Supreme Court Addresses the Credit Repair Organizations Act and Arbitration
In CompuCredit Corp v. Greenwood, No. 10-948 (2012), The U.S. Supreme Court ruled in favor of arbitration in a dispute concerning consumer credit card agreements. The issue was whether disputes concerning the Credit Repair Organizations Act, 15 C. §1679 et seq., (CROA) could preclude enforcement of an arbitration agreement in a lawsuit concerning violations of that Act. The Respondents, in 2008, filed a class-action complaint against CompuCredit alleging CROA violations, including misleading representation that the card could be used to rebuild poor credit and the opening fees that reduced the credit limit.
The Court found that Congress would have been more explicit in limiting arbitration under the provisions of the CROA if that was Congress' intent, as in other contexts where arbitration was restricted with a clairty that far exceeds the claimed indications in the CROA. Because the CROA is silent on whether claims can proceed in an arbitrable forum, the FAA requires that the agreement be enforced according to its terms. To read more go to: http://www.supremecourt.gov/opinions/11pdf/10-948.pdf
Nursing Home Neglect and the Arbitration Clause
In two recent cases, the Florida Supreme Court struck down portions of nursing home arbitration clauses that capped damages lower than those allowable in state courts and provisions that disallowed punitive damages. In Gessa vs. Manor Care of Florida Inc., the plaintiff sued for negligence, violation of her rights as a resident, and breach of fiduciary duties. In Shotts vs. OP Winter Haven Inc., the plaintiff sued OP Winter Haven, for negligence and breach of duty that led to her uncle’s death.
Arbitration agreements are standard in most Florida nursing home contracts. The agreements at issue in these cases agreements capped non-economic damages at $250,000. In Shotts, the issue was whether the arbitration clause was valid because it disallowed an award of punitive damages. In Gessa, the arbitration agreement capped the non-economic damages at $250,000 in addition to prohibiting punitive damages. The court held both clauses invalid, stating, “any arbitration agreement that substantially diminishes or circumvents these remedies stands in violation of the public policy of the State of Florida and is unenforceable.”
Yaz Bellwether delayed for Mediation
Kerry Sims v. Bayer Corp., et al., No. 3:09-cv-10012-DRH-PMF, in which plaintiffs are claiming Bayer contraceptives Yaz and Yasmin caused dangerous blood clots, and that Bayer did not sufficiently warn patients of the risks, was scheduled to go to trial Jan. 9. Instead, the U.S. District Court for the Southern District of Illinois appointed George Washington law professor Stephen Saltzburg special master to mediate. The Judge’s order stated: “Professor Saltzburg shall consider and utilize every reasonable mediation option available to effectuate settlements in this litigation. Each party is ordered to negotiate in good faith.”
Vacatur Denied for $54.1 Million FINRA Award
The U.S. District Court for the District of Colorado denied a request by Citigroup Global Markets, Inc. (CGMI) for vacatur of a $54.1 million Financial Industry Regulatory Authority arbitration panel ruling in favor of a group of investors. The investors had claimed breach of fiduciary duty, breach of written contract, constructive fraud, violation of FINRA rules, unsuitability, failure to supervise, and respondeat superior.
CGMI sold to a group of investors a number of investments that proved to be flawed, with losses of up to 80 percent. The investors claimed that CGMI materially misrepresented the risks involved when they were convinced to invest in these types of products “in lieu of making or continuing direct investments in highly rated and insured municipal bonds or like securities.”
CGMI argued that the FINRA panel disregarded the law in its award claiming the investors could not have relied on contrary oral representations that the firm made in connection with their purchases because the investors had signed subscription agreements which disclosed that they could lose all of their money. Additionally, CGMI argued that the panel exceeded its authority by awarding punitive damages and by awarding attorney’s fees.
The court was not persuaded by the argument of CGMI, stating, “[t]he fact that the Panel disagreed with CGMI’s legal position is not evidence that the Panel ignored controlling law” and that CGMI did not show “willful inattentiveness” to controlling law. The court found the panel did not exceed its powers in either case, denied the motion to vacate, and granted the investors’ petition to confirm the arbitration award.
Matthew Conger is a staff attorney with the ABA Section of Dispute Resolution. Duane Rohrbacher is a law student and Ph.D. candidate at .