Amicus Curiae Brief — EEOC v. Waffle House, Inc.
Supreme Court brief2002
Ask Donna
What actually matters in this document.
Text
MAY 25- >.0f <| “4
No. 99-1823
OFFICE OF THE CLERK
in the
SUPREME COURT OF THE UNITED STATES
EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION,
Petitioner,
v.
WAFFLE HOUSE, INC.,
Respondent.
Brief of the States of Missouri, Alaska, Arizona, Arkansas,
California, Colorado, Florida, Hawaii, Illinois, Indiana,
lowa, Kansas, Louisiana, Maryland, Massachusetts,
Minnesota, Montana, Nebraska, Nevada, New Jersey, New
Mexico, New York, Ohio, Rhode Island, South Dakota,
Utah, Vermont, West Virginia and the Commonwealth of
the Northern Mariana Islands In Support of Petitioner
JEREMIAH W. (JAY) NIXON
Attorney General of Missouri
JAMES R. LAYTON
State Solicitor
Counsel of Record
ALANA M. BARRAGAN-SCOTT
Deputy Solicitor
P.O. Box 899
Jefferson City, MO 65102-0899
(573) 751-3321
Counsel for Amicus Curiae
Additional counsel listed inside cover
Atk
Bruce M. Botelho
Attomey General of Alaska
Janet Napolitano
Attomey General of Arizona
Mark Pryor
Attorney General of Arkansas
Bill Lockyer
At.orney General of California
Ken Salazar
Attorney General of Colorado
Robert A. Butterworth
Attorney General of Florida
Earl I. Anzai
Attorney General of Hawaii
James E. Ryan
Attorney General of Illinois
Steve Carter
Attorney General of Indiana
Thomas J. Miller
Attorney General of lowa
Carla J. Stovall
Attorney General of Kansas
Richard P. Leyoub
Attorney General of Louisiana
J. Joseph Curran, Jr.
Attorney General of Maryland
Thomas F. Reilly
Attorney General of
Massachusetts
Mike Hatch
Attorney General of Minnesota
Mike McGrath
Attorney General of Montana
Don Stenberg
Attorney General of Nebraska
Frankie Sue Del Papa
Attorney General of Nevada
John J. Farmer, Jr.
Attorney General of New Jersey
Patricia A. Madrid
Attorney General of New Mexico
Eliot Spitzer
Attorney General of New Y ork
Betty D. Montgomery
Attorney General of Ohio
Sheldon Whitehouse
Attorney General of Rhode Island
Mark Barnett
Attorney General of South Dakota
Mark Shurtleff
Attorney General of Utah
William H. Sorrell
Attorney General of Vermont
Darrell V. McGraw, Jr.
Attorney General of West Virginia
Herbert D. Soll
Attorney General of
Commonweaith of the Northern
Maniana Islands
i
QUESTION PRESENTED
Whether a victim’s agreement to arbitrate disputes
with another person bars a government law enforcement
agency, as plaintiff in an enforcement action against that
other person, from obtaining victim-specific monetary
remedies such as backpay and damages.
ll
TABLE OF CONTENTS
Page
GaSe COREE ob occcneneseessetéeewes i
TABLE GP ALTTURUEEMIED cc ccc ccc cc cccccccs ill
INTEREST OF AMICUS CURIAE ............... l
SUMMARY OF ARGUMENT .................. 2
ARGUMENT
1. The attorneys general cannot be barred, by an
arbitration agreement to which the state was not a
party, from enforcing state civil rights laws .... 4
Il. The attorneys general cannot be barred, by an
arbitration agreement to which the state was not a
party, from enforcing consumer protection laws. 12
CEMRMAMMEES cc cece ccc esetedccenseceseees 25
——
- ——
|
TABLE OF AUTHORITIES
CASES Page
Albemarle Paper v. Moody, 422 U.S. 405 (1975) ..... 7
Amchem Prods. v. Windsor, 521 U.S. 591 (1997) .... 13
American General Finance v. Branch,
ry FF 8 § f eer ere re se 17
Appleton Papers, Inc. v. The Home Indemnity Co..,
235 Wis.2d 39, 612 N.W. 2d 760 (Wis. App. 2000) .. 17
Arnold v. United Companies Lending Corp.,
204 W.Va. 229, 511 S.E. 2d 854 (W. Va. 1998) ..... 18
Bishop v. We Care Hair Development Corp.,
316 Ill.App.3d 1182, 738 N.E. 2d 610 (Ill. App. 2000) 17
Bodie v. Bank of America, 67 Cal.App.4th 779,
79 Cal.Rptr.2d 273 (Cal. App. 1" Dist. 1998) ....... 16
Broemmer v. Abortion Serv. of Phoenix, Lid.,
173 Ariz. 148, 840 P.2d 1013 (Ariz. 1992) ........ 18
Broughton v. Cigna Healthplans of Calif., 21 Cal.4th 1066,
988 P.2d 67, 90 Cal.Reptr. 334 (Cal. 1999) ........ 18
Bucyrus-Erie Co. v. The Dep't of Industry, Labor and Human
Relations of the State of Wisconsin,
Se GEE ccc étndvsbodcccseces 5
Capitol Chevrolet & Imports v. Granthan,
2000 Ala. LEXIS 490 (2000) ..............455. 17
iV
Carnegie v. H&R Block, Inc., 687 N.Y.S.2d 528
ORY. Dak GR Seed cigs cas owiehe caecka tes 16
Cel-Tech Communications, Inc. v. Los Angeles Cellular
Telephone Co., 20 Cal.4th 163, 973 P.2d 527,
83 Cal.Reptr.2d 548 (Cal. 1999) ................ 13
Circuit City Stores, Inc. v. Adams,
ee Ge CD 4.6 SS cbw es céceeoses 9, 11,15
Colorado Anti-discrimination Comm’n v. Continental
Airlines, Inc., 372 U.S. 714 (1963) ............... 4
Condee v. Longwood Management Corp., 88 Cal.App.4th
215, 105 Cal. Rptr. 2d 597 (Cal. App. 4" Dist. 2001) . 18
DeCanas v. Bica, 424 U.S. 351 (1976) ............ 4
Department of Fair Employment and Housing v. American
Airlines, Inc., 1991 CAFEHC LEXIS 18
(Ca. Fair Emp. & Housing Comm’n March 7, 1991) .. 10
Dobbins v. Hawk's Enterprises, 198 F. 3d 715
rE GD chidiswiveviaciesveccisvctsiet 18
Doctors Assocs., Inc. v. Casarotto,
og Xf era eee eee ee 15
EEOC v. Frank’s Nursery & Crafts, Inc.,
ype fo Tf 2 | ee ee 6, 7
EEOC v. Waffle House, Inc., 193 F.3d 805 (1999) 8,11,12
Erickson v. Aema Health Plans of Calif.
71 Cal. App. 4" 646, 84 Cal. Rptr. 76
(Cal. App. 4th Dist. 1999) ................005. 18
—_— — me
Vv
Fair Employment Practices Manual (BNA) ..... . 4, 5,6
Fireman's Fund Ins. v. Bugailisluis, 278 W.App.3d 19,
662 N.E.2d 555 (Ill. App. 1996).............0-. 17
Gilmer v. Interstate/Johnson Lane Corp.,
Fae Gh SO SED cecbocecccdvedesoscuneced 15
Graham v. State Farm Mutual Automobile Ins. Co..,
Fe) fF F Perr ort rr 17
Green Tree Financial Corp. v. Randolph,
SOO WE. FOG oc ce coc cccscccccdedeeceeus 15
In re Managed Care Litigation, 132 F. Supp. 2d 989
GLE FER BED 6c wocectccescdvecssetes ated 18
In the Matter of Towers, 162 F.3d 952
CG: GOED 6 ebb dbo vc evese ctccstiavee ee 24
Johnnie's Homes, Inc. v. Holt,
Bene Fe BPD dhe tcc ecccoveseue 18
Johnson v. Siegel, 84 Cal. App. 4” 1087,
101 Cal. Rptr 2d 412
AE, Be AD ve cccccvccceséesecees 17
Johnson v. West Suburban Bank, 225 F.3d 366
to fe ) PPPrTIrirrerreerriri ie 17, 23
KKW Enterprises v. Gloria Jean’s Gourmet Coffees,
184 F.3d 42 (1" Cir. 1999) ........... cece eee 17
Lozada v. Dale Baker Oldsmobile, 91 F. Supp. 2d 1087
Cd CE SEED Se cceccvcccocesepeesecces 17
vi
Mace v. Van Ru Credit Corp., 109 F.3d 338
‘gh Eee Pee Pee re ee re eee re 13
Marsh v. First USA Bank, NA, 103 F. Supp. 2d 909
—! * PPrerrre reer eis eee 16
Med Center Cars, Inc. v. Smith, 727 So. 2d 9
ie, TED bh beeekcesdereeswtenedicesauy 17
Nationwide Mutual Fire Ins. Co. v. Pinnacle Medical, Inc.,
rt 8 } S § =e roe ooo 17
Oakwood Acceptance Corp. v. Hobbs,
y F BS El. PPT TT TTI eee 18
Obstetrics & Gynecologists William G. Wixted, et al.,
v. Pepper, 101 Nev. 105, 693 P.2d 1259 (Nev. 1985) . 18
People v. Lann, 225 Ill.App.3d 236, 587 N.E. 2d 521
GE. Aa. BGT) nc cc ccescccccccccsscestcece 14
Powertel, Inc. v. Bexley, 743 So. 2d 570
(Fla. Dist. Ct. App. 1999) .........0 55 eees 16, 17
Purity Supreme, Inc. v. AG, 380 Mass. 762, 407 N.E. 2d 297
'S .. RPPPPrerrrr Terr rerrisi? ors 13
Rodriguez de Quijas v. Shearson/American Express, Inc.,
GO US. S77 (IGE) o ccccccccccccccccceceses 16
Shearson/American Express, Inc. v. McMahon,
St ® |. PPPPrererrcrr sey? Terie 16
Sosa v. Paulos, 924 P.2d 357 (Utah 1996) ......... 18
Vii
State ex rel. Nixon v. Telco Directory Publishing,
863 S.W.2d 596 (Mo. banc 1993) ............... 13
U.S. v. N.L. Industries, Inc., 479 F.2d 354
SPs GUE 6 bo cb c.os 6oeeesdctesdvevenew 7
United Benefit Life Ins. Co. v. Collins,
2001 WL 273902 (N.D. Ala. 2001) .............. 18
We Care Hair Development Corp. v. Engen,
te | fee Sree 17
Westinghouse Elec. Corp. v. State of Maryland Comm'n
on Human Rights, 520 F.Supp. 539 (D. Md. 1981) .... 5
Williams v. Aetna Finance Co., 83 Ohio St.3d 464,
700 N.E. 2d 859 (Ohio 1998)...... gee netuveosne 18
STATUTES
42 U.S.C. § 2000e-5(c) (1995)... 6. ee ee eee 6
Alaska Stat. § 18.80.130(2)(1) (2000) ............. 7
Alaska Stat. § 18.80.240 (2000) ............0005. 4
Ariz. Rev. Stat. § 41-1481.G (1992) ............4.. 7
Ark. Stat. Ann. 16-108-201 (Supp. 1999) ........... 9
Be GE NS TED 6 Chic codewocecesseccséves 5
_ jl. & GFP rrrrrTerrererrrere ye 7
Conn. Gen. Stat. § 46a-85 (2001) ...........6055.% Y
Viii
Fla. Stat. Ch. § 760.11(5) (1997) «1.0... .. 2 eee. 7
775 Ill. Comp. Stat. 5/3-102 (1993) ..........0006- 4
Sas Grea GENE oe cos bet ceticdcotewss 9
em, Ge, A, De Ge 6. 6 00 0 ooh eeesesen an 9
Md. Code Ann. Art. 49(B), § 3(c) (2000) ............ 4
§ Fe fT re Tr 4,7
Mo. Rev. Stat. § 213.030(1) (2000) ............... 5
Mo. Rev. Stat. § 213.040 (2000) ...............-. 4
Mo. Rev. Stat. § 213.075.11(1) (2000) ............. 7
N.J. Stat. Ann. §§ 10:5-14.1, -14.la, and -17 (1993) ... 5
Ohio Rev. Code § 4112.05(G)(1) (2001) ........... 7
S.D. Codified Laws § 20-13-29 (1995) ............ 6
S.D. Codified Laws § 20-13-42 (1995) ............ 7
S.D. Codified Laws § 20-13-47 (1995) ............ 8
OTHER AUTHORITIES
Bingham, Lisa B., On Repeat Players, Adhesive Contracts,
and the Use of Statistics in Judicial Review of Employment
Arbitration Awards, 29 MCGEORGE L. REV. 223
PP SEED. on cnbcdses ist ncdesececsoees 9, 10
ix
Crane, Victoria J., The Mandatory Arbitration Clause: Forum
Selection or Employee Coercion?,
© ia, Pee Oe. Bo. Be Gee oo cc bweveccsve’ 9
Eddy, Katherine, To Every Remedy a Wrong: The
Confounding of Civil Liberties Through Mandatory
Arbitration Clauses in Employment Contracts,
52 HASTINGS L.J. 771 (2001) .............. 9, 10, 11
Guzman, Betsy, The Hispanic Population (U.S. Census 2000
See SO ED kc ccd cvivededesesaven 21
Sternlight, Jean R., As Mandatory Binding Arbitration Meets
the Class Action, Will the Class Action Survive?, 42 WM. &
MARY L. REV. 1 (Oct. FOG) .. ccc ccccess 16, 21-22
Sternlight, Jean R., Panacea or Corporate Tool?: Debunking
the Supreme Court’s Preference for Binding Arbitration, 74
We Gs Ge CUED bc vst beces eu 604 avbed 15
Van Wezel Stone, Katherine, Mandatory Arbitration of
Individual Employment Rights: The Yellow Dog Contracts of
the 1990s, 73 DENV. U. L. REV. 1017 (1996) ........ 9
e-Bay User Agreememt .........00eceee. 19, 21-22
No. 99-1823
In the
SUPREME COURT OF THE UNITED STATES
EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION,
Petitioner,
Vv.
WAFFLE HOUSE, INC.,
Respondent.
Brief of the States of Missouri, Alaska, Arizona,
Arkansas, California, Colorado, Florida, Hawaii, Illinois,
Indiana, lowa, Kansas, Louisiana, Maryland,
Massachusetts, Minnesota, Montana, Nebraska, Nevada,
New Jersey, New Mexico, New York, Ohiv, Rhode Island,
South Dakota, Utah, Vermont, West Virginia and the
Commonwealth of the Northern Mariana Islands
In Support of Petitioner
INTEREST OF AMICUS CURIAE
The amici are all attorneys general — and thus the
chief law enforcement officers — of their respective states and
territories. They have varying amounts of authority to
prosecute criminal cases. But each of them uses civil tools to
enforce a wide range of laws. Among those laws are ones
regulating business practices in areas of the economy where
mandatory arbitration agreements either are already in
2
common use, or could easily be used. The Fourth Circuit’s
holding could permit contracting by private parties to
foreclose suits by the amici where the state seeks monetary
relief that is measured by losses to victims of illegal acts,
even where those victims unknowingly accepted terms buried
in fine print, where the money will eventually flow to the
victims themselves, rather than remain in state coffers. The
amici seek to defend their continued ability to use civil law
enforcement actions as a tool to enforce not just civil rights,
but consumer protection and other laws that protect the
welfare of individual citizens.
SUMMARY OF ARGUMENT
The amici (“attorneys general” herein) work with and
often represent state agencies responsible for enforcing civil
rights laws that largely parallel the statute under which the
Equal Employment Opportunity Commission sought to
proceed in this case. Employment, housing, and other
transactions to which those civil rights laws apply typically
involve written contracts — contracts that could easily include
mandatory arbitration clauses. When the attorneys general
seek to enforce the civil rights laws, their goal is to ensure
that persons and corporations in their states comply with the -
law generally, not just to address the needs of a single victim.
That is true even when the tool the-attorneys general use is
one that measures the monetary penalty according to
individual loss.
The rule adopted by the U.S. Court of Appeals for the
Fourth Circuit ignores that goal. It erases the critical
distinction between the role of the EEOC, the state civil
rights agencies, and the attorneys general on the one hand,
and that of private attorneys representing private parties on
the other. It concludes that merely because the government
calculates monetary payments according to a victim’s losses,
3
its law enforcement efforts are restricted by an arbitration
clause entered into by the victim, as to which the government
was never a party. Thus an employer or landlord, by forcing
individual employees or tenants to individual arbitration, can
prevent the government from effectively attacking even a
pattern or practice of discrimination.
That alone is enough to argue strongly against
affirming the Fourth Circuit’s rule. But there is more, for the
rule is not limited to the employment context. Nor is it
limited to discrimination claims. Rather, it could have an
adverse impact on many other law enforcement efforts by the
attorneys general.
In particular, the Fourth Circuit’s rule could adversely
affect efforts by the attorneys general to enforce deceptive
practices and other consumer protection statutes. The
individual stakes in such cases are often much smaller than
those in employment and housing cases. Those smaller stakes
are proportionally harder to vindicate through individual
actions. Often the purchasers lack the sophistication or means
to pursue even arbitration — particularly when it involves
large up-front fees or requires hearings at distant locations.
Small individual stakes and the buyers’ lack of assets or
knowledge are typical of the situations in which class actions
and consumer protection actions by attorneys general are
brought. But a new sort of mandatory arbitration clause is
specially designed to preclude class actions — thus leaving the
attorneys general as the last bastion of protection for many
victims. The Fourth Circuit’s rule could severely damage that
bastion.
The attorneys general do not suggest that the Court
reverse its consistent case law permitting the enforcement of
arbitration clauses as to individual plaintiffs. In fact,
attorneys general have used arbitration and other forms of
4
alternative dispute resolution to address many problems,
including consumer complaints. But in those instances, the
attorneys general or other third-party or government agencies
have a key role in defining the scope, availability, cost, and
consequences of arbitration. Thus there is an independent
check on the process that ensures its fairness to individual
consumers. If permitted to cut government law enforcement
out of areas of the economy where mandatory arbitration
agreements are becoming common, the Fourth Circuit’s rule
would effectively deprive many deceived consumers of
effective redress. And it would have a dramatic impact on
the deterrent effect of consumer protection laws.
ARGUMENT
I. The attorneys general cannot be barred, by an
arbitration agreement to which the state was not a
party, from enforcing state civil rights laws.
States are free to enact fair employment practice
legislation,’ and virtually every state has done so. ? Their
statutes often stretch well beyond the discrimination in
employment that is the subject of the Equal Employment
Opportunity Commission’s jurisdiction, reaching discrimina-
' Colorado Anti-discrimination Comm'n v. Continental
Airlines, Inc., 372 U.S. 714, 721-22 (1963). See also
DeCanas v. Bica, 424 U.S. 351, 356 (1976)(states possess
broad authority under their police powers to protect workers
within their borders).
2 The States’ statutes are identified and described in
detail in Fair Employment Practices Manual (BNA) 453:1-
458:9991.
5
tion in housing and other economic sectors.’ The States’
strong local interests in enforcing those anti-discrimination
laws‘ are imperiled by the Fourth Circuit’s holding.
Most states have established enforcement agencies to
investigate charges of discrimination and enforce their laws.”
Like the EEOC, the state agencies are not merely surrogates
for individual victims of discrimination. Rather, they have
independent authority to investigate violations of and to
enforce laws addressing discrimination — again, not just
discrimination in employment — based on disability, race, and
other characteristics. For example, the California Director of
Fair Employment and Housing may file complaints to enforce
California’s Fair Employment and Housing Act.° The
Missouri Commission on Human Rights is empowered "to
eliminate and prevent discrimination.”” The New Jersey
Division on Civil Rights “may compel compliance” with, or
> See, e.g., Alaska Stat. § 18.80.240 (2000); 775 Ill.
Comp. Stat. 5/3-102 (1993); Md. Code Ann. Art. 49(B),
§ 3(c) (2000); Minn. Stat. § 363.03 (2000); Mo. Rev. Stat.
§ 213.040 (2000).
* See, e.g., Bucyrus-Erie Co. v. The Dep't of
Industry, Labor and Human Relations of the State of
Wisconsin, 599 F.2d 205, 207 nl (7 Cir. 1979);
Westinghouse Elec. Corp. v. State of Maryland Comm'n on
Human Rights, 520 F.Supp. 539, 542 (D. Md. 1981).
° Fair Employment Practices Manual (BNA) 451:1
and 451:201 (directory of state and local employment
practices agencies).
® 2000 Cal. Stat. 12960.
” Mo. Rev. Stat. § 213.030(1) (2000).
6
“prevent violations of’ New Jersey's Law Against
Discrimination.* The South Dakota Commission of Human
Rights is empowered to file charges for violations of the
state’s Human Relations Act.’ Just as the EEOC represents
the federal government’s interests, such state agencies
represent the interests of the state. In fact, such state
agencies never cease to represent the interests of the state,
even when proceeding on an individual victim’s claim of
* N.J. Stat. Ann. §§10:5-14.1, -14.1a, and -17 (1993).
* §.D. Codified Laws § 20-13-29 (1995).
© In practice, it is the state or local authority, not the
authority retained by the EEOC, that is most often invoked to
address employment discrimination claims. In fact, the
EEOC must defer initial processing of such claims to a state
or local authority where there are comprehensive state laws,
the authority has adequate investigatory and enforcement
powers, and the authority has applied for deferral status. Fair
Employment Practices Manual (BNA) 451:2, citing 42 U.S.C.
§ 2000e-5(c) (1995). State and local authorities that have
been so designated account for initial processing of 60% of
the job discrimination charges that the EEOC receives. Id. at
451:1. And of course, charges may also be filed directly with
a state or local authority at the outset. Placing even more
responsibility in the hands of state and local authorities, the
EEOC may certify a designated authority. Certification
means that the EEOC will accept the findings and resolutions
of such authorities upon a lower level of review. /d. at
451:1. Designated or certified state and local authorities are
listed in Fair Employment Practices Manual (BNA) 403:19.
7
discrimination. Representing the state or the public interest
is something that private litigants cannot do."'
The effect of the Fourth Circuit’s holding on state
agencies’ efforts to enforce their laws is, potentially, no
different from its effect on the EEOC. Limiting the ability
of the state agencies and the EEOC to pursue monetary relief
would negatively impact the ability of those enforcement
entities to protect citizens against unlawful discrimination."
This Court has recognized that "[i]f employers faced only the
prospect of an injunctive order, they would have little
incentive to shun practices of dubious legality."’’ It is the
prospect of having to pay back wages that in many cases
"provides the spur or catalyst’" for change in discriminatory
employment practices.'* Most state legislatures recognize that
a potential award of back pay is an important facet of their
and have given their enforcement authorities the power to
award such damages, in addition to injunctive relief.'°
'' See EEOC v. Frank’s Nursery & Crafts, Inc., i177
F.3d 448, 458 (6" Cir. 1999)(whenever EEOC sues in its own
name, it represents the public interest).
' EEOC v. Frank’s Nursery, 177 F.3d 448 at 466.
'> Albemarle Paper v. Moody, 422 U.S. 405, 417
(1975).
'* Id., quoting U.S. v. N.L. Industries, Inc., 479 F.2d
354, 379 (8th Cir. 1973) (also describing back pay awards as
playing “a crucial role in the remedial process”).
'S Eg. Alaska Stat. § 18.80.130(2)(1) (2000); Ariz.
Rev. Stat. § 41-1481.G (1992); 2000 Cal. Stat. 12970; Fla.
Stat. § 760.11(5) (1997); Minn. Stat. § 363.03 (2000); Mo.
8
The Fourth Circuit’s holding could also hamper the
States’ and the EEOC’s enforcement abilities in an even more
fundamental way. In fulfilling their duties to enforce civil
and human rights laws, these agencies must, despite their
investigatory and subpoena power, depend on individual
victims of discrimination not only to cooperate with them at
the investigation phase, but to alert them at the complaint
filing phase. But individual victims simply may never come
forward at all, when faced with the prospect, as here, of
binding arbitration where contract clauses place the substantial
costs of arbitration in their laps. One circuit judge aptly
noted below that such provisions make “{any] accessible
forum ... in effect, unavailable, because of the disincentive to
arbitrate created by such fees.”"® Under such circumstances,
a victim in effect loses all recourse. And an enforcement
agency does not, as a practical matter, have the opportunity
to learn of the problem and step in, whether to seek damages
Rev. Stat. § 213.075.11(1) (2000); Ohio Rev. Code
§ 4112.05(G)(1) (2001); S.D. Codified Laws § 20-13-42
(1995). States vary in whether their statutes also permit the
imposition of monetary penalties, and as to the size of those
penalties. For example, the cited statutes of Alaska, Arizona,
Florida, Minnesota, Missouri, and Ohio do not refer to
monetary penalties such as fines, though the California and
South Dakota statutes do. See 2000 Cal. Stat. 12970
(permitting actual damages and an administrative fine not to
exceed $150,000, plus a civil penalty not to exceed $25,000);
S.D. Codified Laws § 20-13-47 (1995) (permitting a fine up
to $10,000 for willful or repeat violations of Commission
orders). Clearly many states do not deem penalties, even
with injunctive relief, to be sufficient, standing alone, to
deter violations of civil rights laws.
'© EEOC v. Waffle House, Inc., 193 F.3d 805, 817
n.8 (1999)(King, J., dissenting).
9
or injunctive relief. Both are critical to agency enforcement
efforts.
The Fourth Circuit’s holding also glosses over the fact
that the EEOC is never a party to a private arbitration
agreement. Certainly state enforcement agencies would never
be parties, either. Aside from the obvious absurdity of
binding third parties such as the EEOC or a state agency with
a private contract, especially where a private litigant cannot
and does not represent the public interest, this case presents
the situation in which the need for government enforcement
in general, can be an effective tool of dispute resolution, the
reality is that pre-dispute employment arbitration agreements
are often treated with a healthy dose of skepticism. Some
legal scholars oppose such mandatory arbitration.'’ And some
states have codified their skepticism by specifically exempting
employer-employee pre-dispute arbitration agreements from
enforcement.'* This Court’s decision in Circuit City Stores
'" See, e.g., Katherine Eddy, To Every Remedy a
Wrong: The Confounding of Civil Liberties Through
Mandatory Arbitration Clauses in Employment Contracts, 52
HASTINGS L.J. 771 (2001); Victoria J. Crane, The Mandatory
Arbitration Clause: Forum Selection or Employee Coercion ?,
8 B.U. Pus. INT. L. J. 537 (1999); Lisa B. Bingham, On
Repeat Players, Adhesive Contracts, and the Use of Statistics
in Judicial Review of Employment Arbitration Awards, 29
McCGEORGE L. REV. 223 (Winter 1998); and Katherine Van
Wezel Stone, Mandatory Arbitration of Individual
Employment Rights: The Yellow Dog Contracts of the 1990s,
73 DENV. U. L. REV. 1017 (1996).
‘8 E.g. Ark. Stat. Ann. 16-108-201 (Supp. 1999);
Conn. Gen. Stat. § 46a-85 (2001); lowa Code 679A.1 (2001);
and Kan. Stat. Ann. 5-401 (1999).
10
v. Adams" that the Federal Arbitration Act applies to
employment contracts does not ameliorate that skepticism.
Appropriately, it makes no judgment as to the value of
arbitration in such contracts.
The skepticism over employer-mandated arbitration in
the context of a civil rights claim is based, in part, on the
apparent limitations of the arbitration forum. While
specialized agencies such as the EEOC and the States’
enforcement agencies have developed and apply expertise in
the area of discrimination, arbitrators need have no such
expertise.” Nor are they required to follow case law — which
may lead to “particularly unpredictable” results.*' Despite
that unpredictability, there are trends — and they are troubling.
While “[p)laintiffs are estimated to win nearly 70% of the
25,000 wrongful discharge and discrimination cases filed in
state and federal courts nationwide,”” the same is not true in
arbitration. A study demonstrated that an employer who is
arbitrating for the first time is as likely to lose in arbitration
as in court.” But where the employer is a “repeat player”
(has arbitrated before), that risk drops dramatically — to
'% 121 S.Ct. 1302 (2001).
” See Department of Fair Employment and Housing
v. American Airlines, Inc., 1991 CAFEHC LEXIS 18, *37-39
(Ca. Fair Emp. & Housing Comm’n March 7, 1991).
2! Eddy, supra n. 17, at 777.
22 Id.
23 Bingham, supra n. 17, at 234 (employers
arbitrating for the first time are likely to lose 70% of the
time).
——
—_—-
11
16%.** The amount that employees recover where their
employers are repeat players is also statistically less than in
cases involving employers arbitrating for the first time.”
These statistics may explain why “the number of companies
choosing to require mandatory arbitration of employee
disputes is on the rise.”"* And they explain why the States
need to preserve the ability to themselves address
discrimination — particularly systematic discrimination —
despite mandatory arbitration clauses to which they obviously
were not parties.
When enforcing their anti-discrimination laws, the
States are vindicating not just the federal policy before the
Fourth Circuit, but their own policies. The Fourth Circuit did
not, of course, address those state policies in the context of
the purely federal claim before it. But unless this Court
reverses or limits the Fourth Circuit’s holding, it could
become an effective shield against enforcement of the States’
policies. As a matter of logic, the Fourth Circuit’s holding,
grounded as it purports to be in “the competing federal policy
favoring the enforcement of arbitration agreements” and
striking a “balance” between federal anti-discrimination and
pro-arbitration policies,”’ should not extend beyond federal
law. While this Court has said that the Federal Arbitration
Act “pre-empts those state employment laws which restrict or
limit the ability of employees and employers to enter into
* Id.
-
© Eddy, supra n. 17, at 777.
27 193 F.3d at 812.
12
arbitration agreements,” it did so only in the context of
private disputes in which the nights of the individual plaintiffs
who had agreed to arbitrate were at stake, not in the context
of state (or federal) agencies protecting public policy and the
public interest. No decision of this Court limits the power of
state agencies acting in the public interest to enforce state
law.
States that choose to enact anti-discrimination or other
laws regulating employment should be free to strike their own
balances, by statute or through the common law. That
freedom is threatened in this case. The Fourth Circuit’s
majority “relie{d] on its own assumptions about corporate
practices, as if those are somehow dispositive of the question
whether an agreement to arbitrate has been formed.””” Courts
applying that holding might improperly rely on assumptions
about state law. That would wrongly curtail powers left to
the States under our federalist system. Accordingly, even if
this Court were to uphold the Fourth Circuit’s ruling as an
interpretation of federal anti-discrimination law, it should
clarify that the states, including those whose laws against
discrimination are enforced by amici, remain free to strike a
different balance and to permit state agencies to enforce state
law.
Il. The attorneys general cannot be barred, by an
arbitration agreement to which the state was not a
party, from enforcing consumer protection laws.
Although this case arises from the use of an arbitration
clause in an employment agreement, the Fourth Circuit’s rule
is not, by express limitation or by its rationale, restricted to
8 Circuit City, 121 S. Ct. at 1312.
2° 193 F.3d at 817 (King, J., dissenting).
13
that context. Nor is it limited to the context of the civil
rights laws. Indeed, the Fourth Circuit’s rule may affect any
action where the underlying transaction involves an arbitration
clause. Thus it threatens a wide range of actions in which
attorneys general would otherwise seek to enforce the law by
using restitution or damages as tools. Attorneys general use
those actions to attack practices that result in small individual,
but large collective losses. In those instances, the attorneys
general act where individual claimants may lack the economic
means or the economic incentive to act. The actions of the
attorneys general, much like class actions brought by private
counsel, are intended in part to “overcome the problem that
small recoveries do not provide the incentive for any
individual to bring a solo action prosecuting his or her
rights.” But again, they are also intended to enforce the law
generally — to create a deterrent against fraud, deceit,
discrimination, and other ills.
Though such actions may be brought in a wide variety
of contexts, attorneys general have been particularly active in
the area of consumer protection. “As of 1977, 48 states plus
Puerto Rico and Guam had enacted consumer protection
laws.”*' Many of them are “little FTC Acts,” “meant to
complement the deceptive practices jurisdiction of the
[Federal Trade Commission].”’ Such laws are “modeled
*® Mace v. Van Ru Credit Corp., 109 F.3d 338, 344
(7" Cir. 1997), quoted with approval, Amchem Prods. v.
Windsor, 521 U.S. 591, 616 (1997).
*! Purity Supreme, Inc. v. AG, 380 Mass. 762, 407
N.E. 2d 297, 304 n. 11 (Mass. 1980).
2 Cel-Tech Communications, Inc. v. Los Angeles
Cellular Telephone Co., 20 Cal.4th 163, 973 P.2d 527, 551
n. 2, 83 Cal.Reptr.2d 548 (Cal. 1999) (Kennard, J.
14
after the Federal Trade Commission Act, which prohibits
‘unfair and deceptive acts and practices.””’? In most states,
the laws are enforced by the attorney general.“* When an
attorney general files an action under such an act — even if
the action seeks restitution, as it often does — the suit “is
essentially a law enforcement action designed to protect the
public, not to benefit private parties.””*
The attorneys general have used consumer protection
laws to attack deceptive and unfair practices in a wide variety
of industries. For example, attorneys general have obtained
relief against health insurance companies that permitted
providers to charge co-pays based on a theoretical “full price”
rather than the price actually negotiated with the insurer, and
against cellular telephone companies that round up to the next
minute even after one second without adequately notifying
customers. They have initiated investigations and filed
actions to address a wide variety of complaints in long
distance telephone service, most prominently carriers that
switch residential customers to their systems, sometimes with
high initial and switching fees and usuaily with higher rates,
based on deceptive documents -— colloquially called
“slamming.” Many of the actions taken by the attorneys
general are prompted by consumer complaints. The pattern
of such complaints highlights the potential for mischief
presented by the Fourth Circuit’s rule. As a sample, during
dissenting).
3 State ex rel. Nixon v. Telco Directory Publishing,
863 S.W.2d 596, 601 (Mo. banc 1993).
* Purity Supreme, 407 N.E. 2d at 304 n. 11.
> People v. Lann, 225 Ill.App.3d 236, 587 N.E. 2d
521, 524 (Ill. App. 1992).
15
March 2001, the Missouri Attorney General’s Consumer
Complaint Unit logged 2074 complaints — most of them in
areas such as time shares, consumer finance and credit,
telephone service, and automobile sales. In all of these and
many areas of concern to the attorneys general, there are
written notices and agreements into which a mandatory
arbitration clause could be inserted.
To date, the effect of mandatory arbitration clauses in
these and other areas addressed by the attorneys general has
been very limited. But a collision between those clauses and
the States’ law enforcement efforts is inevitable. This Court
has confirmed the enforceability of arbitration agreements in
a wide variety of contexts.** Businesses are building on that
foundation, rapidly expanding their use of such agreements
into new areas of our economy. Unfortunately, the economic
incentives that encourage that trend sometimes encourage the
use of techniques designed to take advantage of consumers
and others who lack the economic incentive to pursue their
claims when faced with the burdens of, and sometimes
offered only limited benefits by, arbitration.” In some
industries, consumers who manage to read the fine print,
understand it, and persevere to seek out an alternative supplier
can avoid such techniques by choosing a supplier that does
not insist on arbitration, or at least one that offers a
* E.g., Circuit City Stores, Inc. v. Adams, 121 S.Ct.
1302 (2001); Green Tree Financial Corp. v. Randolph, 531
U.S. 79 (2000); Doctors Assocs., Inc. v. Casarotto, 517 U.S.
681 (1996); Gilmer v. Interstate/Johnson Lane Corp., 500
U.S. 20 (1991).
*” See Jean R. Sternlight, Panacea of Corporate
Tool?: Debunking the Supreme Court’s Preference for
Binding Arbitration, 74 WASH. U.L.Q. 637, 680-86 (1996).
16
consumer-friendly arbitration process. But choices may be
limited in some industries.
Consumers have no choice whether to use arbitration
when an entire industry uses arbitration clauses. And the use
of industry-wide arbitration is neither new nor unusual. “For
over a hundred years, so-called self-regulatory organizations
.. such as the New York Stock Exchange have established
arbitration programs for resolution of consumer claims against
brokerages.”** This Court has upheld decisions compelling
arbitration under such programs.” More recently, mandatory
arbitration has become nearly universal in other fields. Thus
today it is standard to find, buried in the small print of the
rules included in credit card solicitations, a clause requiring
arbitration of disputes with the card provider. Similar clauses
are inserted, with little notice, into the rules covering existing
credit card accounts. Some companies have gone so far as to
add a purportedly retroactive clause after a class action
against the company has been filed but before the class is
certified, in a transparent attempt to prevent participation in
the class.“ That expansion has not generally been successful.
38 Jean R. Sternlight, As Mandatory Binding
Arbitration Meets the Class Action, Will the Class Action
Survive?, 42 WM. & MARY L. REV. 1, 45 n. 169 (Oct. 2000).
3° E.g., Rodriguez de Quijas v. Shearson/American
Express, Inc., 490 U.S. 477 (1989); Shearson/American
Express, Inc. v. McMahon, 482 U.S. 220 (1987).
“© See, e.g., Marsh v. First USA Bank, NA, 103 F.
Supp. 2d 909 (N.D. Tex. 2000); Carnegie v. H&R Block,
Inc., 687 N.Y.S.2d 528 (N.Y. Sup. Ct. 1999); Powertel, Inc.
v. Bexley, 743 So. 2d 570 (Fla. Dist. Ct. App. 1999); Bodie
v. Bank of America, 67 Cal.App.4th 779, 79 Cal. Rptr. 2d
273 (Cal. App. 1" Dist. 1998).
17
But it demonstrates the lengths to which some companies will
stretch an industry’s penchant for arbitration.
Though in most industries arbitration is not yet
pervasive, it is present and rapidly becoming common in a
wide variety of consumer transactions. Among the recent
reported cases involving such clauses are ones involving
insurance,*' automobile sales.” franchises,” consumer loans“
and cellular telephone phone service.** The clauses are
rendre + peacoat
*' Appleton Papers, Inc. v. The Home Indemnity Co..,
235 Wis.2d 39, 612 N.W. 2d 760 (Wis. App. 2000);
Nationwide Mutual Fire Ins. Co. v. Pinnacle Medical, Inc.,
752 So. 2d 55 (Fla. 2000); Fireman’s Fund Ins. v.
Bugailisluis, 278 Ill.App.3d 19, 662 N.E. 2d 555 (Ill. App.
1996); Graham v. State Farm Mutual Automobile Ins. Co..,
565 A.2d 908, 912 (Del. 1989).
Capitol Chevrolet & Imports v. Granthan, 2000
Ala. LEXIS 490 (2000); Lozada v. Dale Baker Oldsmobile,
91 F. Supp. 2d 1087 (W.D. Mich. 2000); Med Center Cars,
Inc. v. Smith, 727 So. 2d 9 (Ala. 1998).
* Bishop v. We Care Hair Development Corp., 316
Ill.App.3d 1182, 738 N.E. 2d 610 (Ill. App. 2000); We Care
Hair Development Corp. v. Engen, 180 F.3d 838 (7 Cir.
1999); KKW Enterprises v. Gloria Jean’s Gourmet Coffees,
184 F.3d 42 (1* Cir. 1999).
“ Johnson v. West Suburban Bank; 225 F.3d 366 (3d
Cir. 2000); American General Finance v. Branch, 2001 Ala.
LEXIS 78 (2001).
** Powertel, Inc. v. Bexley, 743 So. 2d 570 (Fla.
App. 1999).
18
involving consumers, such as real estate purchases.” They
are being used to regulate the ability of patients to pursue
complaints about health insurance,*’ physicians,* managed
care organizations,*”” and nursing homes. And they now
appear in many of the parts of the economy where attorney
generals have found consistent patterns of deceptive practices
being used on relatively unsophisticated and economically
“ Johnson v. Siegel, 84 Cal. App. 4" 1087, 101 Cal.
Rptr 2d 412 (Cal. App. 6" Dist. 2000).
‘7 United Benefit Life Ins. Co. v. Collins, 2001 WL
273902 (N.D. Ala. 2001).
“8 Sosa v. Paulos, 924 P.2d 357 (Utah 1996);
Broemmer v. Abortion Serv. of Phoenix, Lid., 173 Ariz. 148,
840 P.2d 1013 (Ariz. 1992); Obstetrics & Gynecologists
William G. Wixted, et al., v. Pepper, 101 Nev. 105, 693 P.2d
1259 (Nev. 1985).
“9 In re Managed Care Litigation, 132 F. Supp. 2d
989 (S.D. Fla. 2000); Broughton v. Cigna Healthplans of
Calif., 21 Cal.4" 1066, 988 P.2d 67, 90 Cal.Reptr. 334 (Cal.
1999); Erickson v. Aetna Health Plans of Calif., 71 Cal. App.
4" 646, 84 Cal.Reptr. 76 (Cal. App. 4" Dist. 1999).
50 Condee v. Longwood Management Corp., 88
Cal.App.4” 215, 105 Cal. Rptr. 2d 597 (Cal. App. 4 " Dist.
2001).
——$—— ee eee a
19
disadvantaged consumers, such as home repairs,*' mobile
home sales,” and “pay day” loans.”
The move toward mandatory arbitration clauses has
been accelerated by the arrival of “e-commerce.” The
purchase of goods and services on the Internet involves
written agreements and long distance relationships that lend
themselves to the imposition of mandatory contractual terms.
The clauses are accessible only through multipie “links” or
“clicks,” and even then only by scrolling through lengthy
“terms and conditions” pages. For example, the most popular
Internet auction site, “eBay,” includes a clause seventeen
paragraphs into its “User Agreement” that requires its
customers to use arbitration — and provides that the arbitration
take place in San Jose, California, that it cannot be
consolidated with other arbitrations, and that it conform to
rules that can impose considerable costs on the person seeking
arbitration:
Any legal controversy or legal claim arising
out of or relating to this Agreement or our
services, excluding legal action taken by eBay
to collect our fees and/or recover damages for,
or obtain an injunction relating to, the eBay
site operations, intellectual property, and our
*! Williams v. Aetna Finance Co., 88 Ohio St. 3d
464, 700 N.E. 2d 859 (Ohio 1998).
*? Oakwood Acceptance Corp. v. Hobbs, 2001 Ala.
LEXIS 4 (2001); Johnnie’s Homes, Inc. v. Holt, 2001 Ala.
LEXIS 8 (2001); Dobbins v. Hawk's Enterprises, 198 F. 3d
715 (8" Cir. 1999).
*> Amold v. United Companies Lending Corp., 204
W.Va. 229, 511 S.E. 2d 854 (W. Va. 1998).
20
services, shall be settled by binding arbitration
in accordance with the commercial arbitration
rules of the American Arbitration Association.
Any such controversy or claim shall be
arbitrated on an individual basis, and shall not
be consolidated in any arbitration with any
claim or controversy of any other party. The
arbitration shall be conducted in San Jose,
California, and judgment on the arbitration
award may be entered into any court having
jurisdiction thereof. . . .“
Such terms inhibit the ability of consumers in distant states
and territories to enforce their rights — especially when the
dispute involves small dollar amounts.
The impact of mandatory arbitration clauses is further
exacerbated by changing demographics. The 1990 Census
showed that nearly 6 million U.S. residents lived in
households that were “linguistically isolated,” i.e., there was
** The eBay “User Agreement” is available at
http://pages.ebay.com/help/community/png-user.html (visited
May 24, 2001). The “commercial arbitration rules of the
American Arbitration Association” (AAA) referred to in the
eBay agreement include filing fees starting at $500 on claims
below $10,000, though the fee might be waived in some
undefined set of circumstances. Effective March 15, 2001,
the AAA has set out a separate set of “Arbitration Rules for
the Resolution of Consumer-Related Disputes,” which
provides for an initial $125 fee for consideration of a paper
record and an additional $100 for a telephone hearing, but
refer the consumer back to the commercial rules for an in-
person hearing. The AAA rules and fee schedules are
available at http://www.adr.org/ under “Focus areas:
Commercial” (visited May 24, 2001).
21
no resident over age 14 who spoke English well.*° Though
the language data for the 2000 Census has not been released,
if it tracks the dramatic increases in the number of Hispanic
and Asian residents, the number of “linguistically isolated”
households will have risen to more than nine million. The
language problems of those making purchasing decisions in
those households makes their residents more likely to
unknowingly agree to mandatory arbitration. And for them,
the arbitration process is particularly difficult, for the rules of
the major arbitration groups lack any promise of translation
assistance.
If the Fourth Circuit’s rule is upheld, the increased use
of mandatory arbitration agreements may severely and
adversely impact the effectiveness of efforts of attorneys
general to protect consumers at all income levels and with all
degrees of English proficiency. Yet the attorneys general
may already be the last bastion of protection where numerous
consumers have small claims but lack the economic power to
vindicate their rights and force changes in behavior. Though
class actions have often shared that role, the arbitration
industry has discovered and actively promoted methods of
preventing consumers and others from pursuing relief as a
** U.S. Census Bureau, Table 3. Language Use and
English Ability, Persons 18 Years and Over, by State: 1990
Census, available at http://www.census.gov/population/-
socdemo/language/table3.txt (visited May 24, 2001).
© In the 1990 Census, 29,627,721 residents listed
Hispanic or Asian as their race; in the 2000 Census, the total
was 45,548,807. For further discussion of the increase in
Hispanic population, see Betsy Guzman, The Hispanic
Population (U.S. Census 2000 Brief Series, May 2001),
available at http://www.census.gov/prod/200 | pubs/-
c2kbr01-3.pdf (visited April 30, 2001).
22
class.’ Companies using mandatory arbitration seek to
prevent class actions because they “know that because many
claims are not viable if brought individually, plaintiffs will
often drop or fail to initiate claims once it is clear that class
relief is unavailable.” Thus they have increasingly used
express bars on class relief. Those bars follow the pattern
shown in the eBay User Agreement: They prohibit an
individual claim in arbitration from being “consolidated in
any arbitration with any claim or controversy of any other
party.” That strategy, “[i]f successful, . . . would permit
any company that has an ongoing relationship with a potential
plaintiff-such as an insurer, manufacturer, cruise ship or
HMO-+to use a contract of adhesion to require that person,
typically unknowingly, to arbitrate rather than litigate, and to
explicitly bar that person from proceeding by way of class
action.”*'
The anti-class-action arbitration strategy has been
subject to attack by plaintiffs and their lawyers. But
companies defending such provisions have themselves brought
the issue back to the point that so concerns the amici
attorneys general. When faced with plaintiffs’ claim that
eliminating class actions blows a huge hole into enforcement
of consumer protection laws, such companies have pointed in
*” See Sternlight, supra note 38, at 5 n. 2.
** Sternlight, supra note 38, at 9.
® See Sternlight, supra note 38, at 6.
® e-Bay User Agreement, supra note 54.
*' Sternlight, supra note 38, at 10-11 (footnotes
omitted).
23
defense directly to enforcement by government agencies.”
Recently the U.S. Court of Appeals for the Third Circuit,
upholding an agreement barring class actions in Johnson v.
West Suburban Bank,® accepted that argument. It pointed to
the continued existence of “administrative enforcement
mechanisms” to rebut a claim that to bar class actions would
severely undermine the effectiveness of the Truth in Lending
Act.“ But that argument is premised on the continued ability
of the government to pursue those who engage in fraudulent
or deceptive practices. And again, that ability is threatened
by the Fourth Circuit’s rule.
The attorneys general recognize that the Fourth
Circuit’s rule permits the use of penalties and injunctive relief
~— as the Third Circuit pointed out in the context of federal
law enforcement in West Suburban Bank.© But at least as
applied to state consumer protection laws, the Third Circuit’s
analysis is problematic. It presupposes — falsely — that there
is a practical alternative for the victims. It presupposes —
again, falsely — either that the government’s interest is solely
to enforce the law prospectively, or that enforcement limited
to the future is an effective deterrent to misbehavior today.
*? _E.g., Brief of The Chamber of Commerce of the
United States of America as Amicus Curiae in Support of
Petitioners, Green Tree Financial Corp. v. Randolph, No. 99-
1235, 1999 U.S. Briefs LEXIS 1235, *22 (Federal Trade
Commission’s restitution authority can be used to protect
consumer rights under the Truth in Lending Act even where
there are arbitration agreements).
® 225 F.3d 366 (3d Cir. 2000).
* Id. at 375.
- =
a4
And it forces the curious conclusion that the public is better
off — and that Congress and the state legislatures intended to
leave them — with penalties flowing into the public treasury
than with restitution flowing to those suffering actual loss. “
There is nothing in the Third Circuit’s opinion, or in any
decision cited by that court, to explain such a conclusion.
Moreover, the Third Circuit’s analysis is in the context
of banking, a closely supervised industry where there are
frequent opportunities for federal agencies to observe and
attack violations of the law. The state consumer protection
laws have a much broader range, and are most often enforced
by the attorneys general outside the regulated industry
context. As to the consumer protection laws, it is critical to
recognize that it may be possible to insert a mandatory
arbitration clause in virtually every consumer transaction with
written documents, either paper or electronic. Thus the
Fourth Circuit’s rule might ultimately permit those selling
goods ranging from time shares to used automobiles, services
ranging from long distance telephone service to driveway
resurfacing, and even those engaged in pyramid schemes to
point to arbitration clauses and proclaim immunity from
actions by the attorneys general that reach nefarious past acts.
That would be true even though the attorneys general appear
as plaintiffs, seeking to enforce the law.®’
Even when an attorney general appears as a plaintiff,
vindicating the public interest and enforcing state law, the
recovery may be measured in terms of consumer loss. The
* The Third Circuit’s analysis does not address, of
course, instances in which penalties are not available. See
note 15, supra.
*” See, e.g., In the Matter of Towers, 162 F.3d 952,
956 (7th Cir. 1998).
25
funds recovered may even flow, directly or indirectly, to
consumers. But neither the measurement nor the identity of
the ultimate recipient changes the fact that suits brought under
consumer protection statutes are law enforcement actions,
intended to eliminate the incentive to deceive by ensuring the
disgorgement of ill-gotten profits. This Court should prevent
the Fourth Circuit (and other state and federal courts that
might follow its rule) from forcing the law and the States
down a road that leads, as a practical matter, to a place where
unnumbered consumers who have been deceived, but who
lack the ability to pursue or have lost sums too small to
justify even the costs of individual arbitrations, are left
without effective protection. Arbitration certainly has an
important role even in consumer law. But it should not be
handed to the unscrupulous as a shield from government
efforts to attack consumer deception after the fact.
26
CONCLUSION
Because of the threat it poses to the effective
enforcement by the States of their civil rights, consumer, and
other laws, the Court should reverse or limit the Fourth
Circuit’s holding and affirm the ability of the States to
enforce their laws even when the tool they use measures
relief and ultimately results in payments to victims who
signed contracts that included mandatory arbitration clauses.
Respectfully submitted,
JEREMIAH W. (JAY) NIXON
Attorney General
JAMES R. LAYTON
State Solicitor
Counsel of Record
ALANA M. BARRAGAN-SCOTT
Deputy Solicitor
Supreme Court Building
P.O. Box 899
Jefferson City, MO 65102-0899
(573) 751-3321
Counsel for Amicus Curiae
May 25, 2001
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.