Cruz, et al. v. Cingular Wireless, LLC, No. 08-16080 (11th Cir. Aug. 2011), is among the first Court of Appeals decisions since the U.S. Supreme Court’s decision in AT&T MobilityLLC (ATTM) v. Conception, 131 S.Ct. 1740 (2011), to address the issue whether a state law imposing limits on a contracting party’s ability to prevent class actions in arbitration was preempted by federal law. The international practice issues arising here are several and important.
Recall that the Supreme Court decision analyzed a California law that at the end of the day “classified most collective-arbitration waivers in consumer contracts as unconscionable”. The Supreme Court held that such laws — when applied in a way special to arbitration agreements (i.e., by “defenses that apply only to arbitration of that derive their meaning from the fact that an agreement to arbitrate is at issue”) — “stand as an obstacle to the accomplishment and execution of the” Federal Arbitration Act, 9 U.S.C. sec. 1, et seq, and, as such were preempted by the FAA.
In the current case, the Elevent Circuit found that, under Conception, the class action wavier in the arbitration agreements before it were also enforceable and that, insofar as Florida law would invalidate these agreements as contrary to public policy, such state law would also be preempted. The Court of Appeals felt it did not have to reach the actual issue of whether Florida law would invalidate the class action waivers.
In many respects the issues before the Eleventh Circuit mirrored those before the Supreme Court in Conception. However, the arbitration agreements in Cruz contained a so-called “blow-up” provision, which provided that, if the class action waiver clause was found unenforceable, “then the entirety of this arbitration provision shall be null and void”. The Court of Appeals did not address the enforceability of the blow-up provision but merely noted that a contract containing that provision should not in and of itself be treated diffently in terms of the preemption analysis than a contract not containing a blow-up provision. Nor did the Court of Appeals address the non-mutuality of the blow-up provision.
The Court of Appeals did make a point of the fact that the arbitration provision itself guaranteed to the claimant “all the same remedies available to plaintiffs” under analogous state consumer protection laws; that “arbitrators can award the same damages and relief that a court can award”; that a prevailing claimant could recover attorneys’ fees; that “there was no confidentiality rule preventing the Plaintiffs from disseminating information about their claims to other potential claimants” and that ATTM “agreed to bear all costs of arbitration regardless of which party prevailed”. The Court of Appeals thus had no occasion to address whether a less-favorable set of provisions would have been enforceable under state law.
The Eleventh Circuit observed both that, “We conclude that Florida law does not yield a certain result in this case and cannot provide an alternative ground for our decision”, and also that, “In light of Conception, our resolution of this case does not depend on a construction of Florida law”.