Massachusetts Supreme Judicial Court Reconsiders, Reverses Course on Class Action Waivers in Arbitration Agreements

In June, the Massachusetts Supreme Judicial Court (“SJC”) renewed its endorsement of the “vindication of statutory rights” ground for invalidating predispute arbitration agreements containing class action waivers. We predicted those two decisions, one in a state consumer protection act case and the other in a Wage Act case, could have a short lifespan. See Massachusetts Supreme Judicial Court Enforces One Class Action Waiver, Squelches Another (June 18, 2013). Sure enough, a week later, in American Express Co. v. Italian Colors Restaurant, the U.S. Supreme Court confirmed the invalidity of the vindication-of-statutory-rights ground as a basis for declining to enforce a class action waiver in an arbitration agreement. See Too Darn Bad: The Supreme Court Rejects Vindication of Federal Statutory Rights as a Ground to Invalidate Class Action Waivers in Arbitration Agreements (June 24, 2013). On August 1, the SJC conceded that the rationale of its two decisions is incompatible with Italian Colors.

In Feeney v. Dell Inc., 465 Mass. 470, 500 (June 12, 2013)(“Feeney II”), the SJC had declared that Massachusetts courts may “invalidate a class waiver provision where the plaintiff can demonstrate that he or she lacks the ability to pursue a claim against the defendant in individual arbitration according to the terms of the agreement.” The SJC held that the Feeney II plaintiffs had met that standard. In the companion Wage Act case, the court held the plaintiffs had not satisfied their vindication-of-rights burden of proof, and therefore upheld the class action waiver in that case. Machado v. System4 LLC, 465 Mass. 508, 516-17 (June 12, 2013).

Dell petitioned for rehearing, asserting that the Supreme Court’s June 20, 2013 Italian Colors decision, 133 S. Ct. 2304, abrogated Feeney II. In an August 1 rescript opinion, the SJC agreed, albeit grudgingly, that its “analysis in Feeney II no longer comports with the Supreme Court’s interpretation of the [Federal Arbitration Act (“FAA”)].” 2013 WL 3929051, at *1. The SJC stated that, “[a]lthough we regard as untenable the Supreme Court’s view that ‘the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims,’ [133 S. Ct.] at 2312 n. 5, we are bound to accept that view as a controlling statement of Federal law.” 2013 WL 3929051, at *2. Noting that plaintiffs had raised several alternative grounds for invalidating Dell’s arbitration agreement that were not considered by the Superior Court judge, the SJC remanded for consideration of those grounds.

In a rescript opinion in the Wage Act case, also issued on August 1, the SJC noted that its ultimate holding upholding the class action waiver provision in that case, although not the court’s rationale for reaching that result, remains sound after Italian Colors. Machado v. System4 LLC, 2013 WL 3929074.

Conclusion

As we noted previously, Italian Colors sealed the fate of Feeney II. The SJC has now recognized that reality. The Feeney case, filed in 2003, appears headed for more skirmishing on arbitration issues in the Superior Court.

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