Class Arbitration Waivers: The "Severability" Doctrine and Its Consequences - Dispute Resolution Journal - Vol. 62, No. 1
Kathleen M. Scanlon is special counsel at Heller Ehrman LLP in New York City. A member of the firm’s Complex Litigation and Insurance Recovery Practice Groups, she works in the international arbitration and ADR practice area. Ms. Scanlon is a
former senior vice president of the International Institute for Conflict Prevention and Resolution. She also teaches courses in ADR ethics and international arbitration at Fordham University School of Law. James Clare, a student at Fordham Law School, class of 2007, and a 2006 summer associate at Heller Ehrman, assisted in the preparation of this article.
Originally from Dispute Resolution Journal
Cases continue to come out of the issue of class-wide arbitration waivers. The author examines the 1st Circuit’s most recent decision on this issue, discusses its implications for practitioners and offers some drafting tips.
Whether parties can be forced into a class-wide arbitration, even when their arbitration clause explicitly precludes this kind of proceeding, is an issue that continues to create unrest. Most recently, the 1st Circuit held that a class arbitration waiver1 was unenforceable. And rather than striking the provision in its entirety, the court severed the class prohibition and enforced the remaining portion of the arbitration clause. The net result was a proceeding to which neither party agreed.
Drafting dispute resolution clauses for commercial agreements is becoming increasingly more specialized because of a growing body of case law. Although the broad issue of the enforceability of arbitration clauses is well established, courts are addressing narrower enforceability issues, such as the validity of punitive damages clauses and clauses expanding or contracting the right to appeal, as well as the enforceability of class arbitration waivers.
On April 20, 2006, the 1st Circuit became the latest federal circuit court to address the validity of class arbitration waivers and the first to address such waivers in the context of antitrust claims. In Kristian v. Comcast Corp.,2 the 1st Circuit held that the waiver was unenforceable on the grounds that it (1) prevented the claimant from vindicating federal and state antitrust claims and (2) conflicted with Rule 23 of the Federal Rules of Civil Procedure (FRCP).