Massachusetts Supreme Judicial Court Bows To U.S. Supreme Court On Class Action Waivers In Arbitration Agreements

In an abrupt but not unexpected reversal, the Massachusetts Supreme Judicial Court (SJC) has been forced to change its position on class action waivers in arbitration agreements in light of a new decision by the U.S. Supreme Court. In Feeney v. Dell Inc., SJC-11133 (Mass. Aug. 1, 2013) (Feeney III), the SJC has acknowledged that the public policy exception to class action waivers that it articulated just two months ago in the same case has now been invalidated by the Supreme Court's decision in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013) (American Express). Henceforth Massachusetts courts must enforce agreements to arbitrate claims individually, even when the low value of any individual recovery makes it unlikely that the claims will be pursued outside of a class proceeding. The SJC's surrender on this issue may augur an end to efforts by state courts to carve out exceptions to recent Supreme Court rulings strongly favoring enforcement of class action waivers in arbitration agreements.

Feeney III is the latest, and likely final, chapter in the SJC's effort to preserve consumer class action rights under Massachusetts law even when those rights conflict with the strong federal policy favoring enforcement of arbitration agreements under the Federal Arbitration Act (FAA). The Feeney case involves a putative class action brought against Dell under the Massachusetts consumer protection act, Chapter 93A, for charging customers Massachusetts sales tax on service contracts when, allegedly, no such tax was due. Dell sought to dismiss the suit on the grounds that the lead plaintiffs had agreed to individual arbitration of any claims as part of their Dell contracts. In a 2009 decision, the SJC held that the mandatory arbitration provision was unenforceable because it conflicted with the statutory provisions for class actions under Chapter 93A, Sections 9 and 11, and Massachusetts public policy. See Feeney v. Dell Inc., 454 Mass. 192, 908 N.E.2d 753 (2009) (Feeney I).

The SJC had to reassess its position, however, after the U.S. Supreme Court struck down a similar ruling by a federal appeals court, applying California law, in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). As detailed in our July 2, 2013 alert, the SJC sought to carve out a narrower public policy exception, consistent with Concepcion, in Feeney v. Dell Inc., 465 Mass. 470, 989 N.E.2d 439 (2013) (Feeney II). In Feeney II, the SJC held that a court...