by Deepak Gupta Tuesday, July 07, 2009
Just before the holiday weekend, the Massachusetts Supreme Judicial Court issued an opinion in Feeney v. Dell Inc., holding that a statutory right to participate in class action lawsuits may not be be foreclosed by a provision in a consumer contract compelling individual arbitration. The court reached that conclusion based not on unconscionabilty doctrine, but on Massachusetts public policy. It emphasized the strong state policy in favor of class actions and relied on cases such as the First Circuit's decision in Kristian v. Comcast Corp., 446 F.3d 25, 54 (1st Cir. 2006), which reject class action bans because of their interference with consumers' ability to vindicate statutory rights: "Allowing companies that do business in Massachusetts, with its strong commitment to consumer protection legislation, to insulate themselves from small value consumer claims creates the potential for countless customers to be without an effective method to vindicate their statutory rights, a result clearly at odds with our public policy." The decision joins the rest of the state and federal appellate courts in holding that the Federal Arbitration Act does not preempt its holding, relying on the analysis of the Ninth Circuit and the Illinois Supreme Court.
The Feeney opinion is also noteworthy for its choice-of-law analysis. The Dell contract at issue specified that Texas law--which appears to allow class action bans--would apply. The court held that Massachusetts' fundamental policy in favor of class actions for small-value consumer claims outweighed Texas's interest in blocking consumers' access to the courthouse doors. As the court put it, "[w]e likewise have little trouble concluding that the interest embodied in this policy--the protection of large classes of consumers and the deterring of corporate wrongdoing--is materially greater than Texas's interest, which the defendants identify as 'minimizing its companies' legal expense.'" Massachusetts joins a growing chorus of courts that reject corporate efforts to use choice-of-law clauses to enforce otherwise impermissible class bans. Another recent example of this trend is the Third Circuit's decision in Homa v. American Express.