Amicus Curiae Brief — Green Tree Financial Corp. v. Bazzle

No.02-634 '- (sar

IN THE Ma Nyda 3)

Supreme Court of the United Stittex 2);

GREEN TREE FINANCIAL CorP. A/K/A GREEN TREE AOCRETANG

Corp. A/K/A GREEN TREE FINANCIAL

SERVICES CORP. A/K/A CONSECO FINANCE CorP.,

Petitioners,

¥.

LYNN W. BAZZLE AND BURT A. BAZZLE, In A Representative

Capacity On Behalf Of A Class And For All Others Similarly

Situated; DANIEL B. LACKEY, GEORGE BUGGS and FLORENE

BuGGS, In A Representative Capacity On Behalf Of A Class And

For All Others Similarly Situated,

Respondents.

On Writ of Certiorari to the

Supreme Court of South Carolina

BRIEF OF AMICI CURIAE LAWYERS’ COMMITTEE FOR

CIVIL RIGHTS UNDER LAW; NATIONAL ASSOCIATION

FOR THE ADVANCEMENT OF COLORED PEOPLE;

NAACP LEGAL DEFENSE AND EDUCATIONAL FUND,

INC.; NATIONAL ASIAN PACIFIC AMERICAN LEGAL

CONSORTIUM; NATIONAL PARTNERSHIP FOR

WOMEN & FAMILIES; AND WOMEN EMPLOYED

IN SUPPORT OF RESPONDENTS

GARY T. JOHNSON RICHARD T. SEYMOUR

STUART MEIKLEJOHN Counsel of Record

Co-CHAIRS LIEFF, CABRASER,

NORMAN REDLICH HEIMANN & BERNSTEIN, LLP

TRUSTEE 1100 New York Avenue, NW

BARBARA R. ARNWINE Suite 1080 — West Tower

THOMAS J. HENDERSON Washington, DC 20005-3934

MICHAEL FOREMAN (202) 582-1000

AUDREY WIGGINS

LAWYERS’ COMMITTEE FOR PAUL W. MOLLICA

CIVIL RIGHTS UNDER METES, MULDER, BURGER

LAW & MOLLICA

1401 NEW YORK AVENUE, NW 208 South LaSalle Street

SUITE 400 Suite 1410

WASHINGTON, DC 20005-2124 Chicago, IL 60604

(202) 662-8600 (312) 263-0272

Additional Counsel listed on inside cover

BEST AVAILABLE COPY =

DENNIS C. HAYES

GENERAL COUNSEL

YOLANDA Y. RILEY

NATIONAL ASSOCIATION FOR

THE ADVANCEMENT OF

COLORED PEOPLE

4805 Mt. Hope Drive

Fifth Floor

Baltimore, MD 21215

(410) 486-9191

VINCENT A. ENG

NATIONAL ASIAN PACIFIC

AMERICAN LEGAL

CONSORTIUM

1140 Connecticut Avenue, NW

Suite 1200

Washington, DC 20036

(202) 296-2300

CARYN BECKER

LIEFF, CABRASER,

HEIMANN & BERNSTEIN, LLP

Embarcadero Center West

275 Battery Street

30" Floor

San Francisco, CA 94111-3339

ELAINE R. JONES

DIRECTOR-COUNSEL

NORMAN J. CHACHKIN

ROBERT H. STROUP

NAACP LEGAL DEFENSE &

EDUCATIONAL FUND, INC.

99 Hudson Street

16” Floor

New York, NY 10013-2897

(212) 965-2200

JUDITH L. LICHTMAN

JOCELYN C. FRYE

NATIONAL PARTNERSHIP FOR

WOMAN & FAMILIES

1875 Connecticut Avenue, NW

Suite 710

Washington, DC 20009

(202) 986-2600

— —

-_—_

STATEMENT OF INTEREST

SUMMARY OF ARGUMENT

ARGUMENT

A.

Table of Contents

The South Carolina Supreme Court’s Decision

Respects this Court’s Precedents Under the

Federal Arbitration Act and, Accordingly, Is

Not Subject to Further Review .....................

The FAA Provides No Default Rule Prohibiting

Class Arbitration And Which Supersede

State-Law Principles Of Contract ..................

Independently of State Contract Law, the FAA

Authorizes Only a Simple Change of Forum,

Without the Loss of Any Substantive Right ......

Some Claims Require Class Treatment to

Vindicate Statutorily Protected Substantive

| eee

l. Class Litigation Is Sometimes Essential

to the Enforcement of the Civil Rights

ED 5 SRE Se eae ee eee

2. Some Claims Are Too Small to Litigate

Effectively on an Individual Basis, Even

With the Benefit of Fee Award..............

3. If a Claim Cannot Be Litigated on a

Class Basis in Arbitration, and if

Class Treatment is Important to the

Prosecution of the Claim, as in

Civil Rights and Small-Recovery

Cases, Claimants Must Be Allowed

to Litigate Their Claims in Court ..........

CONCLUSION

eee eee eee eee eee eee eee eee eee eee

eee eee eee eee eee

ii

Table of Authorities

1. Cases

Adkins v. Labor Ready, Inc.,

es ee 15

Allied-Bruce Terminix Cos., Inc. v. Dobson,

SEE Eres 5,6

Allison v. Citgo Petroleum Corp,

151 F.3d 402 (Sth Cir. 1998), reh'g denied with

explanation, 151 F.3d 434 (Sth Cir. 1998) ......... 18

Amchem Products, Inc. v. Windsor,

kf EeEreereee 19

Ameron, Inc. v. U.S. Army Corps of Engineers,

787 F.2d 875 (3d Cir. 1986), approved on

rehearing, 809 F.2d 979 (3d Cir. 1986), cert.

dismissed, 488 U.S. 918 (1998) .................0008 18

Bailey v. Ameriquest Mortg. Co.,

No. CIV. 01-545 (JRT/FLN),

2002 WL 100391, 145 Lab. Cas. 4 34,473

SS 8) 8 ee 14

Barnes v. Gorman,

Rl ee 7

Bazzle v. Green Tree Financial Corp.,

351 S.C.244, 569 S.E.2d 349 (2002) ......5, 7, 8, 9, 11

Bresgal v. Brock,

843 F.2d 1163 (9th Cir. 1987) .............ccceeeeeees 18

Brooks v. Travelers Insurance Co.,

og fl Ul 4 15

Brown v. Trustees of Boston University,

891 F.2d 337 (ist Cir. 1989),

cert. denied, 496 U.S. 937 (1990) .................000 18

Butler v. Dowd,

979 F.2d 661 (8th Cir. 1992),

cert. denied, 508 U.S. 930 (1993) ..................08 18

Califano v. Yamasaki,

ID ccccadtntindciinieenidnniniientl 12, 18

Celestine v. Petroleos de Venezuela SA,

pK ee 18

Central Wesleyan College v. W.R. Grace & Co.,

ee EY SEE ctptiincinptdocteucedniiccocsnis 11

Circuit City Stores, Inc. v. Adams,

ey TD tincintiticinndmetetensiscdseninctcindiel 6

Circuit City Stores, Inc. v. Adams,

I HEED cnncceesccseccscesccsccen 15

Cooper v. Federal Reserve Bank of Richmond,

ED incntntnicncniccnionsenmninniniieses 17

Daar v. Yellow Cab Co., :

67 Cal. 2d 695, 433 P.2d 732 (Cal. 1967) ........... 21

Deposit Guaranty Nat’l Bank v. Roper,

I I i aitinls icici cesaneriteteinnneimeais 19

Doctor's Associates, Inc. v. Casarotto,

| ne” 6, 10

EEOC v. Waffle House, Inc.,

es Se ED cntenseccnscesinseccaveses 10, 12, 19

Ferguson v. Countrywide Credit Industries, Inc.,

oe een 15

First Options of Chicago, Inc. v. Kaplan,

ks eee 6,9

Franks v. Bowman Transportation Co.,

TE nintsincinicicicerinnmenmonnnanininniats 17

Gilmer v. Interstate/Johnson Lane Corp.,

ee 11, 13, 14, 16

Graniteville Co. (Sibley Division) v. EEOC,

SEED GPUED cncctccesscsecccssccssccees 18

Green Tree Financial Corp.-Ala. v. Randolph,

FOO Ce FO GRSEED cccccccccccecccess 8, 10, 11, 12, 1415

Hines v. Davidowitz,

TD ciinsiiiiednbntereanamegesenesseeeients 10

Hollon v. Mathis Independent School District,

St 18

iv

Hooters of America, Inc. v. Phillips,

pjf , ) |: fea 15

Howsam v. Dean Witter Reynolds, Inc.,

I sr seiinsrmeennanioeenassiatial 6

In re Cadillac V8-6-4 Class Action,

le Ae EE, CED cdecinccserccsccsocsessocces: 21

Int’l Bhd. of Teamsters v. United States,

| ICE eee ner ee 17

Jenkins v. Raymark Indu.,

782 F.2d 468 (Sth Cir.1986) ...........ccccseceeeesees 12

Johnson v. West Suburban Bank,

Be Fe Es BED coccccccccccccoscosescccess 15

Leonard v. Terminix Int'l Co., L.P.,

2002 Ala. LEXIS 316 (October 18, 2002) .......... 21

Lowery v. Circuit City Stores, Inc.,

158 F.3d 742 (4th Cir. 1998), vacated and

remanded on other grounds, 527 U.S. 1031

(1999), reaff'd, Lowery v. Circuit City

Stores, Inc., 206 F.3d 431 (4th Cir.),

cert. denied, 531 U.S. 822 (2000) ................... 18

Mastrobuono v. Shearson Lehman /lutton, Inc.,

— & eee 6,8

McDonald v. Washington,

ee CEP GED coccccosvececcccesescenes 21

Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, Inc.,

EK 6, 13, 14

Moses H. Cone Memorial Hosp. v. Mercury Const. Corp.,

GS ED cecccncenccccnntenantemnsenersnesencent 14

Murray v. United Food and Commercial Workers Int'l

Union,

PEG GEE = ccccecssncccceccsessesoess 15

National Center for Immigrant Rights v. INS,

743 F.2d 1365 (9th Cir. 1984), vacated on other

grounds, 481 U.S. 1009 (1987) .............0cceeeee 18

Paige v. California,

102 F.3d 1035 (9th Cir. 1996) .................ceeeee es 18

Vv

Paladino v. Avnet Computer Technologies, Inc.,

134 F.3d 1054 (11th Cir. 1998) ....................0 16

Perry v. Thomas,

IN IIIT is icidinniiettitccensstinianntiaiened 6, 10

Prima Paint Corp. v. Flood & Conklin

Manufacturing Co.,

A ST cctitidadiednenninadinedanisanninetes 10

Robinson v. Metropolitan-North Commuter R.R. Co.,

267 F.3d 147 (2d Cir. 2001),

cert. denied, 535 U.S. 951 (2002) ...............0005. 17

Sharpe v. Cureton,

ee 18

Southland Corp. v. Keating,

TIS WIE ‘iniiinicitinseisncsnedientendacnsneneds 5, 6

State ex rel. Dunlap v. Berger,

211 W.Va. 549, 567 S.E.2d 265 (W. Va.),

cert. denied sub nom. Friedman’s Inc. v. West

Virginia, 123 S. Ct. 695, 154 L. Ed. 2d 631

SEED ssenenenssnaddssetetandaddidiimmeenenangenvensi 21

Thiessen v. General Electric Capital Corp.,

267 F.3d 1095 (10th Cir. 2001),

cert. denied, 122 S. Ct. 2614,

ee 17

Ting v. AT&T,

182 F. Supp. 2d 902 (N.D. Cal. 2002), aff'd in

relevant part, 319 F.3d 1126 (9th Cir. 2003) ....... 14

USA Check Cashers of Little Rock, Inc. v. Island,

349 Ark. 71, 76 S.W.3d 243 (Ark. 2002) ............ 21

Vasquez v. Superior Court,

Eanes 21

Volt Information Sciences, Inc. v. Board of Trustees of

Leland Stanford Junior University,

i ccicsiieil 6, 8,9, 10

Zepeda v. INS,

(6g, | ESSE 18

vi

2. Statutes and Rules

Age Discrimination in Employment Act ........ 11, 14, 15, 16

Americans with Disabilities Act ................c0cceceeeeeees 15

ST seimiieidnsenhaipieadunentiasiidiinanebeiiveseneianes 15

ST A EID EE ceusccsecenecsscsbeniccusidscusséouses 22

Family and Medical Leave Act................cccceseeeeeeeeeeees 2

Federal Arbitration Act, 9 U.S.C. §§ 1 ef seq............ passim

Pregnancy Discrimimation Act.............0:ccceeeeeeeeeeeneeenes 2

Title VII of the Civil Rights Act of 1964 .................008 15

ee Re icancvcnccecccccnssconssessecsnssesesensonens 15

ar UTD ETT ccnnutnsesencdabiscnssaneennividbnieennddenls 15, 16

e & GR 8 prrerrrrrrrrr ys 11, 12, 20, 22

Se A WOES Wie Gee WU enccvcccccccccapscescsssencncssosess 22

3. Treatises and Law Reviews

Blume, The “Common Questions” Principle in the

Code Provision for Representative Suits,

FO DEI. Le. BBV. SIS (IGS) ccccccccccscccccccccccsccee 9

Blume, Jurisdictional Amount in Representative Suits,

15 MINN. L. REV. 501 (1931) ..............ccecesseeeees 9

CHAFEE, SOME PROBLEMS OF EQUITY (1950) ............-..++ 9

Davies, Federal Civil Rights Practice In The 1990's:

The Dichotomy Between Reality And Theory,

Gp TE Eade BEE CESS cccccccccccccccccessecces 21

Developments in the Law—Multiparty Litigation in the

Federal Courts,

71 HARV. L. REV. 874, 928-41 (1958) ................ 9

Gordon, The Common Question Class Suit Under the

Federal Rules and in Illinois, 42 ILL. L. REV. 518 (1947) ...9

Note, Action Under the Codes Against Representative

Defendants,

Pe Ey Gly GP CU cncesasccsccccvcnsescssocse 9

RESTATEMENT (2D) OF CONTRACTS, § 204, comment d ......7

Vii

Sternlight, As Mandatory Binding Arbitration Meets

The Class Action, Will The Class Action Survive ?,

42 WM. & MARY L. REV. 1 (2000) ................... 20

STREET, 1 FEDERAL EQUITY PRACTICE (1909) ...............4. y

Wheaton, Representative Suits Involving Numerous

Litigants,

I i cicmnadl )

7A WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND

, - iby ft 20

7A WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND

PROCEDURE § 1778 (Supp.1983) .............0ce0e0e. 21

7B WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND

PROG © TFG CIPS cccccccccccccccccscccccccccs 20

Yeazell, From Group Litigation to Class Action:

Part II: Interest, Class, and Representation,

27 UCLA L. REV. 1067 (1980) ................ceeeeeee 9

STATEMENT OF INTEREST

The Lawyers’ Committee for Civil Rights Under Law

(“Lawyers’ Committee”) is a tax-exempt, nonprofit civil

nghts organization, founded in 1963 by the leaders of the

American Bar, at the request of President Kennedy, in order

to help defend the civil nghts of minorities and the poor. Its

Board of Trustees presently includes several past Presidents

of the American Bar Association, past Attorneys General of

the United States, law school deans and professors, and

many of the nation’s leading lawyers. It has independent

local affiliates in Boston, Chicago, Denver, Los Angeles,

Philadelphia, San Antonio, San _ Francisco, and

Washington, D.C. Through the Lawyers’ Committee and its

affiliates, hundreds of attorneys have represented thousands

of clients in civil mghts cases across the country, including a

large number of cases challenging racial discnmuination in

employment.

The National Association for the Advancement of

Colored People (NAACP), established in 1909, is the

nation's oldest civil mghts organization. The fundamental

mission of the NAACP is the advancement and improvement

of the political, educational, social and economic status of

minonty groups; the elimination of prejudice; the publicizing

of adverse effects of discrimination; and the initiation of

lawful action to secure the elimination of age, racial,

religious and ethnic bias.

' Written consent to the filing of this brief has been obtained

from the parties in accordance with Supreme Court Rule 37.3(a). Copies

of the consent letters have been filed with the Clerk. Pursuant to

Supreme Court Rule 37.6, the amici state that this brief was not authored

in whole or part by counsel for any party and that no party or entity, other

than the amici and their counsel, made any monetary contribution to its

preparation or submission.

Ln

a ae Pe Ga

2

The NAACP “egal Defense and Educational Fund,

Inc. (“LDF’’) is a non-profit corporation formed to assist

Afncan Americans in secunng their constitutional and

statutory mghts through the prosecution of lawsuits,

including class actions, and to provide legal services to

Afncan Americans suffering injustice by reason of racial

discnmination.

The National Asian Pacific Amencan Legal

Consortium (“NAPALC”) is a national non-profit, non-

partisan organization whose mission is to advance the legal

and civil nghts of Asian Pacific Americans. Collectively,

NAPALC and its Affiliates the Asian Law Caucus and the

Asian Pacific American Legal Center of Southern California,

have over 50 years of experience in providing legal public

policy, advocacy, and community education on

discrimination issues. NAPALC and its Affiliates have a

long-standing interest in addressing matters of discnmuination

that have an impact on the Asian Pacific American

community, and this interest has resulted in NAPALC’s

participation in a number of amicus briefs before the courts.

The National Partnership for Women & Families

(“National Partnership”) is a national advocacy organization

that develops and promotes policies to help women achieve

equal opportunity, quality health care, and economic security

for themselves and their families. Since its founding in

1971, the National Partnership (formerly the Women’s Legal

Defense Fund) has worked to advance equal employment

opportunities by monitoring agencies, EEO enforcement,

challenging employment discrimination in the courts, and

leading efforts to promote employment policies such as the

Family and Medical Leave Act and the Pregnancy

Discrimination Act.

(

|

;

}

|

3

Women Employed is a national membership

association of working women based in Chicago, with a

membership of 2000. Since 1973, the organization has

assisted thousands of working women with problems of

discrimination and harassment, monitored the performance

of equal opportunity enforcement agencies, and developed

specific, detailed proposals for improving enforcement

efforts.

One of the principal objectives of amici is to protect

the ability of minorities, women, and the poor to obtain

effective civil redress for injuries, whether in arbitration or

through the courts.

SUMMARY OF ARGUMENT

The South Carolina Supreme Court has examined and

authoritatively construed the arbitration agreement used here

pursuant to general principles of state law, and has found that

it does allow the arbitration of class claims. Its

determination of state law and construction of the contract

should not be subject to further review by this Court.

Petitioner’s argument that the Federal Arbitration Act

creates a default rule, overriding state contract law and

forbidding arbitration of class claims where the arbitration

agreement is silent, has no basis in the text or policy of the

statute, and would constitute a judicial rewnting of the

statute. The decision below advances the policy of the FAA,

and was sound.

The FAA authorizes only a simple change of forum,

without the loss of any substantive right under state or

federal law. This Court has recognized that the right of the

EEOC to bring an action seeking relief for a charging party

is a substantive right, and that excessive costs may

4

jeopardize substantive rights by effectively precluding resort

to arbitration. The ability of a private party to litigate a

claim effectively ‘s no less a substantive nght.- In select

cases, the ability to proceed collectively may likewise be

essential to vindicate effectively a substantive nght.

Class treatment is sometimes essential to the

enforcement of the civil rights laws. Proof of a pattern of

discrimination may be critical to victims’ ability to prevail.

The additional discovery in class proceedings is often

necessary in order to prove the pattern and to establish a

structure whereby victims can be identified and made whole.

Finally, broad injunctive relief is often necessary to eradicate

discrimination, but may be unavailable outside the context of

a class proceeding. Additionally, as this Court and

commentators have often observed, class treatment is also

essential to the vindication of class members’ nights where

the amounts at stake are too small to justify individual

litigation. Even with the benefit of fee-shifting statutes,

these cases are economically less desirable than cases in

which substantial recoveries or broad injunctive relief are at

stake. A blanket rule prohibiting class based arbitration

accordingly would have a detrimental impact on the ability

of victims of civil rights violations and plaintiffs with small

monetary statutory claims from having their substantive

rights vindicated.

For these reasons, if a class claim cannot be litigated

in arbitration but class treatment is important to the

prosecution of the claim, such as in civil nghts cases and

small-recovery cases, claimants must be allowed to litigate

their claims in court.

5

ARGUMENT

A. The South Carolina Supreme Court’s Decision

Respects this Court’s Precedents Under the

Federal Arbitration Act and, Accordingly, Is Not

Subject to Further Review

The present case involves the South Carolina

Supreme Court’s application of South Carolina’s contract

law to a claim in arbitration founded on South Carolina’s

consumer law. Bazzle v. Green Tree Financial Corp., 351

S.C. 244, 265, 569 S.E.2d 349, 360 (2002) Resolution of this

matter in respondent’s favor entails a straightforward

application of this Court’s established jurisprudence

applying state-law contract law to interpret the scope of

arbitration under the Federal Arbitration Act, 9 U.S.C. §§ 1

et seq. (“FAA”). Green Tree, however, petitions the Court to

create a new, preemptive rule of contract construction,

barring class arbitration unless explicitly commanded by the

written instrument. Because this rule lacks any basis in the

FAA or this Court’s decisional law, Green Tree’s argument

ought to be rejected and the South Carolina Supreme Court’s

judgment affirmed.

The role of state law under the Federal Arbitration

Act is an enduring, if troubled, theme of the Court’s recent

FAA cases. Nearly twenty years ago, in Southland Corp. v.

Keating, 465 U.S. 1 (1984), the Court held that the FAA

applies in proceedings in state courts and preempts contrary

state anti-arbitration laws. The Court has had repeated

encounters with the preemption issue, but the path of the law

has been questioned. In Allied-Bruce Terminix Cos., Inc. v.

Dobson, 513 U.S. 265 (1995), the Court considered the issue

anew, and while Southland was reaffirmed, three separate

opinions urged that the holding in Southland was in error and

that the FAA should not be deemed preemptive. Jd. at 282

(O’Connor, J. concurring); id. at 284 (Scalia, J., dissenting);

6

id. at 285 (Thomas, J., dissenting).

Yet side-by-side with these cases, the Court has held

unanimously that state—not federal—contract law governs

the interpretation of arbitration agreements. See, e.g., First

Options of Chicago, Inc. v. Kaplan, 514 US. 938, S44

(1995) (to decide “whether the parties agreed to arbitrate a

certain matter,” courts apply “ordinary state-law principles

that govern the formation of contracts”); Mastrobuono v.

Shearson Lehman Hutton, Inc., 514 U.S. 52, 62-63 (1995)

(applying New York and Illinois law);- Volt Information

Sciences, Inc. v. Board of Trustees of Leland Stanford Junior

Univ., 489 U.S. 468, 475-76 (1989) (“general state-law

principles of contract interpretation [apply] to the

interpretation of an arbitration agreement within the scope of

the Act”); Perry v. Thomas, 482 U.S. 483, 492 (1987) (“state

law, whether of legislative or judicial origin, is applicable if

that law arose to govern issues concerning the validity,

revocability, and enforceability of contracts generally”)

(emphasis in original). Although the parties’ intent controls

regarding whether they agreed to arbitrate a particular

dispute, determining their intent is a question for the court to

decide. Howsam v. Dean Witter Reynolds, Inc., 123 S. Ct.

588, 592 (2002); Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 US. 614, 626 (1985).

Especially when interpretation of the contract arises from the

state’s highest court, its ruling deserves special deference.

See, e.g., Mastrobuono, 514 U.S. at 60 n.4 (citing to Volt

? See also Circuit City Stores, Inc. v. Adams, 532 U.S 105, 122

(2001) (acknowledging that “[{n)ot all of the Justices who join today’s

holding agreed with Allied-Bruce”); Doctor's Associates, Inc. v.

Casarotto, 517 U.S. 681, 689 (1996) (Thomas, J., dissenting “for the

reasons given im my dissent last Term in {Allied-Bruce]”); Perry v.

Thomas, 482 U.S. 483, 493-94 (1987) (Stevens and O’Connor, J.J.,

dissenting) (doubting the original outcome in Southland).

——————— -

Info).

This is a classic “missing-term” case. Green Tree’s

arbitration contract form by all accounts fails to address class

arbitration. As the Court noted last Term, courts have taken

varying approaches to filling missing terms in contracts.

Barnes v. Gorman, 122 S. Ct. 2097, 2102 (2002) (“Some

authorities say that reasonably implied contractual terms are

those that the parties would have agreed to if they had

adverted to the matters in question. See 2 Farnsworth, supra,

§ 7.16, at 335, and authorities cited. More recent

commentary suggests that reasonably implied contractual

terms are simply those that ‘compor[t] with community

standards “of fairmess,)5 RESTATEMENT (SECOND) OF

CONTRACTS § 204, Comment d; see also 2 Farnsworth,

supra, § 7.16, at 334- 336.”). The FAA nowhere dictates a

rule for filling in missing terms about either the scope or

process of arbitration.

To supply the missing term here, the South Carolina

Supreme Court applied its own default rule, applicable to

contracts generally, construing silence in the contract against

the drafter (Green Tree):

[U]}nder general principles of contract

interpretation, we construe Green Tree’s

omission of any reference to class actions

against them. . . . No case law or statute in

South Carolina prohibits class-wide

arbitration. To the contrary, this Court

strongly favors arbitration and has held that a

State court may order consolidation of claims

subject to mandatory arbitration without any

contractual or statutory directive to do so.

Bazzle, 351 S.C. at 265, 569 S.E.2d at 360 (citations and

footnote omitted). The South Carolina Supreme Court

8

adopted the same course that this Court took to construe a

doubtful choice-of-law clause in Mastrobuono, 514 US. at

62-63 (applying “the common-law rule that a court should

construe ambiguous language against the interest of the party

that drafted it”).’

Because the South Carolina high court’s application

of its own contract law lies beyond this Court’s review, there

remains nothing more for the Court to decide. See, e.g., Volt

Info, 489 U.S. at 474 (“[a]ppellant acknowledges, as it must,

that the interpretation of private contracts is ordinarily a

question of state law, which this Court does not sit to

review”). Yet Green Tree makes an effort here to obtain de

novo review. Its oft-stated contention that the use of terms

such as “you,” “us,” and “this contract” in the agreement

preclude class arbitration (Pet. Br. at 38-44) just attempts to

resurrect before this Court the state law arguments rejected

by the South Carolina Supreme Court. It disregards the state

court’s conclusion that Green Tree’s form language,

including the terms cited, “at best ... creates an ambiguity.”

Bazzle, 351 S.C. at 264, 569 S.E.2d at 359.

Green Tree’s back-up argument—that the “arbitration

agreement cannot bind non-representative class members

who are not parties to the specific arbitration agreements

upon which the Bazzle and Lackey proceedings were

predicated” (Pet. Br. at 45)}—likewise slights the findings

below. Green Tree used a virtually identical form with all of

the class members (id. at 264 n.18, 569 S.E.2d at 359), and

so it was bound by contract to arbitrate with all of them, and

all of them with Green Tree. /d. at 266, 569 S.E.2d at 360.

> See also Green Tree Financial Corp.-Ala. v. Randolph, 531

U.S. 79, 95 n.1 (2000) (Ginsburg, J., concurring in part and dissenting in

part) (Alabama applies “usage and custom” to fill missing contract terms,

where contract did not specify division of forum fees). Petitioner’s brief

conspicuously omits any citation to Randolph.

ee ——

9

No class member was dragooned into the proceeding. Jd. at

269, 569 S.E.2d at 362 (“[t]he class members’ rights appear

to have been properly protected by the notice given to all of

them”). If individual consumers did not wish to arbitrate

their claim under the form, they were permitted to opt out of

the proceeding. /d. at 250, 569 S.E.2d at 352. The decision

below is thus insulated from review.

B. The FAA Provides No Default Rule Prohibiting

Class Arbitration And Which Supersede State-

Law Principles Of Contract

Petitioner also claims that the FAA interposes a

mandatory, federal default rule* that bars class arbitration

unless expressly authorized. Yet the FAA authorizes

enforcement of arbitration contracts only upon their own

terms, and this contract, as duly construed by the South

Carolina courts, authorizes class arbitration. See, e.g., First

Options, 514 U.S. at 947 (“basic objective” of FAA is to

enforce contracts “according to their terms”); Volt Info, 489

U.S. at 476 (federal policy under FAA “is simply to ensure

* Congress wrote no exclusion of class treatment into the FAA,

although class actions existed at the time the FAA was enacted. CHAFEE,

SOME PROBLEMS OF EQuiTy (1950) at 220-42; 1 STREET, FEDERAL

EQUITY PRACTICE (1909) § 552; Blume, The “Common Questions”

Principle in the Code Provision for Representative Suits, 30 MICH. L.

REV. 878 (1932); Blume, Jurisdictional Amount in Representative Suits,

15 MINN. L. REV. 501 (1931); Yeazell, From Group Litigation to Class

Action: Part Il: Interest, Class, and Representation, 27 UCLA L. REV.

1067 (1980); Developments in the Law—Multiparty Litigation in the

Federal Courts, 71 HARV. L. REV. 874, 928-41 (1958); Note, Action

Under the Codes Against Representative Defendants, 36 HARV. L. REV.

89 (1922); Wheaton, Representative Suits Involving Numerous Litigants,

19 Cornell L.Q. 339 (1934); Gordon, The Common Question Class Suit

Under the Federal Rules and in Illinois, 42 Lt. L. REV. 518 (1947).

There is no basis for any contention that Congress was unaware of the

possibility of class treatment, or intended sub silentio to establish any

special rule of the type for which petitioner contends.

10

the enforceability, according to their terms, of private

agreements to arbitrate”); Prima Paint Corp. v. Flood &

Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967) (“the

purpose of Congress in 1925 was to make arbitration

agreements as enforceable as other contracts, but not more

so”). Silence is not a basis on which this Court has

previously incorporated optional terms into agreements.”

The FAA contains no express terms curbing the

availability of class arbitrations under state law. Indeed, as a

general matter, “[t]he FAA contains no express pre-emptive

provision, nor does it reflect a congressional intent to occupy

the entire field of arbitration.” Volt Info, 489 U.S. at 477.

The FAA preempts state law only “to the extent that it

actually conflicts with federal law—that is, to the extent that

it ‘stands as an obstacle to the accomplishment and execution

of the full purposes and objectives of Congress.’” /d. at

477-78 (quoting Hines v. Davidowitz, 312 U.S. 52, 67

(1941)).

More particularly, “[t]here is no federal policy

favoring arbitration under a certain set of procedural rules;

the federal policy is simply to ensure the enforceability,

according to their terms, of private agreements to arbitrate.”

Volt Info, 489 U.S. at 476. See also Doctor's Associates,

Inc. v. Casarotto, 517 U.S. 681, 688 (1996) (state rule

governing “efficient order of proceedings” may be enforced).

5 This Court has been cautious when the arbitration agreement

is silent on a key term See, e.g, EEOC v. Waffle House, Inc., 534 US.

279, 294 (2002) (refusing to read into silent agreement a term precluding

administrative relief of civil rights claim); Randolph, 531 U.S. at 90-91

(declining to read into silence a term on the division of forum fees);

Perry, 482 U.S. at 492 (remanding, rather than deciding, issue of whether

employees could press “ancillary claims for conversion, civil conspiracy,

and breach of fiduciary duty” in arbitration).

1]

Green Tree complains that the state court’s decision

transformed its arbitration “into a massive proceeding with

millions of dollars at stake and the full trappings of the

process under Rule 23” (Pet. Br. at 32). Mere generic

attacks on the “practical problems associated with class

arbitration,” as Green Tree argues (Pet. Br. at 17, 38-42),

will not suffice to meet this burden. See, e.g, Green Tree

Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000) (party

seeking to avoid arbitration on ground of undue expense has

burden to establish factual record and cannot rely on

generalities); Gilmer v. Interstate/Johnson Lane Corp., 500

U.S. 20, 30 (1991) (rejecting “generalized attacks” on the

arbitration process as applied to a broker’s ADEA claim).

Surely, petitioner cannot claim prejudice in the fact that the

clearly meritorious claims of numerous persons with whom

they had agreements were heard and determined. The fact

that many such persons might not have asserted a claim in

the absence of class treatment is not a legally cognizable

burden. Petitioner has made no record showing that it was

more expensive or time-consuming to adjudicate the rights

of class members in the class arbitral proceeding than in a

large number of individual proceedings involving the same

common questions, and it would not be reasonable to

entertain such an assumption in the absence of evidence.

If anything, the decision below advances rather than

retards FAA objectives. Bazzle, 351 S.C. at 266, 569 S.E.2d

at 361. Class treatment of common issues holds mutual

benefits for claimants and respondents. Economies of scale

save attorneys’ fees and resources that would otherwise be

squandered defending numerous individual arbitrations over

the same issue. And resolution of a class action in a

defendant’s favor brings global closure to a disputed issue.

See Central Wesleyan College v. W.R. Grace & Co., 6 F.3d

177, 185 (4th Cir. 1993) (“Findings in a common issues trial

on even a few of the eight identified questions may

12

eventually save considerable time and judicial resources.

Significant economies may be achieved by relieving

educational institutions of the need to prove over and over

when defendants knew or should have known of asbestos’

hazards, or whether defendants engaged in concerted efforts

to conceal this knowledge, or even whether certain of

defendants’ products crumble and release dust under hand

pressure.”); Jenkins v. Raymark Indus., 782 F.2d 468, 472

(Sth Cir. 1986) (“To the extent defendants win, the

elimination of issues and docket will mean a far greater

saving of judicial resources. Furthermore, attorneys’ fees for

all parties will be greatly reduced under this plan, not only

because of the elimination of so much tral time but also

because the fees collected from all members of the plaintiff

class will be controlled by the judge.”). There is no cause to

believe that such advantages would not attend a well-

managed class arbitration.

This Court has refused to construe even statutory

language discussing individual litigation as creating a

presumption against class litigation, holding that Congress

would have to express such an intent clearly, because the

courts will not infer an intent to exempt particular causes of

action from the normal rules of civil procedure, including

Rule 23. Califano v. Yamasaki, 442 U.S. 682, 700-01

(1979). Because the FAA is intended to provide only for a

change of forum, it would be similarly inappropriate to

create a default rule foreclosing a particular manner of

litigation.

Cc. Independently of State Contract Law, the FAA

Authorizes Only a Simple Change of Forum,

Without the Loss of Any Substantive Right

Although this particular case may be resolved

according to state law, the federal FAA itself conveys a

separate, substantive, and independent limitation on

—_—— o_o

13

arbitration agreements and their interpretation: that they not

impede a claimant from effective vindication of federal or

State statutory nghts. This Court traced the dividing line in

Waffle House:

We have held that federal statutory claims

may be the subject of arbitration agreements

that are enforceable pursuant to the FAA

because the agreement only determines the

choice of forum. “In these cases we

recognized that ‘[b]y agreeing to arbitrate a

statutory claim, a party does not forgo the

substantive rights afforded by the statute; it

only submits to their resolution in an arbitral,

rather than a judicial, forum.’ [Mitsubishi

Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614, 628, 105 S. Ct. 3346, 87

L.Ed.2d 444 (1985)].” Gilmer v. Interstate/

Johnson Lane Corp., 500 U.S. 20, 26, 111 S.

Ct. 1647, 114 L. Ed. 2d 26 (1991).

534 U.S. at 295 n.10. Twice in recent Terms, the Court

recognized circumstances where the FAA would not compel

enforcement of arbitration agreements that invaded a

claimant’s ability to vindicate substantive rights. In Waffle

House, the Court held that this principle would preclude

judicial construction of “an employee’s agreement to submit

his claims to an arbitral forum as a waiver of the substantive

statutory prerogative of the EEOC to enforce those claims

for whatever relief and in whatever forum the EEOC sees

fit.” Jd. at 295. And in Randolph, 531 U.S. at 90, the Court

stated, “[i]t may well be that the existence of large arbitration

costs could preclude a litigant ... from effectively

vindicating her federal statutory rights in the arbitral forum.”

The principle that enforceable arbitration agreements do not

involve the waiver of substantive rights applies with equal

14

force to state statutory claims.°

The adequacy of procedures in arbitration is

considered on a case-by-case basis. See, e.g., Randolph, 531

U.S. at 92; Gilmer, 500 U.S. at 33 (claims of procedural

inadequacies “best left for resolution in specific cases”).

Thus, regarding the availability of class actions, there will be

cases where—upon inquiry into the particular arbitration

clause and facts of the case—the class procedure may be

integral to a claimant’s vindication of a cause of action in

arbitration. See, e.g., Bailey v. Ameriquest Mortg. Co., No.

CIV. 01-545 (JRT/FLN), 2002 WL 100391, 145 Lab. Cas.

34,473 (D. Minn. Jan 23, 2002) (finding that collective

action was integral to relief in FLSA case: “when all the

procedural hurdles contained in the Agreement are

considered together—the need to travel to defendant’s

forum, pay half the costs of the arbitrator, proceed

individually rather than collectively, and the limitation of

damage recovery, the likely result is obvious: the cost of

bringing the claim will quickly outweigh any potential

recovery under the Act’); Ting v. AT&T, 182 F. Supp. 2d

902, 933 (N.D. Cal. 2002) (under California consumer

statute, court found that the contract’s resti:ctions on

damages that a successful plaintiff could obtain, and

prohibition on joinder of claims through class actions to be

unconscionable, because they deprived retail customers of a

meaningful remedy), aff'd in relevant part, 319 F.3d 1126

(9th Cir. 2003).’ Any decision in this case must avoid

® Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460

U.S. 1, 24 (1983) (discussing § 2 of the FAA in a state-law contract case,

the Court stated: “The effect of the section is to create a body of federal

substantive law of arbitrability, applicable to any arbitration agreement

within the coverage of the Act.”); Mitsubishi, 473 U.S. at 619-20,

involved state as well as federal statutory claims.

. Regarding the availability of a class or collective action in

arbitration, Gilmer came closest to this issue when it addressed collective

actions in the ADEA context. 500 U.S. at 32. While holding that the

eee eee el

15

trammeling on the future case-by-case development of this

issue under the FAA.

Those courts that have held that the right to class

treatment can be waived have failed to consider or honor the

limitation of the FAA that arbitration agreements not impede

a claimant from effective vindication of federal or state

statutory rights. They generally hold that the parties to an

arbitration agreement are free to bargain away judicial

remedies, and do not consider—or reject out of hand—the

importance of class actions and other judicial remedies to the

statutory scheme, and whether the rights in question can be

effectively vindicated in the absence of class treatment.

This standardless approach is particularly risky in light of the

fact that a number of companies have been judicially

determined to have trafted agreements or rules that were

intended to give them an edge in arbitration they would not

be allowed in court, or that precluded remedies that would be

available in court.”

absence of these mechanisms does not inherently preclude arbitration in

every ADEA case, the Court also observed that the NYSE rules under

review in fact provided for collective proceedings. /d.

* E.g., Johnson v. West Suburban Bank, 225 F.3d 366, 377 (3d

Cir. 2000) (right to seek $500,000 in statutory TILA damages lost in

absence of class treatment, but “simply because judicial remedies are a

part of a law does not mean that Congress meant to preclude parties from

bargaining around their availability”), cert. denied, 531 U.S. 1145

(2001); Adkins v. Labor Ready, Inc., 303 F.3d 496, 503 (4th Cir. 2002)

(same); Randolph v. Green Tree Financial Corp.-Ala., 244 F.3d 814,

817-18 (11th Cir. 2001) (even though class actions are important tool

under TILA, they can be waived in agreement).

* E.g., Brooks v. Travelers Insurance Co., 297 F.3d 167, 170-71

(2d Cir. 2002) (ADEA, ADA, and ERISA); Murray v. United Food and

Commercial Workers International Union, 289 F.3d 297, 304 (2d Cir.

2002) (Title VII, 42 U.S.C. § 1981); Hooters of America, Inc. v. Phillips,

173 F.3d 933, 940 (4th Cir. 1999) (Title VII); Ferguson v. Countrywide

Credit Industries, Inc., 298 F.3d 778, 786 (9th Cir. 2002) (Title VII);

Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 891 (9th Cir. 2002)

16

D. Some Claims Require Class Treatment to

Vindicate Statutorily Protected Substantive

Rights

1. Class Litigation Is Sometimes Essential to

the Enforcement of the Civil Rights Laws

Many individual civil rights actions can fairly be

resolved on the basis of facts unique to the claim in question,

without any plausible contention that a pattern of

discrimination is involved. However, class treatment where

there is such a pattern is often essential to vindicate civil

rights, from at least three perspectives. First, it enables

plaintiffs to obtain the evidence necessary to show a pattern

of discrimination going beyond the isolated facts particular

to that individual claim. Second, it enables plaintiffs to use

the types and scale of proof necessary to show such patterns

and to establish a structure by which victims can be

identified and obtain relief. Third, one of the principal aims

of civil rights actions is the eradication of discrimination, but

broad injunctive relief is often unavailable outside the

context of a class action.

In Gilmer, the New York Stock Exchange rules

provided for class arbitrations and allowed awards of

equitable relief. This Court accordingly rejected petitioner’s

argument that his arbitration agreement was unenforceable in

that it did not provide for broad equitable relief and

collective actions. The opinion observed that ADEA cases

can be conciliated individually and that the EEOC can bring

class actions. 500 U.S. at 32. That statement does not speak

to the fundamental question raised in this case, because

petitioner’s argument was abstract. He made no showing

that he could not effectively vindicate his rights in a purely

(Title VII); Paladino v. Avnet Computer Technologies, Inc., 134 F.3d

1054, 1057-59 (11th Cir. 1998) (Title VII).

op eta ek me —

17

individual action.

The discovery necessary to prove a pattem of

discrimination is generally unavailable in litigation of an

individual claim. Far more discovery is generally allowed in

class actions because of the complexity of the case, however,

and this additional discovery is often necessary for plaintiffs

.o make the statistical and other showings that are critical to

proving a classwide pattern of discrimination.

Obtaining a just outcome can depend entirely on

proof of a discriminatory pattern. For this reason, this Court

has identified pattern and practice cases as having unique

methods of proof affecting all persons subject to the

challenged practice. Int'l Bhd. of Teamsters v. United States,

431 U.S. 32 (1977). Thus, statistical and other evidence is

available to prove such patterns of discrimination. Once

such a pattern is established, it creates a rebuttable

presumption that each class member was victimized by the

discrimination, shifting to defendants the burden of

persuasion to establish the contrary.'°

There is no effective substitute for this

classwide approach, because it permits the vindication of

rights of persons who were harmed by discrimination but are

not aware of it,'' or courts may refuse to take evidence of

'° Int'l Bhd. of Teamsters v. United States, 431 U.S. 324, 361-

62 (1977); Franks v. Bowman Transportation Co., 424 U.S. 747, 772-737

(1976); Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867,

875-76 (1984); Robinson v. Metro-North Commuter R.R. Co., 267 F.3d

147, 168 (2d Cir. 2001), cert. denied, 535 U.S. 951 (2002); Thiessen v.

General Electric Capital Corp., 267 F.3d 1095, 1106 (10th Cir. 2001)

(“significant advantage” in ADEA collective action), cert. denied, _

US. __, 122 S. Ct. 2614, 153 L. Ed. 2d 799 (2002).

'' The Fourth Circuit has observed that “sophisticated general

policies and practices of discrimination are not susceptible to such

precise delineation by a layman who is in no position to carry out a full-

fledged investigation himself,” although “[I]ong observation of plant

18

patterns of discrimination into account outside the context of

a class action.'”

Moreover, even if individual plaintiffs prove

pervasive discrimination, the absence of class certification

jeopardizes or bars the kind of systemic injunction that will

prevent future wrongs. Many courts have held that broad

injunctive relief is prohibited to the extent that it exceeds

what is needed to give individual relief to the named

plaintiffs. '°

practice may bring the realization that he and his black-coemployees are

not getting anywhere.” Graniteville Co. (Sibley Division) v. EEOC, 438

F.2d 32, 38 (4th Cir. 1971).

'2 For example, even where plaintiffs obtain such evidence

because of an earlier unsuccessful effort to obtain class certification, and

as many as 206 plaintiffs gather together into a consolidated case, one

Circuit has held that plaintiffs could not rely on evidence of the pattern of

discrimination in litigating their claims because no class had been

certified, and then affirmed the dismissal of all 206 plaintiffs’ individual

claims. Allison v. Citgo Petroleum Corp, 151 F.3d 402 (Sth Cir. 1998),

reh'g denied with explanation, 151 F.3d 434 (Sth Cir. 1998), followed by

Celestine v. Petroleos de Venezuela SA, 266 F.3d 343, 355—56 (Sth Cir.

2001) (same case). In effect, the denial of class certification blinded the

court to the type of evidence that was dispositive in Teamsters.

'3 E g., Califano v. Yamasaki, 442 U.S. 682, 702 (1979); Brown

v. Trustees of Boston University, 891 F.2d 337, 361 (ist Cir. 1989), cert.

denied, 496 U.S. 937 (1990); Ameron, Inc. v. U.S. Army Corps of

Engineers, 787 F.2d 875, 888 (3d Cir. 1986), approved on rehearing,

809 F.2d 979, 982 n.1 (3d Cir. 1986), cert. dismissed, 488 U.S. 918

(1998); Lowery v. Circuit City Stores, Inc., 158 F.3d 742, 766-67 (4th

Cir. 1998), vacated and remanded on other grounds, 527 U.S. 1031

(1999), reaff'd, Lowery v. Circuit City Stores, Inc., 206 F.3d 431, 437

(4th Cir.), cert. denied, 531 U.S. 822 (2000); Hollon v. Mathis

Independent School District, 491 F.2d 92, 93 (Sth Cir. 1974) (per

curiam); Sharpe v. Cureton, 319 F.3d 259, 273 (6th Cir. 2003); Butler v.

Dowd, 979 F.2d 661, 674 (8th Cir. 1992), cert. denied, 508 U.S. 930

(1993); Zepeda v. INS, 753 F.2d 719, 727-29 (9th Cir. 1983); Nat'l

Center for Immigrant Rights v. INS, 743 F.2d 1365, 1371-72 (9th Cir.

1984), vacated on other grounds, 481 U.S. 1009 (1987); Bresgal v.

Brock, 843 F.2d 1163, 1170~71 (9th Cir. 1987); Paige v. California, 102

19

Nor would the EEOC be able to fill the void that

would be left if employers required their employees to sign

arbitration agreements that excluded class treatment, and if

this Court held that such agreements would be effective even

where class treatment is necessary to vindicate statutory

rights. As this Court recognized in Waffle House, the EEOC

has never been able to bring more than a small fraction of the

enforcement cases filed annually,'* and the primary burden

of enforcing Title VII has since the beginning been on

private plaintiffs.

2. Some Claims Are Too Small to Litigate

Effectively on an Individual Basis, Even

With the Benefit of Fee Awards

“Where it is not economically feasible to obtain relief

within the traditional framework of a multiplicity of small

individual suits for damages, aggrieved persons may be

without any effective redress unless they may employ the

class-action device.” Deposit Guaranty Nat'l Bank v. Roper,

445 US. 326, 339 (1980). This Court has recently

reaffirmed this percepiion. Amchem Products, Inc. vy.

Windsor, 521 U.S. 591, 617 (1997), stated that “the policy at

the very core of the class action mechanism is 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. A class action solves this

problem by aggregating the relatively paltry potential

recoveries into something worth someone’s (usually an

attorney’s) labor (citations omitted).”

Small-claim recoveries are not limited to consumer

cases. For example, employment discrimination cases

involving denials of promotion ordinarily involve smailer

F.3d 1035, 1039 (9th Cir. 1996).

'* EEOC v. Waffle House, 534 U.S. at 290 n.7.

20

back pay claims than hiring and discharge cases.

In all areas of the law, it is difficult for persons with

small monetary claims to find capable counsel. Even with

fee-shifting statutes, these cases remain economically less

desirable than cases in which substantial recoveries or broad

injunctive relief are at stake.

Class actions are for all these reasons commonly seen

as indispensable to the goals of Congress in enacting many

causes of action. In perhaps the most extensive employment

discrimination treatise in common use, Prof. Larson stated:

“It now is apparent that the increasing complexity and

urbanization of modern American society has tremendously

magnified the importance of the class action as a procedural

device for resolving disputes affecting numerous people.

Nowhere is this more evident than in the context of the

increased number of actions involving the federal

government, labor unions, business and nonprofit

associations, civil rights, and consumer groups.”'* Profs.

Wright, Miller, and Kane state: “Another important factor

indicating the superiority of a Rule 23 action in the consumer

protection field is that typically the individual claims are for

small amounts, which means that the injured parties would

not be able to bear the significant litigation expenses

involved in suing a large corporation on an individual

basis.”'® State courts have also recognized this reality.'’

'5 74 WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND

PROCEDURE § 1751 at 14~15 (1986) (footnotes omitted).

‘© 7B WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND

PROCEDURE § 1782 at 59 (1986); see also Jean Sternlight, As Mandatory

Binding Arbitration Meets The Class Action, Will The Class Action

Survive?, 42 Wm. & MARY L. REV. 1, 9 (2000) (“The potential

defendants 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” (footnote omitted), and noting that

—_~— — ~~ + -

21

in a multi-year period since First USA required its customers to sign

arbitration agreements, only four customers had made claims against it,

while during the same period it invoked arbitration to resolve 51,622

claims against customers); Julia Davies, Federal Civil Rights Practice In

The 1990's: The Dichotomy Between Reality And Theory, 48 HASTINGS

L.J. 197, 236 (1997) (“Despite the existence of individual attorneys

whose choice of cases is driven more by ideological commitment than

money, the plaintiffs’ damages were a factor many survey participants

viewed as extremely important in determining what cases they wanted to

accept.”) (foomote omitted).

See, e.g., USA Check Cashers of Little Rock, Inc. v. Island,

349 Ark. 71, 76 S.W.3d 243 (Ark. 2002) (potential recovery to each

member of class expected to be relatively small and would not justify

contingency fee cases nor cases in which attorneys charge on an hourly

basis); Daar v. Yellow Cab Co., 67 Cal. 2d 695, 715, 433 P.2d 732 (Cal.

1967) (“It is more likely that, absent a class suit, defendant will retain the

benefits from its alleged wrongs.”); Vasquez v. Superior Court, 4 Cal. 3d

800 (1971) (“Individual actions by each of the defrauded consumers is

often impracticable because the amount of individual recovery would be

insufficient to justify bringing a separate action; thus an

seller retains the benefits of its wrongful conduct.”); McDonald v.

Washington, 862 P.2d 1150 (Mont. 1993) (“The Green court also put into

perspective the need for class actions and the type of case which is best

litigated as a class action: Equity has long recognized that there is need

for a course which would redress wrongs otherwise unremediable

because the individual claims involved were too small, or the claimants

too widely dispersed . . . In the instant case, the claims involved would be

unremediable without class action status because most are minor in and

of themselves.”) (citation omitted); Jn re Cadillac V8-6-4 Class Action,

461 A.2d 736 (N.J. 1983) (“[I)}ndividual actions or a test case may be an

inferior alternative to the class action when the economics of the situation

make it impossible for the aggrieved members to vindicate their rights by

separate actions.”) (quoting 7A Wright, Miller & Kane, FEDERAL

PRACTICE & PROCEDURE § 1778 (Supp.1983)). See also Leonard v.

Terminix Int'l Co., L.P., 2002 Ala. LEXIS 316 (October 18, 2002) (“This

arbitration agreement is unconscionable because it is a contract of

adhesion that restricts the Leonards to a forum where the expense of

pursuing their claim far exceeds the amount in controversy. The

arbitration agreement achieves this result by foreclosing the Leonards

from an attempt to seek practical redress through a class action and

restricting them to a disproportionately expensive individual

arbitration.”); State ex rel. Dunlap v. Berger, 211 W.Va. 549, 567 S.E.2d

22

3. If a Claim Cannot Be Litigated on a Class

Basis in Arbitration, and if Class

Treatment is Important to the Prosecution

of the Claim, as in Civil Rights and Small-

Recovery Cases, Claimants Must Be

Allowed to Litigate Their Claims in Court

In the event that a company-drafted arbitration

agreement expressly precludes class treatment, or is silent on

class treatment and state contract law does not require class

treatment, and class treatment is important to the vindication

of the claim, there are a number of means of protecting the

rights of claimants. One is to do as the lower courts did here,

exercising judicial responsibility over the question of class

certification and requiring the arbitral process to resolve the

merits. Another would be to require the arbitrator to

consider whether to certify the class, using the same

standards the courts would follow.'* A third would be to

exempt the controversy from the arbitration agreement and

have the courts determine the individual and class claims,

with the individual claims subject to remand to arbitration in

the event that class certification is denied.'? Any approach

265, 278-79 (W. Va.) (“Thus, in the contracts of adhesion that are so

commonly involved in consumer and employment transactions,

permitting the proponent of such a contract to include a provision that

prevents an aggrieved party from pursuing class action relief would go a

long way toward allowing those who commit illegal activity to go

unpunished, undeterred, and unaccountable.”), cert. denied sub nom.

Friedman's Inc. v. West Virginia, 123 S. Ct. 695, 154 L. Ed. 2d 631

(2002). "

'* Federal standards under Rule 23 or, in appropriate cases,

collective-action standards under the Fair Labor Standards Act, would be

appropriate in cases arising under Federal law and in cases that would if

filed in court be removable to the Federal courts. State class action

standards would be appropriate for non-removable cases arising under

State law.

'° The availability of Rule 23(f), to test the decision whether to

certify the class, is am important assurance of fairness under this

23

would be sufficient if it preserves the opportunity for

consideration of class certification under the standards used

by the courts.

CONCLUSION

For the reasons stated above, the decision of the

South Carolina Supreme Court should be affirmed.

Respectfully submitted,

Richard T. Seymour

Counsel of Record

LIEFF, CABRASER, HEIMANN &

BERNSTEIN, LLP

1100 New York Avenue, NW

Suite 1080 - West Tower

Washington, D.C. 20005-3934

Telephone 202-582-1000

24

Gary T. Johnson

Stuart Meiklejohn

Co-Chairs

Norman Redlich

Trustee

Barbara R. Amwine

Thomas J. Henderson

Michael Foreman

Audrey Wiggins

LAWYERS’ COMMITTEE FOR CIVIL RIGHTS

UNDER LAW

1401 New York Avenue N.W., Suite 400

Washington, D.C. 20005-2124

Telephone: 202-662-8600

Paul W. Mollica

MEITES, MULDER, BURGER & MOLLICA

208 South LaSalle Street, Suite 1410

Chicago, Illinois 60604

Telephone: 312-263-0272

Caryn Becker

LIEFF, CABRASER, HEIMANN &

BERNSTEIN, LLP

Embarcadero Center West

275 Battery Street, 30th Floor

San Francisco, California 94111-3339

Telephone: 415-956-1000

25

Dennis C. Hayes

General Counsel

Yolanda Y. Riley

NATIONAL ASSOCIATION FOR THE

ADVANCEMENT OF COLORED PEOPLE

4805 Mt. Hope Drive, Fifth Floor

Baltimore, Maryland 21215

Telephone: 410-486-9191

Elaine R. Jones

Director-Counsel

Norman J. Chachkin

Robert H. Stroup

NAACP LEGAL DEFENSE & EDUCATIONAL

FUND, INC.

99 Hudson Street, 16th Floor

New York, New York 10013-2897

Telephone: 212-965-2200

Vincent A. Eng

NATIONAL ASIAN PACIFIC AMERICAN LEGAL

CONSORTIUM

1140 Connecticut Avenue, N.W., Suite 1200

Washington, D.C. 20036

Telephone: 202-296-2300

Judith L. Lichtman

Jocelyn C. Frye

NATIONAL PARTNERSHIP FOR WOMEN &

FAMILIES

1875 Connecticut Avenue, N.W., Suite 710

Washington, DC 20009

Teiephone: 202-986-2600

Attorneys for Amici Curiae