On Second Thought… Court Begrudgingly Reverses Its Own June 2013 Decision On Class Arbitration In Light of SCOTUS’s Amex Decision

Eight days prior to the Supreme Court’s decision in American Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304 (2013) (“AMEX”) (which we blogged here), the Massachusetts Judicial Court held that the Federal Arbitration Act (“FAA”) did not prevent a court from invalidating a class action waiver contained in an arbitration agreement when a plaintiff demonstrates that he or she cannot effectively pursue the claim in individual arbitration (Feeney v. Dell Inc., 465 Mass. 470 (Mass. 2013) (“Feeney II”). The court reconsidered its ruling in light of Amex and, while it made clear it did not agree with that decision, reversed its holding in Feeney II upon finding that it did not comport with the Supreme Court’s interpretation of the FAA.

The court had previously held in Feeney II that while the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), severely limited the grounds on which a court can invalidate a class action waiver contained in an arbitration agreement, a court could still invalidate such class action waivers where they would act to effectively deny a plaintiff a practical means of pursuing his or her claim. The most obvious example would be where the potential recovery of a claim would not justify the costs needed to successfully litigate the claim if brought in an individual capacity.

However, in Amex, the Supreme Court left no doubt that the Feeney II court’s reading of Concepcion was, to put it mildly, inaccurate.  As the Supreme Court stated: “Truth to tell, our decision in [Concepcion] all but resolves this case… We specifically rejected the argument that class arbitration was necessary to prosecute claims that might otherwise slip through the legal system.” Further driving home the point, the Court stated that Concepcion “established… that the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims.”

After analyzing the Amex decision, the court begrudgingly concluded that its decision in Feeney II could not stand: “Although we regard as untenable the Supreme Court’s view that ‘the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims,’ we are bound to accept that view as a controlling statement of Federal law.” Although Feeney was a consumer case, its holdings should apply to employment cases as well, particularly since they are likely to have higher individual damages and lower litigation costs.

The Bottom Line: AMEX means what is says. Massachusetts courts may no longer refuse to enforce class action waivers contained in arbitration agreements on the ground that the waivers effectively eliminate a plaintiff’s remedy.