Guest blogger post by Jeremy Greenberg, Public Citizen civil justice intern
When Captain Matthew Wolf of the US Army Reserves was called up for active military service from his New Jersey home, he decided to exercise a benefit Congress created for military men and women under the Servicemembers Civil Relief Act (SCRA).
The SCRA creates procedures that protect soldiers from certain civilian responsibilities so that they may devote their entire energy to their military service. Congress did not want soldiers to be distracted by their civilian obligations. One of the many provisions of SCRA allows service members to terminate car leases and receive a refund for all advance payments made.
However, when Wolf returned his 2007 Nissan Infinity G35 Sedan, the dealer refused to return his payments. He then decided to seek justice for himself and for all other service members similarly situated. He brought a class action lawsuit against Nissan for violating the SCRA.
Unfortunately, Wolf’s lease agreement included an arbitration clause which contained a ban on class actions. Meaning that instead of going to court, Wolf would be forced into a secretive arbitration proceeding controlled by the dealer. In addition, he could not act on behalf of other service members whose rights were also potentially violated because the contract banned class actions.
When Wolf initiated the claim and begun proceedings for a class action, Nissan moved to dismiss the lawsuit by invoking the arbitration clause and class action ban. The district court ruled in Nissan’s favor, holding that the forced arbitration clause and class action ban was valid in light of the Supreme Court’s recent ruling in AT&T Mobility v. Concepcion (decision issued April 27, 2011).
Arbitration clauses are typically found in many everyday contracts between consumers and corporations, including cell phone, banking and employment contracts. When an individual is bound to arbitration instead of an open court with a judge and jury, the fate of his claim rests with a privately financed arbitrator. Further, arbitrators’ decisions are generally withheld from the public, without any reasoning given and are not appealable.
Individuals with identical claims often bring their claims together in one class action. Even assuming that Wolf would have recovered for his loss in arbitration, Nissan likely would not address all of the other soldiers who suffered similar losses. But if all service members were able to combine their claims against Nissan, they could simultaneously seek redress.
However, the Supreme Court held in Concepcion that the Federal Arbitration Act preempts state laws which hold that class actions bans within arbitration clauses are unconscionable. The court effectively allowed companies to insert class action bans within arbitration clauses in their consumer contracts. As a result of the decision, Wolf and his fellow service members could not get their day in court.
Soon after Concepcion was decided, Sen. Al Franken (D-Minn.) and Rep. Hank Johnson (D-Ga.) introduced the Arbitration Fairness Act (S.987, H.R.1873). The legislation would ban arbitration clauses in consumer contracts, which would ensure that arbitration is voluntary and entered into after the dispute arises. It will help to prevent similar injustices from occurring to other service members.
Wolf v. Nissan Motor Acceptance Corp., No. 10-CV-3338 (NLH) (KMW), 2011 WL 2490939 (D.N.J. June 22, 2011).
Jeremy Greenberg is civil justice intern at Public Citizen. This blog is cross-posted from Public Citizen’s Fair Arbitration Now blog.