Since the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, the Eleventh Circuit has consistently enforced agreements to arbitrate with class waivers. Earlier this week, it did so again in a case involving Sprint’s arbitration agreement in its service contracts. See Pendergast v. Sprint Nextel Corp. (pdf), No. 09-10612 (11th Cir. Aug. 20, 2012).
Businesses should pay close attention to Pendergast for two reasons. First, the decision closes a door that—at least according to some plaintiffs—had been left wide open in the Eleventh Circuit. Specifically, the Eleventh Circuit issued the first post-Concepcion federal appellate decision in Cruz v. Cingular Wireless LLC (pdf), 648 F.3d 1205 (11th Cir. 2011) (pdf), which involved the same AT&T Mobility provision upheld in Concepcion. Plaintiffs thus argued that Cruz did not apply to arbitration clauses that lacked the pro-consumer incentives of AT&T’s arbitration provision. See Concepcion, 131 S. Ct. at 1753 & n.3. Because the Sprint provision at issue in Pendergast does not contain similar features, Pendergast makes clear that Concepcion and Cruz extend to a broad array of arbitration agreements with class waivers.
Second, Pendergast rejects the attack on arbitration agreements that is currently in vogue among the plaintiffs’ bar: that without the class action device, a plaintiff will not be able to “effectively vindicate” his or her statutory rights. At the eleventh hour—or, to be more precise, just a few weeks before the Eleventh Circuit issued its opinion— the plaintiff filed a motion (pdf) attempting to invoke In re American Express Merchants Litigation (pdf), 667 F.3d 204 (2d Cir. 2012) (“Amex III”). In Amex III, the Second Circuit refused to enforce the arbitration provision in the agreements between the plaintiff and American Express after concluding that the plaintiffs could not vindicate their federal antitrust claims on an individual basis in arbitration. (Please see our more detailed reports on the Amex III decision (pdf) and the Second Circuit’s denial of rehearing en banc (pdf).) By enforcing Sprint’s arbitration clause, the Eleventh Circuit’s decision tacitly rejects the plaintiff’s attempt to invoke this “vindication of statutory rights theory” in the context of Florida’s consumer-protection statute.
Indeed, the Court of Appeals made short work of the case:
Resolution of Pendergast’s appeal requires only a straightforward application of Concepcion and Cruz. We need not decide whether the class action waiver here is unconscionable under Florida law or if it frustrates the remedial purposes of the [Florida Deceptive and Unfair Trade Practices Act (FDUTPA)], because to the extent Florida law would invalidate the class action waiver, it would still be preempted by the [Federal Arbitration Act (FAA)].
In rejecting the Amex III-type arguments made by the plaintiff, the court pointed to its earlier decision in Cruz:
The Plaintiffs’ evidence goes only to substantiating the very public policy arguments that were expressly rejected by the Supreme Court in Concepcion—namely, that the class action waiver will be exculpatory, because most of these small-value claims will go undetected and unprosecuted.” (quoting Cruz).
The reasoning of Cruz applies equally here. The Supreme Court in Concepcion expressly rejected the notion that the state law should not be preempted because the class action waiver would effectively shield the defendant from liability.
In short, Pendergast should help derail efforts by the plaintiffs’ bar to avoid enforcement of arbitration agreements within the Eleventh Circuit.