Federal Court of Appeals Strikes Down Arbitration Agreement Forbidding Class Actions
By: John Scanlan, Attorney at Law
The Eleventh Circuit Court of Appeals recently struck down an arbitration agreement prohibiting Comcast subscribers from bringing class action suits. Dale v. Comcast Corp., Slip No. 06-15516 (11th Circ. Ct. of App. Sept 4, 2007). The Court held that subscribers were "effectively ...precluded from suing Comcast" over subscription fees. Id. at16.
The Cable Communications Policy Act of 1984, 47U.S.C. §521 et seq., authorized local governments to charge cable operators a franchise fee for the use of public rights-of-way.
The Cable Act allowed the cable operators to pass the fee through to their customers.
Subscribers filed a class-action claiming that Comcast overcharged for these pass-through fees. Comcast immediately filed a motion to compel individual arbitration, in place of the class action.
The Court for the Northern District of Georgia court agreed, ordering the individual plaintiffs to arbitration. The plaintiffs appealed to the 11th circuit.
Each individual subscriber was overcharged by a very small amount, totaling only $10.56 over the four year statute of limitations period. Id. at9. Comcast's total overcharge, to all subscribers, for the period was $39,000. Id.
The district court upheld Comcast's "Policies and Procedures" document as a binding contract between the company and each subscriber. The Court of Appeals agreed, but found the Arbitration Provision, therein, to be unconscionable. The Arbitration Provision contained a class action waiver, stating:
All parties to the arbitration must be individually named. There shall be no right or authority for any claims to be arbitrated or litigated on a class-action or consolidated basis or on basis [sic] involving claims brought in a purported representative capacity on behalf of the general public (such as a private attorney general), other subscribers, or other persons similarly situated.
Id. at3. The Arbitration Provision required Comcast to advance arbitration filing fees and the arbitrator's cost and expenses, upon written request. Id. at8. However, subscribers were responsible for additional costs, including fees for attorneys and expert witnesses. Id. If Comcast prevailed with the arbitrator, subscribers were required to reimburse Comcast for the advanced fees, up to the amount the subscriber would have paid to file the claim in state court. Id. A plaintiff who prevailed could only collect attorney fees and costs if Comcast was found to have "acted bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense." Id. at14.
The plaintiffs asserted that given the small potential recovery when compared to the cost of arbitration, no individual subscriber would proceed to arbitration.
Although the 11th Circuit Court of Appeals had upheld two similar previous arbitration provisions waiving the right to sue as a class, the Court struck down the Comcast class action waiver. Unlike in the previous cases, Jenkins v. First Am. Cash Advance of Ga., LLC, 400F.3d868 (11th Cir. 2005) and Randolph v. Green Tree Fin. Corp.-Ala., 244F.3d814 (11th Cir. 2001), in Dale, a plaintiff generally could not recover attorney fees, should the subscriber prevail at arbitration. Dale at13.
The Court of Appeals held that the Arbitration Provision chilled subscribers from going to arbitration and that the class action waiver acted as a bar to recovery.
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