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#1 of 5 - Kristian v. Comcast Corp - class action arbitration
April 28, 2006 by Ross Runkel at LawMemo

What does Kristian v. Comcast Corp (1st Cir 04/20/2006) have to do with employment law? This is #1 in a series of 5 on that question, with the focus on anti-class-action clauses.

Background: Kristian was an antitrust case brought by cable TV subscribers against their cable provider. The provider moved to compel arbitration as required in the subscriber-provider contract. The 1st Circuit held that arbitration was required.

Class action waiver: The contract prohibited class-action and consolidated arbitrations.

Holding: The court held that this clause had to be removed before enforcing the agreement to arbitrate.

Reasoning:

• First, the issue was for the court to decide, not for an arbitrator. The court distinguished Green Tree Financial v. Bazzle, 539 US 444 (2003), in which the Supreme Court held that an arbitrator must determine whether class-action arbitration was forbidden by a contract. Here, the contract clearly did forbid class arbitration. The issue, therefore, is one of "arbitrability" rather than arbitration "procedure." And that issue is whether "the prospective litigant effectively may vindicate its statutory rights in the arbitral forum."
• Second, enforcing the anti-class-action clause would prevent the plaintiffs from vindicating their statutory rights. Antitrust actions are extremely complex factually and legally. The value of each individual claim is small. It is unlikely that any consumer would litigate such a small claim on an individual basis when the up-front costs (attorney fees, expert witnesses) are so great. No sensible claimant or attorney would take on such a case. Only through the use of class-action will consumers be able to effectively vindicate their statutory rights.
• Third, the offending anti-class-action clause should be severed from the agreement, and arbitration should go forward without it. The contract contained a severance clause.
• Fourth, no point in discussing state unconscionability law (which follows similar reasoning), because federal law analysis takes care of the issue.

Distinguishing contrary authority: The court distinguished cases from four other Circuits which had allowed anti-class arbitration clauses. These were all cases brought under the federal Truth in Lending Act. In those cases, the facts are simple and the law is clear. In antitrust cases, expert fees alone can run $300,000 to $600,000, and lawyer time can run into the millions of dollars.

Applied to employment cases: The court's focus was on the relationship between the small value of the individual claims vs. the high cost of proving a claim (due to factual and legal complexity). Typical discharge cases and harassment cases should not fall into this category. There may be some cases in which the Kristian analysis will prevail, such as small-amount FLSA claims.

Caution: The issue of anti-class-action clauses can be raised as a matter of state law (unconscionability, violation of public policy). State law varies from state to state, so there is an element of unpredictability. Even if you conclude that the Kristian court was wrong, you still have the sate law question to deal with.

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