ARBITRATOR TO DECIDE WHETHER ARBITRATION AGREEMENT’S BAN OF CLASS ACTIONS IS UNCONSCIONABLE
In a dispute centered on retroactive credit card interest-rate increases, Mr. and Mrs. Puleo, on behalf of those similarly situated, appealed the District Court’s decision that the enforceability of an Arbitration Agreement’s ban on class actions was a question of arbitrability for the court to decide. The Puleos argued that the District Court should never have addressed the unconscionability of the class action waiver and instead should have left the issue to be decided by the arbitrator. The Third Circuit Court of Appeals, following the Supreme Court’s decision in Howsam v. Dean Witter Reynolds, Inc., 537 US 79, 84 (2002), concluded that the challenge to the class action waiver in the concededly valid arbitration agreement did not raise an issue of arbitrability, and thus should have been decided by the arbitrator. The Court reasoned that the parties’ agreement provided that all disputes should be arbitrated, and that this agreement included the claim that the agreement’s waiver of class arbitration was unconscionable. The Court noted that its decision was consistent with the Supreme Court’s recent opinion in Stolt-Nielsen S.A. v. AnimalFeeds, because it gave effect to the terms of the parties’ arbitration agreement. Puleo v. Chase Bank USA, N.A., Case No. 08-3837 (3d Cir. May 10, 2010).
This post written by John Black.
