Arthur Chassen v. Fidelity National Financial In

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 15-3789

_____________

ARTHUR CHASSEN; DEBORAH MEREDITH;

JOEL OSTER; DENNIS SCRIMER; GLEN J. DALAKIAN;

JACK HOFFMAN; DEBORAH HOFFMAN; KATHLEEN

COOPER; RICHARD MURPHY, individually and on behalf

of others similarly situated; AMI FELLER,

Appellants

v.

FIDELITY NATIONAL FINANCIAL, INC., a Delaware

corporation; FIDELITY NATIONAL TITLE INSURANCE

COMPANY, a California corporation;

CHICAGO TITLE INSURANCE COMPANY, a Missouri

corporation; THE FIRST AMERICAN CORPORATION, a

California corporation; FIRST AMERICAN TITLE

INSURANCE COMPANY, a California corporation;

LANDAMERICA FINANCIAL GROUP, INC., a Virginia

corporation; TRANSNATION TITLE INSURANCE

COMPANY, a Nebraska corporation; LAWYERS TITLE

INSURANCE CORPORATION, a Nebraska corporation;

STEWART INFORMATION SERVICES CORPORATION,

a Delaware corporation; STEWART TITLE GUARANTY

COMPANY, a Texas corporation; OLD REPUBLIC

INTERNATIONAL CORPORATION, a Delaware

corporation; OLD REPUBLIC TITLE INSURANCE

GROUP, INC., a Delaware corporation; OLD REPUBLIC

NATIONAL TITLE INSURANCE COMPANY, a Minnesota

corporation; WEICHERT TITLE AGENCY

On Appeal from the United States District Court

for the District of New Jersey

District Court No. 3-09-cv-00291

District Judge: The Honorable Peter G. Sheridan

Argued July 13, 2016

Before: SMITH, ROTH, and RENDELL, Circuit Judges

(Filed: September 8, 2016)

Esther E. Berezofsky, Esq.

Williams Cuker Berezofsky

210 Lake Drive East

Woodland Falls Corporate Park

Suite 101

Cherry Hill, NJ 08002

Mark R. Cuker, Esq.

Michael J. Quirk, Esq. [ARGUED]

Williams Cuker Berezofsky

1515 Market Street

Suite 1300

2

Philadelphia, PA 19102

Andrew R. Wolf, Esq.

Henry P. Wolfe, Esq.

The Wolf Law Firm

1520 U.S. Highway 130

Suite 101

North Brunswick, NJ 08902

Counsel for Appellant

Derrick R. Freijomil, Esq.

Michael R. O’Donnell, Esq. [ARGUED]

Riker Danzig Scherer Hyland & Perretti

One Speedwell Avenue

Headquarters Plaza

Morristown, NJ 07962

Grant J. Ankrom, Esq.

Jason E. Maschmann, Esq.

Charles A. Newman, Esq.

Denton US

One Metropolitan Square

211 North Broadway, Suite 3000

St. Louis, MO 63102

Frederick W. Alworth, Esq.

Joshua R. Elias, Esq.

3

Gibbons

One Gateway Center

Newark, NJ 07102

Kevin M. Fee, Jr., Esq.

Gerard D. Kelly, Esq.

Sidley Austin

One South Dearborn Street

Chicago, IL 60201

Steven P. Benenson, Esq.

Porzio Bromberg & Newman

100 Southgate Parkway

Morristown, NJ 07960

Counsel for Appellees

________________

OPINION

________________

SMITH, Circuit Judge.

“A waived claim or defense is one that a party has

knowingly and intelligently relinquished.” Wood v. Milyard,

132 S. Ct. 1826, 1832 n.4 (2012). How, then, can a party

waive a right “in a situation in which no right existed[?]”

Ackerberg v. Johnson, 892 F.2d 1328, 1333 (8th Cir. 1989).

4

The answer is: it cannot. Every circuit to have answered this

question has held that “a litigant [need not] engage in futile

gestures merely to avoid a claim of waiver.” Miller v. Drexel

Burnham Lambert, Inc., 791 F.2d 850, 854 (11th Cir. 1986),

abrogated on other grounds by Gulfstream Aerospace Corp.

v. Mayacamas Corp., 485 U.S. 271 (1988). We too adopt this

position and therefore hold that futility can excuse the

delayed invocation of the right to compel arbitration.

Because we also conclude that any attempt to compel bipolar

– that is, individual – arbitration in this case prior to the

Supreme Court’s decision in AT&T Mobility LLC v.

Concepcion, 563 U.S. 333 (2011), would have been futile, we

will remand with instructions that the District Court compel

bipolar arbitration of all Plaintiffs’ arbitrable claims in

accordance with its May 14, 2015, order and this opinion.

I.

Plaintiffs represent a putative class of New Jersey real

estate purchasers and refinancers who were overcharged

between $70 and $350 in fees stemming from the recording

of their deeds and mortgage instruments. Plaintiffs allege that

the settlement agents – title agents and attorneys who were, in

turn, agents of the Defendants – intentionally charged

Plaintiffs more than the county clerk charged for recording

these documents and pocketed the difference. Plaintiffs

further allege that the class claims add up to over $50 million,

exclusive of treble damages and interest.

5

On January 22, 2009, Plaintiffs filed a complaint in the

U.S. District Court for the District of New Jersey alleging

both breach of contract and violation of New Jersey law. In

response, Defendants sought to dismiss a number of these

claims and raised several affirmative defenses. They did not,

however, seek to compel arbitration based on the arbitration

clauses present in their contracts with Plaintiffs. 1 While no

explanation for this inaction was given, we conclude infra

that an attempt to compel bipolar arbitration would have been

futile under prevailing New Jersey law. Because arbitration

was not sought, the case was litigated for two and a half years

with the focus primarily on class certification. In that time,

both sides conducted broad discovery and contested several

substantive motions on their merits. Plaintiffs have also

extensively documented their efforts in this case and note that

they served over 130 non-party subpoenas and spent over

$50,000 on experts before Defendants sought bipolar

arbitration.

However, on April 27, 2011, the Supreme Court in

Concepcion held that the Federal Arbitration Act (FAA)

preempted state laws that had previously prohibited a party

from compelling bipolar arbitration in certain situations even

when it was specifically agreed to by contract. 563 U.S. at

1

There are two arbitration clauses at issue here; some

putative class members have claims under the 1987 Owner’s

Policy while others have claims under the 1992 Loan Policy.

For purposes of this analysis, the minor differences between

the two are immaterial.

6

352. 2 Sensing an opportunity to ward off this potential class

action, Defendants sent a letter to Plaintiffs on June 8, 2011,

demanding enforcement of the arbitration agreements in light

of this change in the law. 3 Plaintiffs rejected this arbitration

demand and noted that the question of arbitration “might have

been an interesting issue had you thought of it two and a half

years ago when the case was filed . . . .” JA 816. Defendants

then filed a motion in the District Court to compel bipolar

arbitration on August 1, 2011. The District Court concluded

2

It cannot be disputed that Concepcion marked a change in

our jurisprudence. See Litman v. Cellco P’ship, 655 F.3d

225, 230 (3d Cir. 2011) (“The specific question before us

remains whether the FAA preempts the New Jersey Supreme

Court’s ruling in Muhammad. As noted above, we had

previously held that, pursuant to Homa, it did not. We now

examine that decision anew and hold that Homa has been

abrogated by Concepcion and that Muhammad is preempted

by the FAA.”).

3

The dissent characterizes Defendants’ “about-face” as a

“litigation tactic [intended] to derail the court proceedings.”

Such a characterization would seem to apply regardless of

when Defendants moved for arbitration, as arbitration by

definition derails court proceedings. In addition, deciding

whether to invoke an arbitration clause is certainly a litigation

“tactic,” but tactical decision making alone does not counsel

against enforcement of a valid arbitration agreement. Indeed,

this general disapproval of arbitration clauses has been

roundly rejected by the Supreme Court. Concepcion, 563

U.S. at 339 (explaining that the FAA reflects a “liberal

federal policy favoring arbitration.”).

7

that any attempt to compel bipolar arbitration prior to

Concepcion would have been futile. Accordingly, the District

Court granted the motion, stayed the case, and ordered bipolar

arbitration.

This decision, however, led to a barrage of motions for

reconsideration that, as the District Court observed, “has

come to resemble a ping pong match between the parties.”

JA 42. Ultimately, the District Court conducted an

evidentiary hearing and found that all but two Plaintiffs had

agreed to bipolar arbitration. Accordingly, over Plaintiffs’

strong protest, it again compelled bipolar arbitration of the

remaining claims.

Three issues relating to this ruling were certified for

interlocutory appeal pursuant to 28 U.S.C. § 1292(b):

(a) Whether the [District] Court’s decision to

allow Defendants to assert the affirmative

defense of arbitration due to a change in law

even though a substantial period of time elapsed

between [D]efendant[s’] answer and filing of

the motion to assert the defense was in error; (b)

Whether Plaintiffs’ claims against Defendants

alleging a violation of the New Jersey

Consumer Fraud Act, N.J.S.A. §§ 56:8-1 et

seq., are barred; and (c) any other issues arising

out of the District Court’s decision concerning

the arbitration of the claims.

8

JA 195-96 (internal citations omitted). Because we conclude

that the District Court did not err in compelling bipolar

arbitration, we need not address any other issues on appeal. 4

II.

We first consider whether, as an abstract matter, the

futility of raising bipolar arbitration as a defense should

excuse the delay in doing so. Generally, “[a] written

provision in any . . . contract . . . to settle by arbitration a

controversy thereafter arising out of such contract . . . shall be

valid, irrevocable, and enforceable, save upon such grounds

as exist at law or in equity for the revocation of any contract.”

Federal Arbitration Act, 9 U.S.C. § 2. The Supreme Court

has stated that this provision reflects a “‘liberal federal policy

favoring arbitration.’” Concepcion, 563 U.S. at 339 (quoting

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460

U.S. 1, 24 (1983)). Thus “any doubts concerning the scope of

arbitrable issues should be resolved in favor of arbitration,

whether the problem at hand is the construction of the

contract language itself or any allegation of waiver, delay, or

a like defense to arbitrability.” Moses H. Cone, 460 U.S. at

24-25; see also Volt Info. Scis., Inc. v. Bd. of Trs. of Leland

Stanford Junior Univ., 489 U.S. 468, 476 (1989) (“There is

no federal policy favoring arbitration under a certain set of

4

The District Court had jurisdiction pursuant to 28 U.S.C.

§ 1332(d)(2) and this Court has jurisdiction pursuant to 28

U.S.C. § 1292(b).

9

procedural rules; the federal policy is simply to ensure the

enforceability, according to their terms, of private agreements

to arbitrate.”). Given this strong preference to enforce

arbitration agreements, we have concluded that a party waives

the right to arbitrate “only where the demand for arbitration

came long after the suit commenced and when both parties

had engaged in extensive discovery.” PaineWebber Inc. v.

Faragalli, 61 F.3d 1063, 1068-69 (3d Cir. 1995) (internal

quotation marks and citation omitted).

For example, in Ehleiter v. Grapetree Shores, Inc., we

held that a defendant seeking to compel arbitration may waive

the right to do so when the plaintiff demonstrates unfair

prejudice arising from the defendant’s delay in raising

arbitration as an affirmative defense. 482 F.3d 207, 223 (3d

Cir. 2007). To guide this prejudice inquiry, in Hoxworth v.

Blinder, Robinson & Co. we identified six nonexclusive

factors that courts should consider when determining if the

defense of arbitration has been waived: (1) the timeliness or

lack thereof of the motion to arbitrate; (2) the extent to which

the party seeking arbitration has contested the merits of the

opposing party’s claims; (3) whether the party seeking

arbitration informed its adversary of its intent to pursue

arbitration prior to seeking to enjoin the court proceedings;

(4) the extent to which the party seeking arbitration engaged

in non-merits motion practice; (5) the party’s acquiescence to

the court’s pretrial orders; and (6) the extent to which the

parties have engaged in discovery. 980 F.2d 912, 926-27 (3d

Cir. 1992).

10

None of these cases, however, dealt with a situation in

which the prejudicial delay occurred solely because an

attempt to raise the defense of arbitration earlier would have

been futile. Accordingly, we believe that our analysis in a

futility case cannot rely solely on Hoxworth because there,

waiver was premised on the fact that the right in question

indisputably existed and could have been raised earlier.

Wood, 132 S. Ct. at 1832 (defining waiver as the known

relinquishment of a claim or defense). It makes no sense to

consider, for example, whether a party “assent[ed] to the

district court’s pretrial orders,” Hoxworth, 980 F.2d at 927,

when, at the time the orders were issued, the party had no

grounds on which it could plausibly contest them. In other

words, Hoxworth was simply not a futility case. Thus, its list

of factors for determining prejudice is ill suited for our

analysis here.

Accordingly, we must look beyond Hoxworth to

determine whether and when futility can excuse the delayed

invocation of an arbitration clause as an affirmative defense.

In so doing, we identify three primary reasons why we

believe that adoption of the futility exception in this context is

appropriate.

First, we believe that in the arbitration context, the

logic of our waiver analysis – in addition to its specific

factors – is undercut to the extent that the delay we are

considering was the result of futility. This suggests to us that

the standard waiver analysis should not apply in the futility

context. Cf. Moses H. Cone, 460 U.S. at 24-25 (“[A]ny

11

doubts concerning the scope of arbitrable issues should be

resolved in favor of arbitration, whether the problem at hand

is the construction of the contract language itself or any

allegation of waiver, delay, or a like defense to

arbitrability.”). As we noted in Hoxworth, “‘where a party

fails to demand arbitration during pretrial proceedings, and, in

the meantime, engages in pretrial activity inconsistent with an

intent to arbitrate, the party later opposing a motion to compel

arbitration may more easily show that its position has been

compromised, i.e., prejudiced.’” 980 F.2d at 926 (quoting

Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1161

(5th Cir. 1986)). In other words, one of the primary

justifications for waiver is that the party attempting to raise it

as a belated defense acted inconsistently with his earlier

known right to do so. However, if an earlier attempt to assert

the defense of arbitration would have been futile, this failure

to take a futile action is not inconsistent with that defense.

See Fisher, 791 F.2d at 697 (“[T]he Fishers have failed to

demonstrate that Becker acted inconsistently with a known

existing right to compel arbitration.”). Thus, applicability of

the standard waiver analysis seems to miss the key fact that

while there may be some prejudice resulting from the delay in

raising a particular defense, that prejudice is attributable to a

change in the applicable law, not to any negligent action on

the part of either party.

Second, we have recognized futility as an exception to

both ripeness and administrative exhaustion. See Sammon v.

N. J. Bd. of Med. Examiners, 66 F.3d 639, 641 (3d Cir. 1995)

(engaging in a “futile gesture to establish ripeness” would be

12

unnecessary); Berger v. Edgewater Steel Co., 911 F.2d 911,

916 (3d Cir. 1990) (“Although the exhaustion requirement is

strictly enforced, courts have recognized an exception when

resort to the administrative process would be futile.”);

Harrow v. Prudential Ins. Co. of Am., 279 F.3d 244, 249 (3d

Cir. 2002) (“A plaintiff is excused from exhausting

administrative procedures under ERISA if it would be futile

to do so.”). We see no reason why this logic would not

extend to the case at hand. Why would we require a party to

make a “futile gesture” to prevent waiver when we do not

require such gestures in other scenarios?

Finally, as Plaintiffs’ admitted at oral argument, all

four circuits to have considered this issue have undertaken

similar analyses and come to the same conclusion. Fisher v.

A.G. Becker Paribas Inc., 791 F.2d 691, 697 (9th Cir. 1986)

(“Until the Supreme Court’s decision in Byrd, the arbitration

agreement in this case was unenforceable. Therefore, the

Fishers have failed to demonstrate that Becker acted

inconsistently with a known existing right to compel

arbitration.”); Miller, 791 F.2d at 854 (“This circuit does not

require a litigant to engage in futile gestures merely to avoid a

claim of waiver. Thus, appellees’ failure to request

arbitration prior to the Byrd decision is irrelevant to the issue

of waiver.”); Peterson v. Shearson/Am. Exp., Inc., 849 F.2d

464, 466 (10th Cir. 1988) (“There was no requirement that

Shearson make a futile attempt to obtain arbitration on the

federal claim given the state of the law; indeed, it would be

difficult to argue that such an attempt had a basis in existing

law.”); Ackerberg, 892 F.2d at 1333 (“[W]e cannot find

13

waiver, the voluntary relinquishment of a known right, in a

situation in which no right existed. . . . To find that the []

defendants waived a right they did not have . . . is not only

illogical, but also would encourage litigants, in order to avoid

a finding of waiver, to file motions they knew to be futile.”).

We therefore hold that futility can excuse the delayed

invocation of the defense of arbitration.

III.

We next look at the futility exception in the context of

this case. To do this, we first consider the existing bipolar

and class arbitration case law and conclude that courts have

typically treated each form of arbitration as substantively

distinct. We therefore conclude that each can be

independently waived, thereby requiring that each receive a

separate futility analysis. We next ask what it means for the

assertion of a right to have been futile, concluding that the

appropriate test is whether assertion of that right was almost

certain to fail. Finally, we apply this framework and hold that

here, a motion to compel bipolar arbitration prior to

Concepcion was almost certain to fail.

A.

Plaintiffs contend that it would not have been futile for

Defendants to have moved to enforce the arbitration clauses

prior to Concepcion. Defendants, however, assert that this is

14

not the proper question. Instead, they suggest that the real

question is whether they could have compelled bipolar

arbitration prior to Concepcion. 5 We agree with Defendants

that the latter question is the proper inquiry, largely because

profound differences distinguish class and bipolar arbitration.

Cf. David S. Clancy, Matthew M.K. Stein, An Uninvited

Guest: Class Arbitration and the Federal Arbitration Act’s

Legislative History, 63 Bus. Law. 55, 62 (2007) (“Class

arbitration is very different from the arbitration contemplated

by Congress when Congress passed the FAA, and it is

different in ways that plainly matter: its characteristics are the

opposite of those that impressed Congress about

arbitration.”). In Opalinski v. Robert Half International, Inc.,

we undertook a thorough review of Supreme Court and Third

Circuit cases dealing with class and bipolar arbitration. 761

F.3d 326 (3d Cir. 2014). In doing so, we concluded that

bipolar and class arbitration are distinct at a fundamental,

substantive level. They are thus not merely different

adjudicative procedures that are easily interchanged:

[W]e read the Supreme Court as characterizing

the permissibility of classwide arbitration not

solely as a question of procedure or contract

interpretation but as a substantive gateway

5

Indeed, Plaintiffs acknowledge that “Defendants have not

sought arbitration other than on an individual basis” and at

one point in this litigation argued that the motion to compel

such arbitration should be denied because it would not allow

for class arbitration. ECF No. 221 at * 40.

15

dispute qualitatively separate from deciding an

individual quarrel. Traditional individual

arbitration and class arbitration are so distinct

that a choice between the two goes, we believe,

to the very type of controversy to be resolved.

Id. at 334. Indeed, we further noted that “[t]he [Supreme]

Court’s line of post-Bazzle opinions . . . indicates that,

because of the fundamental differences between classwide

and bilateral arbitration, and the consequences of proceeding

with one rather than the other, the availability of classwide

arbitrability is a substantive gateway question . . . .” Id. at

335 (discussing Green Tree Fin. Corp. v. Bazzle, 539 U.S.

444, 459 (2003)). Accordingly, we held that – absent clear

and unmistakable evidence of agreement to the contrary – the

court, not the arbitrator, must decide whether a contract

permits either bipolar or class arbitration. Id. at 330, 335.

Indeed, the Supreme Court in Concepcion also

highlighted three reasons why class arbitration is

fundamentally different from bipolar arbitration. “First, the

switch from bilateral to class arbitration sacrifices the

principal advantage of arbitration—its informality—and

makes the process slower, more costly, and more likely to

generate procedural morass than final judgment.” 563 U.S. at

348. “Second, class arbitration requires procedural formality.

The AAA’s rules governing class arbitrations mimic the

Federal Rules of Civil Procedure for class litigation.” Id. at

349. “Third, class arbitration greatly increases risks to

defendants.” Id. at 350. Indeed, as Concepcion concluded,

“[a]rbitration is poorly suited to the higher stakes of class

16

litigation.” Id. These differences make it clear why parties,

to put it bluntly, care so much about whether the agreement to

arbitrate permits class arbitration. They also make clear why

having the right to compel class arbitration is not the same as

having the right to compel bipolar arbitration. 6 We thus part

ways with our dissenting colleague who believes that the

“dispositive question here” is whether “it would have been

futile in 2009 for [Defendants] to move to enforce the

arbitration clauses.” By so broadening the dispositive inquiry

in this case, it is no wonder she concludes that the futility

exception does not apply. Had Defendants sought to enforce

the arbitration clauses in 2009, they would have been, as we

explain below, forced into class arbitration with near

certainty. 7 Even the dissent begrudgingly acknowledges that

6

We recognize that both Concepcion and Opalinski were

decided after this case was brought and thus were not

available to Defendants when they had to decide whether to

move for bipolar arbitration. That said, we believe that these

cases fairly summarize the rather uncontroversial position that

class arbitration differs greatly from bipolar arbitration. See

Bazzle, 539 U.S. at 459 (recognizing that parties who have

agreed to bipolar arbitration cannot be forced into class

arbitration because the two procedures are substantively

distinct); EEOC v. Waffle House, Inc., 534 U.S. 279, 289

(2002) (“[N]othing in the [FAA] authorizes a court to compel

arbitration of any issues, or by any parties, that are not

already covered in the agreement.”). This was well

understood in 2009 when the complaint was filed.

7

As discussed infra, the New Jersey Supreme Court made it

clear that “it [is] unconscionable for defendants to deprive

17

they “might not have succeeded in getting what they wanted:

individual arbitration.” How, then, can we say that

Defendants waived the right to individual arbitration by

failing to seek to enforce an arbitration clause which almost

certainly would have resulted in class arbitration? We

believe that the right to individual arbitration is a distinct

right separate from the right to class arbitration. We therefore

hold that – whether or not class arbitration was permissible –

a court must also determine whether it would have been futile

to move for bipolar arbitration under the prevailing law. We

turn, then, to that question.

B.

To determine whether Defendants’ motion to compel

bipolar arbitration would have been futile, we must first

define futility as understood in this context. Other courts to

address this issue have concluded that futility does not mean

something is absolutely impossible; nor does it mean

something is merely improbable. See generally Garcia v.

Wachovia Corp., 699 F.3d 1273, 1279 (11th Cir. 2012) (“The

more lenient unlikely-to-succeed standard . . . would only

encourage litigants to delay moving to compel arbitration

until they could ascertain how the case was going in federal

district court.” (internal citations and quotation marks

omitted)). Instead, when asking whether arbitration would

[plaintiff] of the mechanism of a class-wide action, whether

in arbitration or in court litigation.” Muhammad, 189 N.J. at

22.

18

have been futile, courts ask whether “it was almost certain

. . . that a motion to compel arbitration would have been

denied.” Id. (emphasis added); see also Miller, 791 F.2d at

854 (“[A]ny motion to compel arbitration would almost

certainly have been futile.”); Peterson, 849 F.2d at 466

(“Because Shearson almost certainly could not have obtained

an order for arbitration of the Rule 10b-5 claim prior to

McMahon, it did not waive its right to arbitrate the claim.”). 8

We agree, which requires us to ask whether a motion

to compel bipolar arbitration filed by Defendants prior to

Concepcion was almost certain to fail. We hold that it was.

Then-existing New Jersey law prohibited courts from

compelling bipolar arbitration in a certain subset of adhesive

consumer contracts. Muhammad v. Cty. Band of Rehoboth

Beach, DE, 189 N.J. 1 (2006). Because we conclude that the

contracts here fall within the subset of contracts for which

compelled bipolar arbitration would have been

unconscionable under Muhammad, we hold that any attempt

8

We see no conflict between the “almost certain to fail”

standard and the Eighth Circuit’s position that waiver is

appropriate if “it should have been clear . . . that the

arbitration agreement was at least arguably enforceable.” Se.

Stud & Components, Inc. v. Am. Eagle Design Build Studios,

LLC, 588 F.3d 963, 967 (8th Cir. 2009). If an arbitration

clause is not at least arguably enforceable, it is almost certain

to fail. These are, if not essentially the same standard,

logically parallel.

19

to seek bipolar arbitration in this case prior to Concepcion

was almost certain to fail.

In Muhammad, the New Jersey Supreme Court held

that “it was unconscionable for defendants to deprive

Muhammad of the mechanism of a class-wide action, whether

in arbitration or in court litigation.” 189 N.J. at 22. This was

because “[t]he public interest at stake in [the plaintiff’s]

ability and the ability of her fellow consumers effectively to

pursue their statutory rights under this State’s consumer

protection laws overrides the defendants’ right to seek

enforcement of the class-arbitration bar in their agreement.”

Id. Specifically, the court considered “the small amount of

damages being pursued in this action involving complicated

financial arrangements and multiple out-of-state entities.” Id.

It then went on to note that the small value of each claim – at

most $600 – would make it difficult to pursue individually,

even if recovery of attorney’s fees were permitted. Id. at 21

(“One may be hard-pressed to find an attorney willing to

work on a consumer-fraud complaint involving complex

arrangements . . . when the recovery is so small.”).

Accordingly, the court concluded – after performing a fact

intensive inquiry – that in a certain subset of adhesive

contracts, a consumer cannot be compelled to submit to

bipolar arbitration. This was primarily because the court

concluded that individual plaintiffs were frequently

discouraged from asserting meritorious claims by the

relatively high costs inherent in doing so. Thus, as a policy

matter, the court concluded that consumers in such situations

20

could not be forbidden from pursuing their claims in a class

setting. Id.

Three years later in Homa v. American Express Co.,

we also confirmed that this New Jersey policy was not

preempted by the FAA. 558 F.3d 225 (3d Cir. 2009). In

Homa, a putative class of consumers alleged that American

Express misrepresented the terms of the rewards program for

one of its credit cards. 558 F.3d at 227. Like Muhammad,

the claims at issue in Homa were small claims that were not

generally worth litigating on an individual basis. Id. The

District Court in Homa, however, held that despite

Muhammad, American Express could compel bipolar

arbitration by enforcing the class arbitration waiver provision

in its contracts. Id. at 230-231. We read Muhammad

differently and reversed. First, we noted that the District

Court placed too much emphasis on language in Muhammad

explaining that class-arbitration waivers are not per se

unenforceable. Id. at 230. We concluded that this focus on

the lack of a per se rule inappropriately minimized the

broader applicability of Muhammad and its conclusion that

certain contracts barring class arbitration violated New

Jersey’s public policy against exculpatory clauses. Id.

Second, we compared the facts of Homa to those in

Muhammad and concluded that

the contract at issue [in Homa] bears the

hallmarks of a contract of adhesion—it was

presented on a take-it-or-leave-it basis, . . . in a

standardized printed form, without opportunity

21

for the adhering party to negotiate except

perhaps on a few particulars and, as Appellant’s

underlying claim implicates less than five

percent of a cardholder’s overall credit card

balance, predictably involves a small amount of

damages . . . . [Thus,] the District Court should

have denied the 12(b)(6) motion and concluded

that, in light of Muhammad, at this stage the

class-arbitration waiver at issue violates New

Jersey’s fundamental public policy.

Id. at 231. Thus, “we h[e]ld that, if the claims at issue are of

such a low value as effectively to preclude relief if decided

individually, then, under Muhammad, . . . the class-arbitration

waiver is unconscionable.” 9 Here, however, because we

9

In a concurring opinion, Judge Weis also discussed some of

the specific factors that New Jersey courts seemed to focus on

when determining if a contract is unconscionable. This list,

too, makes it clear that one of the key factors is the relatively

small value of the individual claims: “[m]atters bearing on the

Court’s appraisal included the lawsuit’s complexity, the

amount of damages involved, and the availability of

attorneys’ fees and statutory multipliers. The size of potential

damages was considered to be an important consideration and

was used to limit the holding to ‘low-value’ cases.” Homa,

558 F.3d at 233. He did, however, express some doubt about

our ability to determine with certainty how the New Jersey

Supreme Court would rule if confronted with this case, and

thus explained that the District Court should perform a more

in depth application of Muhammad on remand. Id. at 233-34.

22

know the value of the individual claims, we need not require

the District Court to conduct further inquiry into this issue on

remand.

Applying Homa and Muhammad, we must undertake a

fact specific inquiry into whether the contracts in this case

have the same characteristics as those discussed above. See

Rudbart v. N. Jersey Dist. Water Supply Comm’n, 605 A.2d

681, 687 (N.J. 1992) (“[I]n determining whether to enforce

the terms of a contract of adhesion, courts have looked not

only to the take-it-or-leave-it nature or the standardized form

of the document but also to the subject matter of the contract,

the parties’ relative bargaining positions, the degree of

economic compulsion motivating the ‘adhering’ party, and

the public interests affected by the contract.”). If so, we can

confidently conclude that any attempt by the Defendants to

compel bipolar arbitration – and “deprive [Plaintiffs] of the

mechanism of a class-wide action, whether in arbitration or in

court litigation,” Muhammad, 189 N.J. at 22 – was almost

certain to fail.

In doing so, we conclude that the contracts here

contain the same characteristics as those in Muhammad and

Homa. Therefore, a New Jersey court confronted with this

case in 2009 would almost certainly have found Muhammad

controlling and would have denied Defendants’ motion to

compel bipolar arbitration. Specifically, we highlight three

key similarities. First, the value of the individual claims in

this case are small, between $70 and $350; the claims in

Muhammad were all for less than $600. This suggests that it

23

would be, in most cases, impractical to bring an individual

claim for relief. See Delta Funding Corp. v. Harris, 912 A.2d

104, 115 (N.J. 2006) (“Harris has adequate incentive to bring

her claim as an individual action. Not only are her damages

substantial, but the fact that her home is at stake in the

foreclosure proceeding makes it likely that she would contact

an attorney. The same cannot be said of low-value claims

where individuals have little, if any, incentive to seek out an

attorney.”). Second, there is little doubt that these contracts

are adhesive consumer contracts; they were presented on a

“take-it-or-leave-it basis, commonly in a standardized printed

form, without opportunity for the ‘adhering’ party to

negotiate except perhaps on a few particulars.” Muhammad,

189 N.J. at 15. 10 Finally, it is likely that here, “without the

availability of a class-action mechanism, many consumer-

fraud victims may never realize that they may have been

wronged.” Id. at 20. Most consumers would lack the

necessary motivation to spend time looking into the costs

associated with filing records in their county. Because these

10

We recognize that Plaintiffs had the option to augment a

few specific terms in the contract by, for example, asking for

a pre-printed Arbitration Endorsement which would have

required both parties to consent to arbitration. Based on the

evidence presented to the District Court, this option was

rarely, if ever, requested. Nonetheless, the ability to exercise

this option in a real estate closing hardly provides support for

the position that this is anything but a contract of adhesion.

Indeed, Muhammad recognized that the ability to negotiate

“on a few particulars” does not prevent a contract from being

adhesive. 189 N.J. at 15.

24

similarities all evidence the same unconscionability concerns

highlighted in Muhammad, we hold that any attempt by

Defendants to compel bipolar arbitration prior to Concepcion

would almost certainly have failed. 11

Indeed, even the Plaintiffs at one point argued that

under Muhammad, the contracts here would be

unconscionable if read to prohibit class arbitration and

compel bipolar arbitration. In a section of Plaintiffs’ response

to Defendants’ motion to compel arbitration that is aptly titled

“Under New Jersey Law Chosen by Defendants, a

Requirement of Individual Arbitration of Plaintiffs’ Claims

Would be Unconscionable,” the Plaintiffs explained that

“[t]he factors identified by the Court in Muhammad as

rendering the class action ban unconscionable are present

here to the extent Defendants invoke their arbitration clause

solely in order to prohibit any class action.” Pl.’s Br. in Opp.

11

While we readily acknowledge the concerns which the New

Jersey Supreme Court has suggested necessitate a finding of

procedural unconscionability, we need not opine on the public

policy considerations inherent in deciding whether to enforce

similar arbitration clauses because Congress has already made

this difficult decision. As the Supreme Court made clear in

Concepcion, “[t]he principle purpose of the FAA is to ensure

that private arbitration agreements are enforced according to

their terms.” 563 U.S. at 344. And because the Supreme

Court has decided that the FAA preempts contrary state law,

we need not address this issue further.

25

to Joint Mot. to Stay, ECF No. 221 at *39. 12 While not

giving this inconsistency any real weight, we simply note its

existence.

12

This further highlights the key error the dissent makes

when suggesting that the lack of a class arbitration waiver

meaningfully distinguishes this case from Muhammad. The

dissent argues that in our case, it is unlikely that a New Jersey

court would have held the arbitration clauses unconscionable

because the clauses could have been read to permit class

arbitration (due to their lack of a class-arbitration waiver).

While this is true, the right question to ask when assessing

futility here is not whether the arbitration clauses, as a whole,

would have been unconscionable. The question is whether a

motion to compel bipolar arbitration would have been futile

prior to Concepcion. Indeed, practically speaking, the

dissent’s approach to futility would lead to an absurd outcome

in this case. In order to prevent waiver of Defendants’ now-

existing right to compel bipolar arbitration, Defendants’

lawyers would have had to seek to enforce an arbitration

agreement that they knew – or should have known – would

almost certainly be read to allow Plaintiffs to arbitrate as a

class. Accordingly, had they pursued arbitration in 2009,

they would have been exposing their clients to the very real

possibility that a multi-million dollar class action case would

be decided by an arbitral panel; a procedural outcome far less

preferable for Defendants than a class action in federal court.

See generally Concepcion, 563 U.S. at 350 (“Arbitration is

poorly suited to the higher stakes of class litigation.” );

Jonathan R. Bunch, To Be Announced: Silence from the

United States Supreme Court and Disagreement Among

26

IV.

We next address two minor issues. First, having

concluded that the futility exception applies, we go on to

excuse the pre-Concepcion delay and analyze the post-

Concepcion delay under Hoxworth. Second, we consider the

scope of the arbitration clauses here and conclude that their

breadth makes it clear they encompass the New Jersey

Consumer Fraud Act (NJCFA) claims that are contested on

appeal.

A.

Because any attempt to compel bipolar arbitration in

this case prior to Concepcion was almost certain to fail, we

will disregard Defendants’ pre-Concepcion delay 13 when

Lower Courts Suggest an Uncertain Future for Class-Wide

Arbitration, 2004 J. DISP. RESOL. 259, 272 (2004) (explaining

that class arbitration often seems to “bring[] the burdens of

litigation into the arbitral forum” without bringing any of the

benefits along with it). It would be a cruel joke to tell

Defendants that they waived their right to bipolar arbitration

by not seeking to enforce an arbitration agreement that would

have almost certainly led to class arbitration.

13

The length of the delay itself – if excused under the futility

exception – is not relevant to our inquiry. Yet even were we

to consider it, we note that delays of a similar length have

been excused by the Eighth and Eleventh Circuits. See

Benoay v. Prudential-Bache Sec., Inc., 805 F.2d 1437, 1440

(11th Cir. 1986) (“Despite the fact that Bache and Stark’s

motion to compel arbitration was made two and one-half

27

determining whether waiver is appropriate. See Miller, 791

F.2d at 854 (“Subsequent to [the relevant change in the law],

appellees delayed only two and a half months in making their

request. Much of that delay is attributable to consolidation of

the cases and appellant’s filing of an amended complaint. In

light of these facts, we find no waiver of the right to

arbitrate.”). 14 Plaintiffs also do not claim that they suffered

any additional unfair prejudice apart from the costs associated

with maintaining and prosecuting this case prior to

Concepcion. See generally Fisher, 791 F.2d at 698 (“The

Arbitration Act requires district courts to compel arbitration

even where the result would be the possibly inefficient

maintenance of separate proceedings in different forums.”). 15

years after initiation of the civil action, we conclude that the

motion was timely in light of a change in law affecting the

parties’ rights.”); Nesslage v. York Sec., Inc., 823 F.2d 231,

234 (8th Cir. 1987) (excusing two year delay).

14

We also believe that our decision to excuse the delay and

its resulting expense to Plaintiffs here is supported by the

“‘liberal federal policy favoring arbitration.’” Concepcion,

563 U.S. at 339 (quoting Moses H. Cone, 460 U.S. at 24).

We therefore leave it to courts in future cases to decide

whether and how to apply futility outside of the arbitration

context.

15

In In re California Title Insurance Antitrust Litigation, No.

CIV. 08-1341, 2011 WL 2566449 (N.D. Cal. June 27, 2011),

a case practically identical to ours, Judge White concluded

that the delay resulting from the belated invocation of

arbitration as a defense was not unfairly prejudicial despite

28

Because we fully excused the pre-Concepcion delay,

we consider only whether Defendants’ approximately three-

month delay between April 27, 2011 (when Concepcion was

decided) and August 1, 2011 (when Defendants filed their

motion to compel arbitration) was prejudicial to Plaintiffs. In

doing so, we look to the Hoxworth factors outlined supra for

guidance and conclude that waiver would be inappropriate for

three reasons. First, Defendants notified Plaintiffs on June 8,

2011 – just over a month after Concepcion was decided – that

they were demanding bipolar arbitration. This promptly put

Plaintiffs on notice that a motion for arbitration was coming if

the demand was rejected. Second, only three months passed

the fact that the case had been going on for over three years.

Specifically, he noted, “[t]here is nothing in the record to

support Plaintiffs’ conclusory contention that granting the

motion to compel arbitration would unfairly prejudice

Plaintiffs.” Id. at *3 (internal citations and quotation marks

omitted). He then noted that the trial date was still over a

year away and that only limited substantive discovery had

taken place. We too are not convinced by Plaintiffs’

allegations of prejudice here and, in light of the FAA’s strong

policy favoring arbitration, reject the argument that the

litigation costs associated with a delay in this case can alone

qualify as sufficient unfair prejudice to prevent application of

the futility exception. Cf. Martin v. Yasuda, No. 15-55696,

slip op. at *13 (9th Cir. July 21, 2016) (“A determination of

whether ‘the right to compel arbitration has been waived must

be conducted in light of the strong federal policy favoring

enforcement of arbitration agreements.’” (quoting Fisher, 791

F.2d at 694)).

29

between the accretion of the right and Defendant’s motion to

compel arbitration. This is not an unreasonable amount of

time. Third, virtually no substantive or procedural litigation

occurred during this delay. Hoxworth, 980 F.2d at 926-27. 16

B.

Finally, we note that the broad scope of the arbitration

clauses here make it clear that we do not need to reach the

viability of Plaintiffs’ NJCFA claims. 17 The 1987 Owner’s

Policy states that “arbitration shall decide any matter in

16

We also summarily reject Plaintiffs’ argument that the

Arbitration Endorsement was a mandatory addendum to every

title insurance contract at issue here. Not only are the District

Court’s findings on this issue compelling, but we are also

reviewing the court’s factual findings for clear error, despite

Plaintiffs attempt to dress up their argument as a matter of

law by suggesting that the District Court ignored probative

evidence. See N. River Ins. Co. v. CIGNA Reinsurance Co.,

52 F.3d 1194, 1218 (3d Cir. 1995). The District Court here

properly considered and weighed the competing evidence and

found the Defendants’ position more compelling. This was

not clearly erroneous.

17

The scope of an arbitration clause is decided by the court

absent clear and unmistakable evidence that the parties agreed

to submit this issue to the arbitrator. First Options of

Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995);

CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 171 (3d

Cir. 2014). We find no language in the contracts suggesting

an intent that this issue be submitted to the arbitrator.

30

dispute between you and the Company,” while the 1992 Loan

Policy states that “[a]rbitrable matters include, but are not

limited, to any controversy or claim between the company

and the insured arising out of or relating to the policy . . . .”

JA 33. As we held in CardioNet, when the plain language of

an arbitration clause is clear, it controls. 751 F.3d at 173. We

went further, however, and also concluded that if the

language of the contract is ambiguous, “the presumption of

arbitrability applies” because “[w]e must resolve ‘any doubts

concerning the scope of arbitrable issues . . . in favor of

arbitration.’” Id. (quoting Moses H. Cone, 460 U.S. at 24-

25). Thus, we have no doubt that the NJCFA claims raised

here are subject to arbitration.

V.

For the reasons previously articulated, we will remand

this case to the District Court with instructions to compel

bipolar arbitration of Plaintiffs’ arbitrable claims in

accordance with the District Court’s May 14, 2015, order and

this opinion.

31

Chassen v. Fidelity National Financial, Inc. et al.

No. 15-3789

RENDELL, Circuit Judge, dissenting:

The majority’s opinion is flawed for a clear and

obvious reason: it relies on caselaw that has no application

here. Therefore, I must respectfully dissent.

In Muhammad v. County Bank of Rehoboth Beach, the

New Jersey Supreme Court held that “the presence of the

class-arbitration waiver in Muhammad’s consumer arbitration

agreement render[ed] that agreement unconscionable.” 912

A.2d 88, 100 (N.J. 2006). Yet, despite the lack of a class

arbitration waiver in the arbitration clauses here, the majority

holds that a New Jersey court in 2009, at the outset of this

case, would have found Muhammad controlling here. I reject

that view, and urge you to read Muhammad and the actual

arbitration clauses at issue here. Doing so will lead inexorably

to one conclusion: this case is not Muhammad, and a motion

by the Defendants in 2009 to compel arbitration thus would

have been anything but futile. Moreover, the majority has

expanded the concept of futility beyond what we as a court

should recognize.

In Muhammad, the New Jersey Supreme Court

considered whether to compel arbitration under an arbitration

agreement in a payday loan contract that in no uncertain

terms prohibited class arbitration. Specifically, in multiple

places, the agreement required Muhammad to resolve all

1

disputes related to her payday loan transaction “by binding

individual (and not class) arbitration.” Id. at 92. The court

held these waivers unconscionable under New Jersey law.

According to the court, by forcing Muhammad to waive class

arbitration in her case, which involved a small amount of

damages, the arbitration agreement operated as an

exculpatory clause, effectively releasing the lender from

liability for possible statutory violations. See id. at 99–101.

Unsurprisingly, then, courts applying New Jersey law

considered Muhammad to be relevant only when analyzing

the unconscionability of class arbitration waivers. In Homa v.

American Express Co., for example, we examined an

arbitration provision in a consumer agreement that required

all claims to “be arbitrated on an individual basis . . . [with]

no right or authority for any Claims to be arbitrated [as] a

class action.” 558 F.3d 225, 227 (3d Cir. 2009). After

comparing this class arbitration waiver to the “similar class-

arbitration waiver” at issue in Muhammad, we deemed it

unconscionable under New Jersey law. Id. at 230–31; see

also, e.g., Cohen v. Chase Bank, N.A., 679 F. Supp. 2d 582,

595 (D.N.J. 2010) (holding that the “the present class-action

waiver” is unconscionable under Muhammad); Davis v. Dell,

Inc., No. 07-630 (RBK), 2008 WL 3843837, at *4 (D.N.J.

Aug. 15, 2008) (“This Court finds that this case is

distinguishable from Muhammad, and the class action waiver

does not act as an unconscionable exculpatory clause.”).

Here, the arbitration clauses—which are situated in the

Loan Policies and the Owners’ Policies—lack any sort of

class arbitration waiver. The Loan Policies provide:

2

Unless prohibited by applicable law, either the

Company or the insured may demand

arbitration pursuant to the Title Insurance

Arbitration Rules of the American Arbitration

Association. Arbitrable matters may include,

but are not limited to, any controversy or claim

between the Company and the insured arising

out of or relating to this policy, any service of

the Company in connection with its issuance or

the breach of a policy provision or other

obligation. All arbitrable matters when the

Amount of Insurance is $1,000,000 or less shall

be arbitrated at the option of either the

Company or the insured. All arbitrable matters

when the Amount of Insurance is in excess of

$1,000,000 shall be arbitrated only when agreed

to by both the Company and the insured.

Arbitration pursuant to this policy, and under

the Rules in effect on the date the demand for

arbitration is made or, at the option of the

insured, the Rules in effect at Date of Policy,

shall be binding upon the parties.

J.A. 3981. And the Owners’ Policies provide: “If it is

permitted in your state, you or the Company may

demand arbitration. The arbitration shall be binding on

both you and the Company. The arbitration shall

decide any matter in dispute between you and the

Company.” J.A. 3997. These clauses, quite obviously,

do not even mention class arbitration, let alone outright

prohibit it. If the Defendants had sought individual

arbitration at the outset of the case, this silence might

have been interpreted to mean that the parties simply

3

did not contemplate class arbitration. Or it might have

been construed as permitting class arbitration. 1 Surely,

it would not have been futile for them to move to

enforce these clauses at that time.

Because the arbitration clauses here sit far

outside the reach of Muhammad, as they are devoid of

a class arbitration waiver, “‘it should have been clear

to the [Defendants in 2009] that the arbitration

agreement[s] w[ere] at least arguably enforceable.’”

Garcia v. Wachovia Corp., 699 F.3d 1273, 1278 (11th

Cir. 2012) (quoting Se. Stud & Components, Inc. v.

Am. Eagle Design Build Studios, LLC, 588 F.3d 963,

967 (8th Cir. 2009)). Indeed, the Defendants have cited

not one case—let alone any controlling precedent in

2009—in which a court applied Muhammad and held

as unconscionable an arbitration agreement that

contained no class arbitration waiver or prohibition.

See id. (“[A]bsent controlling . . . precedent

foreclosing a right to arbitrate, a motion to compel

arbitration will almost never be futile.”).

The majority contends that it does not matter

that the arbitration clauses here lacked class arbitration

1

The majority claims that, had the Defendants moved to

enforce the arbitration clauses in 2009, “they would have

been . . . forced into class arbitration with near certainty.”

Majority Op. 18. I disagree. The majority bases that view on

the flawed premise that these arbitration clauses implicated

Muhammad. There simply is no class arbitration bar that

would have been held unconscionable, and the clauses at

issue could have been interpreted either way.

4

waivers. See Majority Op. 26 n.12. According to the

majority, regardless of whether these clauses contained

class arbitration waivers, given Muhammad, it would

have been futile in 2009 for the Defendants to seek

individual arbitration. It concludes that “a New Jersey

court confronted with this case in 2009 would almost

certainly have found Muhammad controlling and

would have denied Defendants’ motion to compel

[individual] arbitration.” Id. at 24.

That conclusion is simply wrong. The

majority’s analysis here fails to refer back to its own

characterization of Muhammad as being animated by

the explicit “class-arbitration bar,” or “class-arbitration

waiver,” at issue there. Majority Op. 21, 22. This

omission renders its conclusion not only arbitrary, but

wrong.

Furthermore, contrary to the majority’s

position, the futility inquiry is not about disregarding

the actual arbitration clauses at issue and asking the

question—divorced from the arbitration clauses

themselves—of whether “it would have been futile to

move for [individual] arbitration under [Muhammad].”

Id. at 19. No circuit court has ever framed the inquiry

this way, and for good reason. As noted above, the

futility inquiry sensibly focuses on the enforceability

of the actual arbitration clauses—that is, would it

have been futile in 2009 for the Defendants to move to

enforce these clauses? See, e.g., Gutierrez v. Wells

Fargo Bank, NA, 704 F.3d 712, 719 (9th Cir. 2012)

(“Our [futility] analysis begins with the [arbitration

agreement] between Wells Fargo and the class

5

members.”); Fisher v. A.G. Becker Paribas Inc., 791

F.2d 691, 697 (9th Cir. 1986) (“Until the Supreme

Court’s decision in Byrd, the arbitration agreement in

this case was unenforceable.”). 2 Here, the answer is

no.

But even if we were to pretend that these

clauses contained class arbitration waivers so as to

implicate Muhammad, a motion to compel individual

arbitration in 2009 would have been far from futile. In

Muhammad, the New Jersey Supreme Court did not

hold that class arbitration waivers were “per se”

unconscionable—far from it. 912 A.2d at 101. Rather,

in holding that particular class arbitration waiver

unconscionable, it articulated a “multi-factor analysis,”

one that necessitated a “fact-sensitive examination,”

for courts to apply when “evaluat[ing] claims of

unconscionability.” Id. at 97. A court must first

determine whether the class arbitration waiver was part

of a contract of adhesion. Id. at 96–97. If so, it must

next consider (1) “the subject matter of the contract”;

(2) “the parties’ relative bargaining positions”; (3) “the

degree of economic compulsion motivating the

adhering party”; and (4) “the public interests affected

by the contract.” Id. at 97 (internal quotation marks

omitted).

2

The majority itself quotes this language from Fisher, see

Majority Op. 14, but then analyzes the futility issue here in a

manner totally divorced from the actual language of the

arbitration clauses.

6

So, if we were to pretend Muhammad applied

here, the Defendants could have easily argued that

these arbitration clauses were not unconscionable.

Most notably, they could have shown that these

clauses were not part of contracts of adhesion, which

would have obviated the need for the court to even

consider the remaining factors. See id. (“The

determination that a contract is one of adhesion . . . is

the beginning, not the end, of the inquiry . . . .”

(internal quotation marks omitted)). As noted by the

majority in a footnote, the Plaintiffs “had the option”

to “ask[] for a pre-printed Arbitration Endorsement

which would have required both parties to consent to

arbitration.” Majority Op. 25 n.10. In other words, the

Plaintiffs could have avoided being forced into

arbitration. The Defendants thus could have

established that these contracts were not ones of

adhesion because the very terms at issue—the

arbitration clauses—were optional, i.e., they were not

“presented on a take-it-or-leave-it basis.” Muhammad,

912 A.2d at 96; see also Nino v. Jewelry Exchange,

Inc., 609 F.3d 191, 201 (3d Cir. 2010) (holding that an

arbitration agreement was part of a contract of

adhesion and thus procedurally unconscionable

because the defendant “presented the arbitration

agreement to [the plaintiff] for signature on a take-it-

or-leave-it basis” (internal quotation marks omitted)).

How, then, could it possibly have been futile in light of

Muhammad for the Defendants to move to compel

individual arbitration in 2009? I am baffled by the

majority’s conclusion that “there is little doubt” that

the arbitration clauses at issue here were part of

contracts of adhesion. Majority Op. 25.

7

The Defendants’ inaction in 2009, and their

about-face to seek arbitration in 2011, were no doubt

driven by litigation tactics to derail the court

proceedings. At the outset of the case, they realized

that moving to compel individual arbitration under the

arbitration clauses here, which were silent as to class

arbitration, could have exposed them to class

arbitration—a situation they admitted they “would

never ever open [themselves] up for.” Oral Arg. Tr.

20:37–41, July 14, 2016. That prospect then became

unlikely when the Court decided Stolt-Nielsen S.A. v.

AnimalFeeds International Corp. and rejected the idea

that “the parties’ mere silence on the issue of class-

action arbitration constitutes consent to resolve their

disputes in class proceedings.” 559 U.S. 662, 687

(2010). Fueled by Stolt-Nielsen, they then seized the

opportunity to cloak their delay under the veil of

futility ostensibly afforded to them by AT&T Mobility

LLC v. Concepcion, 563 U.S. 333 (2011). But the

previous uncertainty as to class arbitration does not

mean that it would have been futile in 2009 for them to

move to enforce the arbitration clauses, which is the

dispositive question here. It just means that they might

not have succeeded in getting what they wanted:

individual arbitration.

For these reasons, I respectfully dissent from

the majority’s opinion. It would have been far from

futile for the Defendants to move to enforce these

arbitration clauses in 2009. We should therefore

consider only whether their belated attempt to do so

prejudiced the Plaintiffs under the factors from

8

Hoxworth v. Blinder, Robinson & Co., Inc., 980 F.2d

912 (3d Cir. 1992). This analysis would undoubtedly

lead to our finding that the Plaintiffs were prejudiced

such that the Defendants waived their right to arbitrate.

The Defendants did not just warm the bench for two

and a half years before moving to compel arbitration.

During that time, they repeatedly contested the merits

of the Plaintiffs’ claims, engaged in substantial non-

merits litigation, and participated in extensive

discovery that cost the Plaintiffs over $57,000. Under

Hoxworth, this would not even be a close call. See id.

at 925–26 (finding prejudice where the defendants

waited eleven months to seek arbitration, participated

in numerous pretrial proceedings, filed motions

challenging the merits of the plaintiffs’ claims, and

took depositions).

9