The anti-arbitration rule issued by the Consumer Financial Protection Bureau in July is now just one short step away from elimination.

The Senate tonight voted 51-50 (with Vice President Pence casting the deciding vote) to invalidate the CFPB’s rule under the Congressional Review Act (“CRA”). That vote follows the House of Representatives’ disapproval of the rule in July.

The last remaining step is the President’s signature on the legislation, which seems highly likely given the Administration’s statement today (pdf) urging the Senate to invalidate the rule.

The President’s approval will trigger two provisions of the CRA.

First, the rule “shall not take effect (or continue)” (5 U.S.C. § 801(b)(1)). In other words, the rule no longer has the force of law and businesses are no longer required to comply with its terms.

Second, the CFPB may neither re-issue the rule “in substantially the same form” nor issue a new rule that is “substantially the same” as the invalidated rule—unless Congress enacts new legislation “specifically authoriz[ing]” such a rule (5 U.S.C. § 801(b)(2)). The scope of this “substantially the same” standard has not been addressed by the courts, but it seems clear that at the very minimum the Bureau cannot issue (a) a new rule banning class action waivers; (b) an express ban of pre-dispute arbitration clauses; (c) a rule that has the practical effect of eliminating pre-dispute arbitration clauses; or (d) any other rule that imposes similar burdens on the use of arbitration.

Invalidation of the rule under the CRA also will moot the pending broad-based industry lawsuit against the CFPB challenging the legality of the regulation. (Mayer Brown represents the plaintiffs in the litigation).

The Supreme Court kicked off its October 2017 Term yesterday with a spirited oral argument in the three cases involving the enforceability of arbitration agreements in employment contracts.

As we have explained, these cases—Epic Systems v. Lewis, Ernst & Young LLP v. Morris, and NLRB v. Murphy Oil USA—present the question whether an arbitration agreement in an employment contract that requires bilateral arbitration, and prohibits class procedures, is invalidated by Section 7 of the National Labor Relations Act (NLRA), which gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” According to the National Labor Relations Board, Section 7 protects employees’ right to seek relief on a class-wide basis, and therefore renders unenforceable arbitration agreements that bar class procedures—even though the Supreme Court has twice held that the Federal Arbitration Act (FAA) protects the enforceability of such agreements, in AT&T Mobility LLC v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013).

The four Justices who dissented in either Concepcion or Italian Colors (or both) aggressively defended the NLRB’s determination. When the dust settled, however, it was not at all clear that they will be able to attract a fifth Justice to their position.

Continue Reading Supreme Court Considers Class Waivers in Employment Arbitration Agreements

We have repeatedly discussed in this space the ongoing debate among the federal courts about ascertainability—a red-hot topic in class action litigation these days. (For a more detailed look at our views on the ascertainability doctrine, see the amicus brief (pdf) that we filed on behalf of the National Association of Manufacturers in support of a pending cert petition.) That topic—and the debate among the lower courts—shows no sign of slowing down, as evidenced by new decisions issued by the Second, Sixth, and Third Circuits over the past two months. The central takeaway from these decisions is that while ascertainability is not a panacea for defendants facing consumer class actions, the doctrine (or variations on the ascertainability theme) should help defeat class actions in many circuits when class members cannot be identified without individualized inquiries.

Continue Reading Making sense of the cascade of appellate decisions on ascertainability

Today, in CalPERS v. ANZ Securities, Inc. (pdf), the Supreme Court recognized a crucial limitation on the doctrine that allows a class action to toll the deadline for absent class members to bring their own separate individual suits. We’ve been following this issue in the CalPERS appeal for some time. (See our previous reports on this appeal.)

In a 5-4 decision authored by Justice Kennedy, the Court held that the American Pipe tolling doctrine does not apply to statutes of repose. As a result, the three-year statute of repose in the Securities Act of 1933 barred a suit that CalPERS had filed against the underwriters for certain Lehman Brothers debt securities more than three years after the securities were issued, but while a timely class action bringing similar claims was pending.

Continue Reading Supreme Court Refuses To Allow Class Action To Extend Deadline For Filing Suit

As many of our readers know, the Supreme Court will hear arguments next term in a trio of cases examining whether class waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act. Many observers—including the two of us—believed that the issue had been settled by the Supreme Court’s decisions in AT&T Mobility LLC v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013). But—as detailed on our blog—in 2012 the National Labor Relations Board concluded in the D.R. Horton case that Section 7 of the National Labor Relations Act (NLRA), which protects the ability of employees to engage in “concerted activities” (for example, union organizing), supersedes Concepcion (and by extension, American Express) and requires that employees be allowed to bring class actions (either in court or in arbitration).

Over the past several years, a circuit split has developed over whether the Board’s approach in D.R. Horton rests on correct interpretations of the FAA and NLRA, with the majority of courts rejecting the Board’s position. In January, the Supreme Court granted review in three cases—NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris—to resolve the split. Briefing on the merits is now underway. We filed our amicus brief on behalf of the U.S. Chamber last Friday, and—while we believe our brief makes compelling arguments (which we discuss below)—the big development in these cases was the amicus brief that the United States filed on Friday.

Significantly, the United States has changed its position since last October, when the DOJ represented the NLRB in filing the petition for certiorari in Murphy Oil. That petition was a full-throated defense of the D.R. Horton rule, consistent with efforts by a number of federal agencies during the Obama Administration to circumvent Concepcion by banning class waivers or banning predispute arbitration entirely. Last Friday, however, the United States broke with the Board’s position, filing an amicus brief in support of Murphy Oil and the other two companies.

As the government explained in its brief on Friday, the Solicitor General’s office has concluded that its earlier briefs got the issue wrong:

In Murphy Oil, this Office previously filed a petition for a writ of certiorari on behalf of the NLRB, defending the Board’s view that agreements of the sort at issue here are unenforceable. After the change in administration, the Office reconsidered the issue and has reached the opposite conclusion. Although the Board’s interpretation of ambiguous NLRA language is ordinarily entitled to judicial deference, courts do not defer to the Board’s conclusion as to the interplay between the NLRA and other federal statutes. We do not believe that the Board in its prior unfair-labor-practice proceedings, or the government’s certiorari petition in Murphy Oil, gave adequate weight to the congressional policy favoring enforcement of arbitration agreements that is reflected in the FAA.

Continue Reading Solicitor General weighs in against NLRB’s anti-arbitration rule

We’ve previously blogged about Bristol-Myers Squibb v. Superior Court (“BMS”), in which the Supreme Court granted certiorari to review a decision of the California Supreme Court that adopted an unusual—and extraordinarily expansive—view of California courts’ power to exercise specific personal jurisdiction over a defendant.

We filed an amicus brief on behalf of the Chamber of Commerce of the United States of America, the California Chamber of Commerce, the American Tort Reform Association, and the Civil Justice Association of California, arguing that the California court’s holding conflicted with numerous Supreme Court decisions making clear that in order to invoke specific jurisdiction, a plaintiff’s claims must arise out of the defendant’s in-state conduct.  (The views in this post are ours, and not those of our clients.)

The case was argued in April, and the Court announced its decision today. The result is an 8-1 opinion rejecting the California Supreme Court’s approach and, in our view, recognizing important limits imposed by the Fourteenth Amendment’s due process clause on the ability of courts to adjudicate cases that aggregate the claims of plaintiffs from many jurisdictions.

The immediate impact of the decision is to limit the forums where nationwide mass actions in state court can proceed to those states in which the defendant is subject to general jurisdiction (usually the state of incorporation and principal place of business).  In addition, as we discuss below, the decision raises substantial questions about whether nationwide class actions can proceed in jurisdictions where a defendant is not subject to general jurisdiction. Continue Reading Supreme Court’s Decision In Bristol-Myers Squibb v. Superior Court Rejects Expansive View Of Specific Jurisdiction

The U.S. District Court for the Central District of California recently issued an interesting decision (pdf) denying class certification in 15 consolidated consumer class actions against the maker of 5-hour ENERGY drinks.

Continue Reading Court refuses to certify 5-hour Energy false-advertising class action for lack of common proof

Today’s decision by the Supreme Court in Microsoft Corp. v. Baker puts an end to a tactic used by plaintiffs in the Ninth Circuit to manufacture an immediate appeal of an order denying class certification. When a federal district court grants or denies class certification, Federal Rule of Civil Procedure 23(f) allows the losing party to ask the court of appeals for permission to appeal immediately. Otherwise, the parties must litigate the case to a final judgment—the named plaintiffs’ individual claims if certification has been denied, or the class claims if certification has been granted—to obtain appellate review of the district court’s class certification determination. But the Ninth Circuit created an exception to this rule by authorizing a plaintiff who has had class certification denied to dismiss his or her individual claims with prejudice and then file an appeal from that self-generated judgment.

After the oral arguments in Baker, it seemed likely that the Supreme Court would reject that exception. And that is exactly what the Court decided today. Much more interesting is how they got there: Although all eight participating Justices agreed on the outcome, they took different approaches to the question presented. Continue Reading Supreme Court rejects end runs around Rule 23(f) by use of “voluntary dismissal” tactic

Yesterday afternoon, the Supreme Court heard oral argument (pdf) in CalPERS v. ANZ Securities, a case that asks whether a plaintiff asserting violations of Section 11 of the Securities Act of 1933 can file suit after the three-year outer limit for such suits has passed, if a class action encompassing the plaintiff’s claims was timely filed and remained pending. The answer to that important question, which has divided the federal courts of appeals, will tell defendants facing suit over the issuance of securities whether the Securities Act’s three-year repose period is a real protection against belated lawsuits or simply a limited protection that dissolves once a timely class action is filed. Yesterday’s argument suggested the Court, too, may be divided about how to resolve this debate.

Continue Reading Can Opt-Out Plaintiffs File Suit After Expiration of a Statute of Repose? Supreme Court Hears Oral Argument in CalPERS v. ANZ Securities

Good news for businesses that use fax machines to communicate with customers: A panel of the D.C. Circuit has just struck down the FCC’s 2014 order mandating that even faxes requested by the recipient that contain advertising material include a special opt-out notice. The decision issued today in Bais Yaakov of Spring Valley v. FCC, No. 14-1234 (D.C. Cir. Mar. 31, 2017), is available here (pdf).

Continue Reading DC Circuit invalidates FCC’s opt-out requirement for solicited faxes