Arbitration & Mediation

Eleventh Circuit Rules That Statutes Which Provide For Enforcement in Court Can Still Be Resolved in Arbitration

By Christopher B. Hopkins, Esq.

A clever but likely short-lived legal theory arose in the case of Elizabeth Picard et al. v. Credit Solutions, Inc. a/k/a Credit Solutions of America, Inc. If a statute indicates that any violation can be enforced in court, does this preclude arbitration?

According to the Eleventh Circuit, the answer is no.

The plaintiff claims that she entered into a contract with the defendant whereby the defendant would negotiate with the plaintiff's unsecured creditors to lower her debt and monthly payment. Something apparently went wrong and the plaintiff both filed for bankruptcy and sued the defendant. Of note, one of her claims was that the defendant violated the Credit Repair Organization Act, 15 U.S.C. 1679 et al. The Plaintiff claimed that the CROA barred arbitration. It appears she was wrong.

There was some initial squabbling over who-signed-what until the defendant appeared with an audio recording of the phone conversation and a completed internet form.

As a backdrop, arbitration is generally favored and statutory claims still fall under that rubrick barring Congress evincing an intention to disallow waiver of judicial remedies. Step one, the CROA doesn't mention arbitration or that it is barred. Step two, while the CROA says that statutory rights can be enforced in court, the 11th Circuit concluded that is not exclusive -- to wit, the Securities Exchange Act of 1934 also gives access to judicial remedies/forums but those claims are arbitrated all of the time under FINRA. Step three, the proposed arbitration forum will provide all substantive rights under CROA.

The arbitration clause appears solid, although we prefer the "arising from or relating to" clause, so its worth repeating here:

"If there is any dispute between the parties arising out of this agreement, the parties agree to submit the dispute to binding arbitration under the auspices of the American Arbitration Association (AAA). If such arbitration is held under the auspices of any other organization,, the arbitration will be held in accord with AAA rules to the extent possible. Binding arbitration means that both parties give up their right to a trial by jury and to appeal except for a narrow range of issues that may be appeared under Texas law. Discovery may be limited by the arbitrator."

We note, as advanced before, that the clause regarding arbitrating "under" or "in accordance with" the AAA rules (or whatever forum you choose) is a good idea.

Full post as published by Florida Arbitration Law on June 08, 2009 (boomark / email).