First Circuit Leaves Validity of Class Action Waiver in Arbitration Clause to Arbitrator, Holds Bar on Multiple Damages Invalid and Severs from Arbitration Agreement, Holds Bar on Recovery of Attorney Fees Invalid and Severs from Agreement, and Invalidates One-Year Limitations Period on Claims Against Comcast and Severs from Agreement
Plaintiff filed a putative class action lawsuit in Massachusetts state court against his telecommunications provider, Comcast, for violations of the state’s unfair business practices statute and other tort claims based on the allegation that it charged customers a monthly to lease a cable converter box and remote control for television service even if the customer already owned a cable-ready television. Anderson v. Comcast Corp., 500 F.3d 66, 68(1st Cir. 2007). Defense attorneys removed the class action to federal court based on diversity jurisdiction, and then moved to compel arbitration under an arbitration clause the prohibited class actions as well as “multiple or punitive damages,” id., at 69. Among the arbitration provisions central to the appeal were the following: (1) a class action waiver provision, (2) a requirement that any claims against Comcast be brought within one year, (3) a requirement that consumers pay their own costs of arbitration, including attorney's fees, (4) a bar on any award in arbitration of multiple or punitive damages, and (5) a severance clause. Id. The district court agreed with defense attorneys that plaintiff must arbitrate his claims but held that he could pursue a class action in arbitration, and while the district court granted the motion to compel arbitration and dismissed the class action complaint, id., at 69-70, it severed several other portions of the arbitration agreement, such as the requirement that each side bear its own costs - including attorney and expert fees, id., at 69 n.5. The First Circuit largely upheld the district court’s order, holding in part that the validity of the class action waiver provision must be addressed first by the arbitrator.
Plaintiff’s class action complaint alleged that Comcast violated the Massachusetts Consumer Protection Act and various common law torts. Anderson, at 68. The class action also sought treble damages, punitive damages and attorney fees, id., at 69. Defense attorneys moved to compel arbitration under provisions of its standard agreement with subscribers entitled, "Notice to Customers Regarding Policies, Complaint Procedures & Dispute Resolution." Id., at 68 n.1. The district court applied the First Circuit’s recent decision in Kristian v. Comcast, Corp., 446 F.3d 25 (1st Cir. 2006) - summarized<a href="http://classactiondefense.jmbm.com/2006/06/class_action_defense_cases_kri.html">here</a> - and granted the motion to compel, but “only after severing provisions in the arbitration agreement prohibiting attorney's fees, double or treble damages and a class action remedy in the arbitral forum.” Anderson, at 68. The district court also ruled that "the arbitrator will have the power to determine the validity and applicability of the agreement's one-year statute of limitations." Id. Both plaintiff and defense appealed the district court’s ruling.
The First Circuit began its analysis by observing that it considered the appeal “against the backdrop of a strong pro-arbitration policy expressed by Congress and repeatedly upheld by the courts.” Anderson, at 70. With respect to the class action bar, the Circuit Court held that there was no conflict between Massachusetts state law and the class action waiver provision, id., at 71. The First Circuit distinguished its holding in Kristian, which invalidated a Comcast class action wavier in an arbitration clause, because it found a conflict between such a waiver and the “nature and purposes of antitrust law”; here, by contrast, the class action bar, by its terms, applies “unless your state's laws provide otherwise,” and the consumer law statute in question expressly permits class action lawsuits be filed to enforce it. Id., at 72. The Court did not hold that the exception to class action litigation applied, however, concluding that the question of arbitrability must be addressed first by the arbitrator, id.
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