The Court’s decision yesterday in CompuCredit Corporation v. Greenwood reversed the Ninth Circuit in yet another in the one-sided line of cases involving the enforceability of pre-dispute arbitration agreements. The decision involves arbitration of claims that involve an obscure statute, the Credit Repair Organizations Act (CROA), but an all-too-familiar product: the so-called “harvester” credit card largely outlawed by Section 105 of the CARD Act of 2009. CompuCredit is best known in consumer credit circles as the target of a 2008 FDIC enforcement action documenting the features of these cards, which typically come with a low credit limit and high up-front fees. The card at issue here had a credit limit of $300 and first-year fees of $257, leaving an available credit limit of only $43. Collectively, those features are likely to push the effective interest rate on purchases with the card far above one hundred percent per year. So CompuCredit is no stranger to dissatisfied customers.
The natural reaction to a decision like this is to pigeonhole it as suggested in the title and first sentence of this entry: Ninth Circuit rejects arbitration agreement; Supreme Court reverses; Justice Ginsburg dissents. And the context only underscores the point. The decision follows last year’s arbitration case – reversing the Ninth Circuit in AT&T v. Concepcion (albeit by a closer five-to-four vote). Greenwood was accompanied by an eight-to-one decision in Minneci v. Pollard, also reversing the Ninth Circuit with only Justice Ginsburg dissenting. And Greenwood followed by just one day Justice Scalia’s heated dissent from denial in Cash v. Maxwell, which emphasized the Ninth Circuit’s wayward tendencies in reviewing California criminal convictions and suggested that the only appropriate remedy was to review even the most factbound of cases; the Cash opinion hearkens back to Justice Black’s view that the Court should review all FELA cases in which plaintiffs failed in the lower courts.
So the real question, then, is whether there is anything more interesting in Greenwood than a factbound application of settled Federal Arbitration Act (“FAA”) jurisprudence to rein in a disloyal court of appeals. Perhaps. Justice Scalia’s opinion for the Court largely forgoes his typical verve and instead works quickly through the arguments raised in support of the Ninth Circuit’s ruling. First, he stakes out the ground covered by the Court’s prior cases: the every-day creation of a federal statutory cause of action is not enough to imply an exception to the FAA rule validating arbitration agreements. Joining issue with Justice Ginsburg, he acknowledges that this is the first case to include a provision barring waiver of the cause of action. His answer to that problem is simple (if a bit circular): “[I]f a cause-of-action provision mentioning judicial enforcement does not create a right to initial judicial enforcement, the waiver of initial judicial enforcement is not the waiver of a ‘right of the consumer.’” In his view, what the waiver preserves is not a right to sue in court but “the guarantee of the legal power to impose liability.”
He then turns to the Ninth Circuit’s argument, that a disclosure describing the CROA as including a “right to sue” requires validation of a nonwaivable right to judicial relief. With commendable frankness, he characterizes the disclosure statement as a “colloquial” but “necessarily . . . imprecise” summary of the statute, which cannot alter the meaning of the statute itself. Because the Court’s earlier cases involve statutes with similar substantive provisions, the disclosure cannot justify a different result here.
Justice Sotomayor (joined by Justice Kagan) concurred only in the judgment. Explaining that she finds the statutory arguments of Justices Scalia and Ginsburg precisely balanced (“in equipoise”), she justifies her vote for arbitration by her view that “opponents of arbitration . . . bear the burden of showing that Congress disallowed arbitration.”
Justice Ginsburg has long been the most ardent opponent of the Court’s broad interpretation of the FAA, filing or joining dissents from such decisions as AT&T v. Concepcion, Rent-A-Center v. Jackson, and Green Tree Financial Corp. v. Randolph. So her decision to dissent here should not surprise anyone, nor should her articulate justification of the Ninth Circuit’s holding. Unlike the Court, which starts from the premise that arbitration agreements are enforceable absent a strong statutory command, Justice Ginsburg starts from the point that the disclosure was written by Congress solely for the purposes of giving information to consumers. From there, she reasons that if ordinary consumers would understand the disclosure to promise them a nonwaivable right to go to court (as they surely would), then it is willfully perverse to claim that the Congress that wrote the disclosure did not intend consumers to have a right to go to Court.
The gulf in perspectives between Justice Ginsburg and the pro-arbitration wing of the Court could hardly be broader. From a broader institutional perspective, what is most interesting is the likelihood that this will be one of the last cases in this line. It is of course hard to know whether the Court’s vigorous rediscovery of the Federal Arbitration Act in the 1980s unearthed a long unenforced intent of Congress or simply furthered judiciary-centered concerns about overworked trial courts. But it seems clear that Congress has moved on to a present view that pre-dispute arbitration agreements substantially interfere with important consumer rights. So, on those few occasions when recent Congresses have granted new rights to consumers, Congress often has explicitly carved them out of the FAA. Without taking a position on whether that provides any support for the proper interpretation of the CROA (enacted so long before the current standoff), it does suggest that newer statutes will satisfy whatever pro-FAA clear-statement rule the Court might erect.
One final note, if it seems strange for the Court’s senior Associate Justice to receive an assignment in such a routine and uncontroversial case, it presumably reflects Justice Scalia’s authorship of the majority opinion last year in the much more important and closely divided decision in AT&T v. Concepcion.
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