Ninth Circuit Affirms that “Right to Sue” Means What it Says

Posted on: September 24th, 2010 by Steve Larson

The Ninth Circuit correctly held that a mandatory arbitration clause in a credit card agreement is unenforceable under the Credit Repair Organizations Act (“CROA”).  Greenwood v. CompuCredit Corp., — F.3d —-, 2010 WL 3222415 (9th Cir. 2010), was a class action stemming from a credit card marketed to consumers with weak credit as a card that would help “rebuild poor credit.”  The plaintiffs alleged that the fees charged for the card (about $275 in fees charged on the card reducing the $300 credit limit to about $25) violated provisions of the CROA and of California’s Unfair Competition Law. The card agreements included arbitration clauses requiring mandatory arbitration before an arbitration company called the National Arbitration Forum, which we now know was owned by the credit card companies.  Plaintiffs sought to void the arbitration agreements on grounds that CROA specifically precludes arbitration by expressly providing for an unwaivable “right to sue.” The district court agreed, and the Ninth Circuit affirmed, holding that:

[T]he plain language of the CROA provides consumers with the “right to sue.” The “right to sue” means what it says. The statute does not provide a right to “some form of dispute resolution,” but instead specifies the “right to sue.” The act of suing in a court of law is distinctly different from arbitration. The right to sue protected by the CROA cannot be satisfied by replacing it with an opportunity to submit a dispute to arbitration.

It is likely that the credit card company will file a petition asking the U.S. Supreme Court to grant certiorari hoping that the corporation-friendly U.S. Supreme Court will deprive consumers of their right to sue in court.  The credit card company is likely to claim that there is a split in the circuits, because the Third and Eleventh Circuits interpreted the CROA differently.  I think the U.S. Supreme Court should deny certiorari.  The purported split in the circuits is because the Third and Eleventh Circuit decisions were wrongly decided. Those opinions did not even consider the plain language of the statute.