August 1, 2013

Massachusetts high court reverses anti-arbitration decision

By Deborah J. La Fetra Senior Attorney

The Massachusetts Supreme Judicial Court really doesn’t like arbitration.  It doesn’t matter that Congress enacted the Federal Arbitration Act in 1925 specifically to counteract judicial hostility to arbitration.  The Massachusetts court remains hostile, and has shown considerable creativity in striking down arbitration contracts in which consumers agree to individual arbitration of their disputes.

In the long-running saga of Feeney v. Dell, the Massachusetts court first struck down an arbitration clause in a computer sales contract because the class action waiver purportedly violated the state’s public policy favoring class actions in “consumer protection” cases.  That 2009 decision was rendered bad law by the Supreme Court’s decision in AT&T Mobility v. Concepcion (2011), which held that courts could not invalidate arbitration contracts that require individual arbitration simply because a state’s public policy favors class actions.

On rehearing, the Massachusetts court acknowledged that it needed a new rationale after Concepcion so in June of this year, it issued Feeney II (in which PLF filed an amicus brief), and invalidated the arbitration contract on a new ground:  that requiring individual arbitration would, “as a practical matter… immunize business defendants from private civil liability for consumer injuries” because the claims were so complex yet the potential individual damages so small.

As noted on this blog at the time, Feeney II was likely to end up a footnote in legal history, because the Supreme Court was expected to hand down its decision in American Express Co. v. Italian Colors Restaurant at any time.  Would that the Massachusetts court had waited a week, because the Amex decision, when it arrived 8 days after Feeney II, completely obliterated the Massachusetts court’s rationale.  Amex reinforced Concepcion’s holding that the Federal Arbitration Act requires courts to uphold arbitration contracts according to their terms, and that this “command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims.”

Today, the Massachusetts court grudgingly acknowledged the demise of Feeney II.  In Feeney III, the state court bitterly wrote, “Although we regard as untenable the Supreme Court’s view … we are bound to accept that view as a controlling statement of Federal law.”  But while the court was forced to hold that the contract’s class action waiver could not be struck down because it “effectively denies the plaintiffs a remedy,” it gave the plaintiffs yet another chance to come up with a legally sound theory, by remanding the case to the trial court consider “alternative grounds.”  PLF will stand by, to see if Feeney IV appears on the horizon.

PLF greatly appreciates the assistance of Donald R. Pinto, Jr., in Boston, who acted as local counsel for us.

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