A unanimous panel of the Third Circuit today affirmed an order compelling arbitration of federal claims on a non-class basis. The court did so despite two Pennsylvania appellate decisions that went the other way, holding that bans on class arbitrations ran afoul of state law unconscionability principles. It justified the ruling on the ground that the Pennsylvania Superior Court panels failed to enforce the federal policy favoring enforcement of arbitration agreements. Gay v. CreditInform, No. 06-4036 (3d Cir. Dec. 19, 2007) (rejecting Lytle v. CitiFinancial Services, Inc., 810 A.2d 643 (Pa. Super. Ct. 2002), and Thibodeau v. Comcast Corp., 912 A.2d 874 (Pa. Super. Ct. 2006)).
If that strikes you as an odd outcome, don't feel lonesome. The court conferred near super-powers on arbitration clauses, enforcing them despite their unconscionability under general state law principles precisely because their unconscionability inhered in their requirement of individual arbitration. Under that rationale, courts must enforce all bans on class arbitrations no matter how heinously unconscionable.
The decision conflicts, at least atmospherically, with several other courts' analyses. Cases like Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006), held class arbitration bans unenforceable because they frustrated enforcement of federal statutory rights, while others, such as Dale v. Comcast Corp., 498 F.3d 1216 (11th Cir. 2007), concluded that state law unconscionability principles doomed the bans.
Gay takes no notice of those contrary decisions, putting the Third Circuit at the forefront of aggressively enforcing arbitration clauses -- even if their terms plainly aim at assuring that no arbitration whatsoever will happen.
Barry Barnett
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