We just read an interesting class action arbitration decision case from the First Circuit. In Kristian v. Comcast Corp. (1st Cir. 2006) __ F.3d __, Apr. 20, 2006, WL 1028758, the First Circuit Court of Appeals held that a class action ban in an arbitration clause was unconscionable. According to the plaintiff's lawyers,
The Court of Appeals pointed to evidence that the ban deprived subscribers of any practical means of recovering overcharges resulting from Comcast's alleged antitrust violations. The Court also invalidated provisions that prohibited treble damages and attorneys' fees, both of which federal antitrust law entitles prevailing plaintiffs to recover.
We find the opinion, which can be read in full here, to be quite interesting in that it agrees with the California Supreme Court's prior holdings that, under state law, such bans are unconscionable. Defendants often argue, rarely with success, that the Federal Arbitration Act trumps such views by state courts. The Kristian holding was based upon federal law, even considering the implications of Green Tree Financial Corp. v. Bazzle (2003) 539 U.S. 444, finding that such clauses prevent the vindication of statutory rights under state and federal law. Nevertheless, the arbitration agreements contain savings clauses that provide for severance of these invalid provisions. With these provisions severed, the arbitration can go forward.
In that sense, Comcast succeeded, because the forum for the class action will be an arbitrator's office. However, its true goal of eliminating the class action liability was not achieved.
Comments