Credit Repair Organization Act provision that requires issuers to tell customers, "‘You have a right to sue a credit repair organization that violates the [Act].” 15 U. S. C. §1679c(a).

Writing for the majority, Associate Justice Antonin Scalia notes that the "mere 'contemplation' of suit in any competent court [under CROA] does not guarantee suit in all competent courts,disabling the parties from adopting a reasonable forum selection clause." [Emphasis in the opinion.]

The opinion continues, "[J]ust as the contemplated availability of all judicial forums may be reduced to a single forum by contractual specification, so also can the contemplated availability of judicial action be limited to judicial action compelling or reviewing initial arbitral adjudication.  The parties remain free to specify such matters, so long as the guarantee of [CROA's] §1679g—the guarantee of the legal power to impose liability—is preserved." [Emphasis in the opinion.]

Associate Justice Sonia Sotomayor wrote a separate concurrence, joined by Associate Justice Elena Kagan.

Associate Justice Ruth Bader Ginsburg dissented, writing that consumers should be able to go to court:  "If the [a]ct affords consumers a nonwaivable right to sue in court, as I believe it does, a credit repair organization cannot retract that right by making arbitration the consumer’s sole recourse."

Earlier this term, the Court reversed a Florida appeals court decision that refused to compel arbitration for investment fraud claims.  The five-page per curiam decision in KPMG LLP v. Robert Cocchi, No. 10-1521 (Nov. 7), meant that 19 parties that filed suit against investment funds that in turn invested with disgraced financier Bernard Madoff may have to arbitrate their claims. Details and links, here.

--Russ Bleemer, Editor, Alternatives