November 14, 2013

Asking again: Can silence equal consent?

By Deborah J. La Fetra Senior Attorney

In 2010, the Supreme Court held in Stolt-Nielsen v. AnimalFeeds International Corp. that parties must affirmatively “agree to authorize” class arbitration, because class arbitration is such a different animal than individual arbitration.  The parties in that case stipulated that there was no such agreement, so the result of the Court’s holding was that the parties were bound to traditional, individual arbitration of their dispute.  Two years later, in Oxford Health Plans LLC v. Sutter, the Court could have addressed the constitutional implications of allowing silence to equal consent to class arbitration, which PLF briefed as amicus curiae, but instead the Court issued a narrow decision on statutory grounds.

Important due process questions don’t fade away, however, and the Court has a new opportunity to consider whether due process protects parties from being “deemed” to consent to class arbitration when the contract is silent on that point.  The new case is Southern Communications Services, Inc. v. Thomas, out of the Eleventh Circuit.  Derek Thomas sued Southern Communications, a cellular telephone service, for imposing an allegedly illegal penalty ($200) for early termination of services.  The contract requires all disputes to be submitted to arbitration and makes no reference to class arbitration.  Thomas claimed to represent all customers who had been charged the early termination fee and the arbitrator decided that, despite the silence in the contract, he could interpret it to permit a class proceeding.  The Eleventh Circuit refused to vacate this decision, even though the arbitrator himself acknowledged that subsequent Supreme Court decisions completely undercut his rationale.

Southern Communications filedpetition for writ of certiorari in the Supreme Court, and PLF is supporting the petition with an amicus brief.  PLF argues, as it did in the previous two cases, that the hybrid nature of class arbitration raises significant due process concerns such that authorization cannot be imputed to contract language that is silent as to class arbitration, just because the contract generally requires arbitral resolution of disputes.  Let’s hope the third time is the charm, and the Supreme Court addresses these important due process questions.

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