District Court in West Virginia Enforces Class Action Waiver in Arbitration Clause

At the Contracts Conference at UNLV, there was anexceedingly impressive panel on arbitration.  During the Q&A, Professor Victor Goldberg (Columbia) commentedthat he was surprised that none of the presenters mentioned the class actionwaiver.  After all, aren’t manycompanies using arbitration to avoid class actions?  And, if class action waivers are not enforceable, will theystop opting for pre-dispute arbitration clauses in their contracts? 

I tend to agree that the nub of the whole pre-dispute(“mandatory”) arbitration regime is the class action.  Some courts have specifically invalidated these class actionwaivers as unconscionable, some courts have generally invalidated the entirearbitration clause as unconscionable based on the class action waiver, and somecourts have upheld both the waiver and the arbitration clause moregenerally.  Recently, in Wince v.Easterbrooke Cellular, the Federal District Court in West Virginia fell intothe last camp, concluding that the arbitration clause used by AT&T Mobility(“ATTM”) is valid and enforceable even though it contains a class actionwaiver.  

The court held that thewaiver was not unfair because it was written in a way that did not financiallydisincetivize plaintiffs from bringing smaller, individual claims.  The court reasoned:

Here, however, each putative classmember has incentive to bring his or her claim, regardless of whetherclassified as “high” or “small” dollar.  This incentive is provided by several provisions of the ATTMarbitration clause.  First, withlimited exceptions, ATTM has committed to pay all of the costs of arbitrationwhether a customer wins or loses.  Second,if a customer prevails in arbitration, he or she may obtain the sameremedies-including compensatory, punitive, and statutory damages; injunctiveand declaratory relief; and attorneys’ fees-that are available in court.  Finally, if the arbitrator awards thecustomer an amount greater than ATTM’s last settlement offer, ATTM must pay him$10,000.00, plus double attorneys’ fees.

ATTM certainly figured out how to build the better classaction waiver – in the drafting stages, taking aim at some of the policy critiquesof the waivers.  It will be interesting to see whetherthe same clause will hold up in other jurisdictions.

Wince v. Easterbrooke Cellular Corp., — F.Supp.2d —-,2010 WL 392975 (N.D.W.Va. Feb 02, 2010) (NO. CIV.A. 2:09-CV-135).

[Meredith R. Miller]