CompuCredit Corp. v. Greenwood: 8-1 SCOTUS Decision Finds Credit Repair Organizations Act Does Not Preclude Arbitration
In a very narrow decision today, the U.S. Supreme Court found that the Credit Repair Organizations Act (CROA) does not preclude the arbitration of consumer suits alleging violations of that Act. CompuCredit Corp. v. Greenwood, 565 U.S. ___ (2012). The 8-1 decision was written by (who else?) Justice Scalia, with a concurring opinion filed by Justice Sotomayor and joined by Justice Kagan, and a dissent from Justice Ginsburg. Despite the show of solidarity in the holding, the opinions show there may be disagreement at the Court about how clear Congress needs to be to preclude arbitration of particular statutory claims.
In CompuCredit, consumers brought a lawsuit against the issuer of a credit card alleging violations of CROA. Those consumers argued that the arbitration agreements in their contracts were unenforceable because CROA mandates that any suits to enforce it be heard in a court. The federal district court and Ninth Circuit sided with the consumers, finding CROA precluded enforcement of the arbitration agreements.
The essential question in the case was whether CROA’s requirement that a consumer be told it has “a right to sue” for violations of the Act was sufficient to override the Federal Arbitration Act’s mandate in favor of enforcing arbitration agreements. As predicted, the majority of the Supreme Court found the language did not show Congressional intent to preclude arbitration primarily because the “right to sue” language was only in a section of the statute about what disclosures had to be provided to consumers, not a section detailing the rights created by the statute. The majority also described the phrase “right to sue” as a “colloquial method of communicating to consumers that they have [a] legal right,” but not one that excludes the possibility of arbitration.
In contrast, Justice Ginsburg’s dissent accused the majority of placing a “sophisticated gloss” on the phrase “right to sue.” Justice Ginsburg wrote “The right to sue, I would hold, means the right to litigate in court.”
Maybe more important than what the Supreme Court said in CompuCredit is what the Supreme Court did not say in CompuCredit. The Supreme Court did not set out a new or higher standard for how clearly Congress must show its intent to override the FAA when it is drafting legislation. In fact, that seems to be the entire point of the concurring opinion from Justices Sotomayor and Kagan. The majority held out as a model of “clarity” a statute (7 U.S.C. §26(n)(2)) that provides “no predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.” In her concurring opinion, however, Justice Sotomayor writes “I do not understand the majority opinion to hold that Congress must speak so explicitly in order to convey its intent to preclude arbitration of statutory claims.” In the dissent, Justice Ginsburg reminds her colleagues that under current precedent Congress “need not employ ‘magic words’” to override the FAA.
Because CompuCredit fails to set forth any new test for finding a Congressional override of the FAA, it will be interesting to see if it has any effect on the current trend of litigating whether arbitration is precluded under particular federal statutes. It will also be interesting to see if Congress gets the message and begins adding very direct language about whether arbitration is or is not consistent with drafted legislation.