Litigators, Money, Texas

Your Daily Reminder That Arbitration Provisions Are Ridiculous

At what point does the effort to chain shut the courthouse doors go too far?

By  
on

court gavel on U.S. Twenty dollar billsWhen Tom Brady decided to drop his case against the NFL rather than take it to the Supreme Court, he let a little more air out of the hopes and dreams of those of us who’d like to see a bit more justice back in the justice system. Had Brady continued pressing his case, his legal team, including superstar Ted Olson, was poised to mount a challenge to the out-of-control deference the courts grant arbitrators.

And while the NFLPA wasn’t the most sympathetic plaintiff — seeing as the collection of multimillionaires, represented by Biglaw heavies, negotiated a contract at arm’s length that granted Roger Goodell laughably broad powers — the case would have brought more mainstream attention to the Court’s arbitration love affair than, say, Concepcion did.

And we’d have gotten more cool courtroom sketches of Tom Brady.

In the meantime, here’s another ridiculous example of the judicial system’s “ride or die” attitude when it comes to enforcing broad arbitration provisions. Cash Biz, a payday lender down in Texas, makes its customers consent to an arbitration provision. That’s pretty much par for the course. What isn’t so usual is Cash Biz’s practice of pressing criminal charges against customers who couldn’t pay them back.

It was this practice that provided the hook for a class action complaint against Cash Biz for illegally using the criminal justice system to collect civil debts. As a savvy actor, Cash Biz moved to compel arbitration, and a trial court promptly denied the motion, seeing as Cash Biz had taken these debts to the courts already and thereby waived the provision.

Yesterday, a divided appellate panel reversed (in Texas, they have a right to immediate appeal, so this preempted any discovery). In a curious legal analysis, the majority waved the waiver away:

Cash Biz’s filing of a criminal complaint does not rise to the extent of active engagement in litigation that Texas courts have consistently held to be specific and deliberate actions inconsistent with a right to arbitrate or that display an intent to resolve a dispute through litigation. To begin, courts consistently evaluate a party’s conduct after suit is filed to determine whether it waived its right to arbitration. Here, the parties focus on Cash Biz’s conduct in a separate proceeding before the underlying litigation was filed by the Borrowing Parties. (citations omitted)

Sponsored

Wha? Sure, you can look at actions after the case was filed. Not sure that precludes considering past behavior. If Cash Biz wrote a letter saying “we forever waive our arbitration rights” two weeks before filing, would these robes argue “well, that’s not a waiver because… stuff and things”? Because that’s what it looks like.

Further, under these facts, Cash Biz was not a party to the criminal prosecutions and did not serve as a witness or provide any interviews to facilitate prosecution.

Right. Because the state pursues criminal prosecutions. While conceding “absent Cash Biz’s complaint, no criminal prosecution would have occurred,” the majority still decided that this wasn’t an effort on the part of Cash Biz to… spur criminal prosecutions. So the “imma just leave this here, you do what you want with it” defense is still alive in Texas.

The dissenting justice was having none of this nonsense:

First, the traditional waiver requirement that the judicial process have been substantially invoked after the filing of the underlying lawsuit is based on the usual situation where there is only one legal proceeding. Here, we are presented with the unique situation of a civil lawsuit and a criminal proceeding, both of which arise out of the same civil debt. Second, while the formal parties in a criminal proceeding are the defendant and the State of Texas, the victim or complainant has a personal interest in the prosecution and thus plays a unique role in criminal proceedings. (citations omitted)

Sponsored

Note “arise out of the same civil debt.” That’s the real rub, ain’t it? Cash Biz wanted the courts to make findings about its customers and their inability to pay back these debts when it furthered Cash Biz’s aims, but when the company faces a class action over those debts, it wants an arbitrator. If that’s not a waiver, then companies can use arbitration clauses as both a sword and shield, which smacks of some measure of wild unfairness. And that’s what Justice Rebeca Martinez concluded:

I believe the record here shows that Cash Biz substantially invoked the judicial process by deliberately engaging in a series of overt acts in court that evidence a desire to resolve the same arbitrable dispute through litigation rather than arbitration.

But we’re in the age of bending over backward to keep every corporate dispute in the hands of private justice. At what point does the effort to chain shut the courthouse doors go too far?

Maybe if something happens to Aaron Rodgers.

(The dueling opinions are available over the next two pages…)

Joe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.

1 2 3Next »

Topics

, , , , , , , , , ,