The recently released Carlton Fields 2016 Class Action Survey reports that class actions are up for the first time in four years. While data privacy class actions still make up a relatively small portion of class action filings, their growth is expected to continue.
As class actions increase, arbitration clauses remain a popular first line of defense. The Carlton Survey reported that nearly 50 percent of companies employ arbitration clauses that address class actions. Still, enforcing such arbitration clauses often generates mini-litigations in their own right. Two recent decisions from the Fourth Circuit are of interest in this regard.
Dell Webb Communities, Inc. v. Carlson (4th Cir., March 28, 2016): The Fourth Circuit addressed the question of who decides whether an arbitration agreement provides for class arbitration – a question, the Fourth Circuit noted, “the Supreme Court has not conclusively” answered. What is clear is that procedural questions may be determined by the arbitrator, while questions of arbitrability are for the courts. Still, the line between procedure and arbitrability is not always clear. In reaching its decision, the Fourth Circuit noted the differences between bilateral and class arbitration. Often, parties agree to arbitrate to, among other things, lower the costs of dispute resolution, maintain confidentiality, and reach finality more expeditiously. Class arbitration, however, upends many of those benefits. The risks are higher for defendants, and the multilayered appellate review of judicial class certification decisions (both interlocutory and after a final judgment) is unavailable in review of an arbitration award. Accordingly, in the absence of clear direction that the arbitrator is to decide whether the agreement authorizes class arbitration, the Fourth Circuit held the issue is not simply procedural but goes to the arbitrator’s underlying power. It must be decided in court.
Dillon v. BMO Harris Bank, N.A. (M.D.N.C., March 23, 2016): In Dillon, the question of arbitrability was front and center. The defendant bank moved to compel arbitration based on click-wrap (online) loan agreements between the plaintiff and non-party lenders. While there is a presumption in favor of arbitrability, the court found the defendant failed to meet its evidentiary burden to show a valid arbitration agreement.
The court’s opinion is a reminder of proper authentication under Federal Rule of Evidence 901. It noted that “these are not abstract, unimportant concerns [because] click-wrap contracts like the one at issue here pose special risks of fraud and error.” As evidence of the arbitration agreement, the defendant submitted copies of electronic agreements through an employee declaration. But the submitted copies did not have the plaintiff’s signature or any indication that the plaintiff actually viewed them when completing the online loan application. The declarant did not explain how the electronic documents were created or preserved, declined to sit for a deposition, and consequently, the court found, failed to authenticate the documents as the arbitration agreement with plaintiff. The plaintiff’s deposition testimony could not authenticate the agreement either because it did not establish that he “had the personal knowledge necessary.”
Dillon thus demonstrates the importance of carefully constructing online click-wrap agreements, as well as diligent record-keeping and meticulous presentation of evidence.
[View source.]
