January 10, 2012

Supreme Court Decides CompuCredit Corp. v. Greenwood

On January 10, 2012, the Supreme Court decided CompuCredit Corp. v. Greenwood, No. 10-948, holding that the Credit Repair Organizations Act ("CROA") does not preclude enforcement of an agreement to arbitrate claims brought under that act.

Plaintiffs in the action—respondents in the Supreme Court—opened credit cards through petitioner CompuCredit. They later brought a putative class action, alleging that CompuCredit violated the CROA by making allegedly misleading representations regarding the credit cards' use to rebuild poor credit. The district court denied CompuCredit's motion to compel arbitration, concluding that CROA claims are not arbitrable. A divided panel of the Ninth Circuit affirmed.

The Supreme Court reversed and held that CROA claims may indeed be arbitrated. Federal statutory claims, just like other claims, are subject to the "liberal federal policy favoring arbitration agreements." Under Section 2 of the Federal Arbitration Act ("FAA"), contracts to arbitrate federal claims must thus be enforced—unless the FAA has been "overridden by a contrary congressional command."

Plaintiffs argued that the CROA contains a contrary congressional command because it requires credit repair organizations to advise consumers that "[y]ou have a right to sue" and provides that its protections cannot be waived. But the Court held that these references are not sufficient to preclude arbitration because "[i]t is utterly commonplace for statutes that create civil causes of action to describe the details of those causes of action, including the relief available, in the context of a court suit." Many times, the Court has enforced agreements to arbitrate federal claims created by statutes with similar language. The CROA's disclosure requirement are a "colloquial method of communicating to consumers" that they have a legal right to recover damages caused by violations, and enforcing arbitration agreements does not contradict this disclosure. Had Congress meant to restrict the use of arbitration, it would have so with clarity, as it has done in other statutes. Because it did not do so, agreements to arbitrate CROA claims are enforceable.

Justice Scalia delivered the opinion of the Court, in which Chief Justice Roberts and Justices Kennedy, Thomas, Breyer, and Alito joined. Justice Sotomayor filed an opinion concurring in the judgment, in which Justice Kagan joined. Justice Ginsburg filed a dissenting opinion.

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