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A federal district court in Virginia held that the enforceability of a class waiver is a question of arbitrability that is presumptively decided by the court rather than the arbitrator. In deciding that question of arbitrability, the Court held that the class waiver was enforceable because the claimant had "advance[d] no tenable reason" for not enforcing the waiver.
In Freeman v. Capital One Bank, No. 3:08CV242-HEH, 2008 WL 2661990 (E.D. Va. July 3, 2008), Freeman applied for a Capital One credit card online. Capital One mailed Freeman her credit card along with the Customer Agreement, which included an agreement to arbitrate.
Some time later, Freeman applied for an increase in her credit limit. Capital One denied the request, but did not explain the reason for the denial. Freeman subsequently filed a class action lawsuit, alleging that that Capital One violated the Equal Credit Opportunity Act by not explaining the denial.
In response, Capital One filed a motion to stay the action pursuant to the Federal Arbitration Act (FAA). The arbitration agreement between the parties included a class waiver that barred any class-wide proceedings.
The issue before the Court was the enforceability of the class waiver and whether the Court or the arbitrator should decide that issue. The Court found that the enforceability of the class waiver presented a question of arbitrability, and since the parties had not agreed to submit questions of arbitrability to the arbitrator, the enforceability of the waiver would be decided by the Court.
On that issue, the Court found that the class waiver was enforceable because Freeman had "advance[d] no tenable reason" why the waiver should not be enforced. Given the enforceability of the class waiver, the Court ordered the parties to proceed with arbitration on an individual basis.
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