On Monday, May 15, 2017, the Supreme Court issued its latest reminder to state and lower federal courts that they must treat arbitration agreements as equally valid as all other contracts. In Kindred Nursing Centers Limited Partnership v. Clark et al., 581 U.S. ___ (2017), the Court confronted a rule imposed by the Kentucky Supreme Court that barred contracts conferring broad “powers of attorney” — contracts that authorize individuals to act on behalf of, and legally bind, others—from entering into an arbitration agreement, on the principal’s behalf, absent a “clear statement” of authority that allows the agent to waive the principal’s right to a jury trial.
On April 26, 2017, the Consumer Financial Protection Bureau (“CFPB”) broke new ground by imposing a fine – in excess of a million dollars – against a consumer financial services company for allegedly violating the terms of its prior settlement with the CFPB.
Businesses across the country regularly bemoan the time and expense of litigation. Even when businesses are successful in defending non-meritorious consumer claims alleging unfair or deceptive practices, false advertising, technical violations of statutory rules, and so on, they nonetheless essentially suffer defeat because of the time and resources they expend to fend off such claims. There is a relatively proven way to ameliorate this situation that is often quicker and less expensive for everyone involved—and yet many companies do not understand or utilize pre-dispute arbitration provisions when they easily could do so.
Foley is restructuring its practice groups to bring our considerable consumer law and class action expertise together in a single forum. We are proud to announce the formation of our new Consumer Law, Finance & Class Action Practice Group. Consistent with our new focus, we are also expanding the scope of this blog to reach a broader array of consumer class action issues.
A class action that aggregates the claims of individual plaintiffs against a common defendant can promote judicial economy and maximize efficiency. However, even the pursuit of class certification can promote abuse. In the words of Judge Henry Friendly, class actions can at times result in “blackmail settlements,” where even defendants with meritorious defenses feel compelled to settle based on the enormous threat of liability that a class action can present. See In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298 (7th Cir. 1995) (quoting Henry J. Friendly, Federal Jurisdiction: A General View 120 (1973)). In part to avoid this abuse, the Federal Rules of Civil Procedure strike a balance that permits certification of damages classes under Rule 23(b)(3) only when, among other things, common issues predominate over individualized issues necessary to resolve the case.