home
about the group
appellate attorneys
briefs
docket reports
oral arguments
news
contact
 
SUPREME COURT DOCKET REPORT
OCTOBER TERM 2011
DECISION ALERT


October Term, 2011

January 10, 2012

Today the Supreme Court issued two decisions, described below, of interest to the business community.


Federal Arbitration Act—Arbitrability of Disputes Under the Credit Repair Organizations Act

CompuCredit Corp. v. Greenwood, No. 10-948 (previously discussed in the May 2, 2011 Docket Report).

Under the Federal Arbitration Act (“FAA”), agreements to arbitrate federal statutory claims ordinarily must be enforced according to their terms, unless the FAA’s policy favoring arbitration of disputes is “overridden by a contrary congressional command.” Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 226 (1987). Today the Supreme Court held that the federal Credit Repair Organizations Act (“CROA” or “Act”) does not contain such a command, and therefore that claims under the CROA are arbitrable.

The CROA requires credit repair organizations to provide their customers with a disclosure document informing them that they “have the right to sue a credit repair organization that violates” the Act. 15 U.S.C. § 1679c(a). The CROA further provides that “[a]ny waiver by any consumer of any protection provided by or any right of the consumer under this subchapter” is void and unenforceable. 15 U.S.C. § 1679f(a). Both the district court and a divided panel of the Ninth Circuit—in conflict with other courts of appeals—concluded that the language requiring customers to be informed of a “right to sue” established an unwaivable right to bring a CROA claim in court and thereby prohibited arbitration of such claims.

By an 8-1 vote, the Supreme Court reversed. In a majority opinion authored by Justice Scalia—and joined by Chief Justice Roberts and Justices Kennedy, Thomas, Breyer, and Alito—the Court explained that, “[b]ecause the CROA is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms.” Slip op. at 10. Rather than creating any unwaivable right to file a lawsuit in court, the majority held, “the ‘right to sue’ language describes the consumer’s right to enforce the credit repair organization’s liability.” Id. at 4-5 (internal quotation marks omitted). The Court observed that statutes that create civil causes of action commonly describe them “in the context of a court suit.” Id. at 5. Thus, “[i]f the mere formulation of the cause of action in this standard fashion were sufficient to establish the ‘contrary congressional command’ overriding the FAA, valid arbitration agreements covering federal causes of action would be rare indeed.” Id. at 5-6. The Court rejected the notion that its interpretation renders the CROA’s mandated disclosure misleading; instead, the Court reasoned, the disclosure “is meant to describe the law to consumers in a manner that is concise and comprehensible to the layman,” and to convey the fact that consumers are entitled “to recover damages from credit repair organizations that violate the CROA.” Id. at 7-8. Finally, the Court noted that, in other contexts, Congress has expressly restricted the use of arbitration, rendering it all the more unlikely that it intended to do so in such a roundabout manner in the CROA. Id. at 9-10.

Justice Sotomayor, joined by Justice Kagan, concurred in the judgment. In her view, the competing interpretations of the CROA’s disclosure provision were “in equipoise.” Slip op. 1-2 (concurring opinion). She agreed with the result because, under the Court’s precedents, “the opponents of arbitration bear the burden of showing that Congress disallowed arbitration of their claims, and because we resolve doubts in favor of arbitration.” Id. at 2. While the majority had explained that a number of “recently enacted statutes . . . expressly disallow arbitration,” Justice Sotomayor did “not understand the majority opinion to hold that Congress must speak so explicitly” in order to preclude arbitration of a particular statutory claim; “proof of Congress’ intent may also be discovered,” she said, “in the history or purpose of the statute.” Id.

Justice Ginsburg dissented. She believed that “Congress enacted the CROA with vulnerable consumers in mind,” and that such “consumers [are] likely to read” the CROA’s disclosure of the “‘right to sue’ to mean the right to litigate in court, not the obligation to submit disputes to binding arbitration.” Slip op. 2 (dissenting opinion). Justice Ginsburg also argued that, to “depart from” the FAA’s policy favoring arbitration agreements, Congress should not have to resort to “magic words” or an “unmistakably clear statement.” Id. at 8 (internal quotation marks omitted).

The decision in CompuCredit is the latest in a long line of Supreme Court cases over the past quarter century that have uniformly rejected arguments that Congress intended to exclude particular statutory causes of action from arbitration. See 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009) (Age Discrimination in Employment Act); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (same); Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477 (1989) (Securities Act of 1933); Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220 (1987) (Securities Exchange Act of 1934 and Racketeer Influenced and Corrupt Organizations Act); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (Sherman Act). CompuCredit confirms—again—that congressional intent to preclude the arbitration of federal statutory disputes will not be inferred lightly.  

The decision also will likely impact the similar—and hotly contested—question whether claims under the Magnuson-Moss Warranty Act (“MMWA”) are subject to arbitration. Compare Kolev v. EuroMotors West/The Auto Gallery, 658 F.3d 1024 (9th Cir. 2011) (holding that MMWA claims are not arbitrable), petition for rehearing en banc filed, No. 09-55963 (Oct. 4, 2011), with, e.g., Walton v. Rose Mobile Homes LLC, 298 F.3d 470 (5th Cir. 2002) (holding that MMWA claims are arbitrable); Davis v. S. Energy Homes, Inc., 305 F.3d 1268 (11th Cir. 2002) (same).


Government Contractors—Bivens Actions

Minneci v. Pollard, No. 10-1104 (previously discussed in the May 16, 2011 Docket Report).

The Supreme Court held today in Minneci v. Pollard, No. 10-1104, that no implied cause of action arises under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971), when a federal prisoner alleges that individual employees of a private prison corporation have violated his or her constitutional rights. The Court’s holding was based principally on its conclusion that state tort law gave the plaintiff—whose claim rested on allegedly negligent conduct of the kind that “typically falls within the scope of traditional state tort law”—an adequate, alternative damages remedy. Slip op. 12.

While incarcerated at a federal prison operated under contract by a private corporation, the plaintiff (respondent in the Supreme Court) allegedly sustained various injuries. He contended, among other things, that the prison employees did not provide him with adequate medical treatment, deprived him of basic hygienic care, and forced him to return to work before his injuries had healed. Claiming that his Eighth Amendment right to constitutionally adequate medical care had been violated by employees of the corporation, the plaintiff brought suit in federal district court.

The district court dismissed the claims against the employees (petitioners in the Supreme Court). It concluded that an implied cause of action under Bivens was not available against the individual defendants, who had no direct contractual or employment relationship with the federal government, because state law provided the plaintiff with alternative remedies. The Ninth Circuit held otherwise and would have allowed a Bivens action to proceed.

The Supreme Court reversed. It explained that its precedent had set forth a two-step inquiry for deciding whether to recognize a Bivens remedy. The threshold step was evaluating whether there wasan “alternative, existing process” for protecting the constitutional interest at stake. Slip op. 3. Only if there were no such alternative remedies would the Court look further, and consider whether there were “special factors” counseling against recognition of a Bivens remedy. Id. at 4.  

The first of these steps was dispositive here. The Court reasoned that the plaintiff’s “Eighth Amendment claim focuse[d] upon a kind of conduct”— routine negligence in the administration of medical care—“that typically falls within the scope of traditional state tort law.” Slip op. 6. Moreover, the Court explained, prisoners generally can bring state-law tort actions against employees of a private firm.

The Court recognized that state tort law might provide less generous remedies than would a Bivens action—by, for example, capping damages or permitting recovery for emotional suffering only if accompanied by physical harm. But “[s]tate-law remedies and a potential Bivens remedy need not be perfectly congruent,” the Court held, to constitute an adequate alternative remedy. Slip op. 10.It is sufficient that “state tort law remedies provide roughly similar incentives for potential defendants to comply with the Eighth Amendment while also providing roughly similar compensation to victims of violations.” Id. at 11. And that was the case here.

Justice Scalia filed a concurring opinion that was joined by Justice Thomas. He would have gone further, limiting Bivens and its two follow-on cases to their facts and declining to recognize any additional Bivens actions.

Justice Ginsburg dissented. She took the position that the respondent was entitled to the same type of relief as prisoners “incarcerated in a federal- or state-operated facility.” Slip op. 1 (dissenting opinion).


Mayer Brown's Supreme Court & Appellate practice distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community and distributes a Docket Report-Decision Alert whenever the Court decides such a case. We hope you find the Docket Reports and Decision Alerts useful, and welcome feedback on them (which should be addressed to Andrew Tauber, their general editor, at atauber@mayerbrown.com or +1 202 263 3324).

Feel free to forward this message to anyone who you believe might be interested in the Decision Alert.

Please visit us at www.appellate.net

Mayer Brown Supreme Court Docket Reports provide information and comments on legal issues and developments of interest to our clients and friends. They are not a comprehensive treatment of the subject matter covered and are not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed.

 
 
© 2014. The Mayer Brown Practices. All rights reserved. --  Legal Notices | Attorney Advertising

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.