A copy of the opinion is available at: http://www.ca9.uscourts.gov/datastore/opinions/2010/08/17/09-15906.pdf
This class action lawsuit arose from a credit card marketed and provided to consumers with low or weak credit scores by defendant credit providers. The consumer plaintiffs each applied for and received the credit cards, and were charged certain fees in connection with the issuance of the cards. Before receiving the credit card, the consumers received an "Acceptance Certificate" which included a mandatory arbitration clause. The consumers then brought this action in federal court, alleging that defendants' actions related to the credit cards violated the CROA and California's Unfair Competition Law. Defendants moved to compel arbitration of the CROA claims. The district court denied defendants' arbitration request, holding that that the arbitration clause was "invalid and void under the CROA's prohibition of the waiver of a consumer's right to sue in court." This appeal followed.
The Ninth Circuit agreed with the district court's decision to deny the defendants' motion to compel arbitration and in so doing, employed its "usual methodology in statutory construction," starting with the plain language of the statute. The court focused specifically on: (a) the right provided for in the CROA for a consumer to "sue a credit repair organization;" and (b) the non-waiver provision of the CROA, which provides that any waiver of, among other things, the "right to sue," is to be treated as void and unenforceable. Based its reading of the plain language of the statute, and an analysis of the plain and ordinary meanings of the terms "sue" and "arbitrate," the court held that the right to sue contained in the CROA "means what it says. The statute does not provide a right to 'some form of dispute resolution.'"
The Court disagreed with each of defendants' counter-arguments based on: (a) a claim that the "right to sue" is merely a "simplified" shorthand for "right to bring a claim;" and (b) a claim that the statute's use of the term "any other person" contained in the waiver clause intended arbitrators to be able to decide CROA claims. Further, the Court noted that its decision is in conflict with the Third and Eleventh Circuits, ultimately ruling that it was nevertheless "unpersuaded by the reasoning of those cases," which discuss the explicit language focused upon by the Ninth Circuit creating a "right to sue" with footnotes only. The Court also held that the Supreme Court cases cited in those opinions are distinguishable from the specific situation presented in CROA cases.
Ralph T. Wutscher
Kahrl Wutscher LLP
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