Supreme Court Decision Alert - January 10, 2012

Originally published January 10, 2012

Keywords: Federal Arbitration Act, Credit Repair Organizations Act, disputes, government contractors, implied cause of action, prisoner, constitutional rights, negligence,

Today the Supreme Court issued two decisions, described below, of interest to the business community.

Federal Arbitration Act—Arbitrability of Disputes Under the Credit Repair Organizations Act Government Contractors—Bivens Actions Federal Arbitration Act—Arbitrability of Disputes Under the Credit Repair Organizations Act

CompuCredit Corp. v. Greenwood, No. 10-948 (previously discussed in the May 2, 2011 Docket Report).

Under the Federal Arbitration Act ("FAA"), agreements to arbitrate federal statutory claims ordinarily must be enforced according to their terms, unless the FAA's policy favoring arbitration of disputes is "overridden by a contrary congressional command." Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 226 (1987). Today the Supreme Court held that the federal Credit Repair Organizations Act ("CROA" or "Act") does not contain such a command, and therefore that claims under the CROA are arbitrable.

The CROA requires credit repair organizations to provide their customers with a disclosure document informing them that they "have the right to sue a credit repair organization that violates" the Act. 15 U.S.C. § 1679c(a). The CROA further provides that "[a]ny waiver by any consumer of any protection provided by or any right of the consumer under this subchapter" is void and unenforceable. 15 U.S.C. § 1679f(a). Both the district court and a divided panel of the Ninth Circuit—in conflict with other courts of appeals—concluded that the language requiring customers to be informed of a "right to sue" established an unwaivable right to bring a CROA claim in court and thereby prohibited arbitration of such claims.

By an 8-1 vote, the Supreme Court reversed. In a majority opinion authored by Justice Scalia—and joined by Chief Justice Roberts and Justices Kennedy, Thomas, Breyer, and Alito—the Court explained that, "[b]ecause the CROA is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms." Slip op. at 10. Rather than creating any unwaivable right to file a lawsuit in court, the majority held, "the 'right to sue' language describes the consumer's right to enforce the credit repair organization's liability." Id. at 4-5 (internal quotation marks omitted). The Court observed that statutes that...