Enforceability of Agreements for Individual Arbitration in Lieu of Class Proceedings
NCLC urged the Third Circuit to rule that the Federal Arbitration Act (FAA) preempts a ruling by the New Jersey Supreme Court that barred class action waivers in arbitration agreements as "unconscionable." The New Jersey Supreme Court ruling denies consumers and businesses the benefits of streamlined and fair resolution of disputes through individual arbitration. In its brief, NCLC argued that individual arbitration provides a fast, fair, and efficient alternative to class wide resolution of disputes, and that the New Jersey ruling will hurt consumers as well as businesses.
The Third Circuit ruled that the New Jersey law at issue, which requires the availability of classwide arbitration, is preempted by the Federal Arbitration Act. Accordingly, the court affirmed the district court's order compelling individual arbitration. Previously, in May 2010, the Third Circuit ruled that the Federal Arbitration Act (FAA) does not preempt the decision by the New Jersey Supreme Court. Subsequently, the U.S. Supreme Court vacated that ruling in light of AT&T Mobility v. Concepcion, and remanded the case back to the Third Circuit for reconsideration. On remand, the Third Circuit agreed with NCLC's original amicus brief that the New Jersey rule is inconsistent with the Federal Arbitration Act.
Amicus brief filed 2/26/09. Third Circuit decision 5/21/10. Vacated and remanded by U.S. Supreme Court 5/2/11. Revised Third Circuit decision 8/24/11.