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A federal district court in the District of Columbia (D.C.) relied on the law of a neighboring jurisdiction in holding that an arbitration agreement which bars class-wide proceedings is enforceable under D.C. law.
In Szymkowicz v. DirecTV, Inc., No. Civ. A. 07-0581PLF, 2007 WL 1424652 (D.D.C. May 9, 2007), Szymkowicz sued DirecTV, his television service provider. DirecTV filed a motion to compel arbitration pursuant to an arbitration agreement that barred class-wide proceedings.
In opposing the motion to compel, Szymkowicz cited Cohen v. DirecTV, Inc., 48 Cal. Rptr. 3d 813 (Cal. Ct. App. 2006) in arguing that the bar on class-wide proceedings rendered the arbitration agreement unconscionable and therefore unenforceable.
After citing "the strong policy favoring arbitration," the Court turned to the unconscionability argument. As the Court noted, Cohen was of limited relevance because it applied California law rather than D.C. law.
Moreover, where there is no D.C. law on point, D.C. courts look to Maryland law for guidance. Accordingly, the Court cited Walther v. Sovereign Bank, 872 A.2d 735 (Md. 2005) in upholding the arbitration agreement over Szymkowicz's unconscionability challenge.
Specifically, the Court quoted the following language from Walther: "Numerous courts, both federal and state, have rigorously enforced no class-action provisions in arbitration agreements and found them to be valid provisions of such agreements and not unconscionable."
Alternatively, Szymkowicz argued that the doctrine of collateral estoppel precluded DirecTV from re-litigating the enforceability of the arbitration agreement because that issue was already decided in Cohen. In rejecting this argument, the Court explained that collateral estoppel did not apply because Cohen and the instant case turned on different bodies of law.
The Maryland courts recently reaffirmed the principle that a bar on class-wide arbitration is enforceable under Maryland law. Specifically, in Doyle v. Finance America, LLC, 918 A.2d 1266 (Md. Ct. Spec. App. 2007), the court stated that Maryland "stands firm in the majority" of jurisdictions that recognize the enforceability of arbitration agreements which bar class-wide proceedings.
Courts generally uphold one-on-one arbitration agreements because the affordability and informality of consumer arbitration enable people to pursue their claims on an individual basis. See, e.g., Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 174 (5th Cir. 2004) ("As the Supreme Court has explained, the fact that certain litigation devices may not be available in an arbitration [e.g., class-wide proceedings] is part and parcel of arbitration's ability to offer 'simplicity, informality, and expedition,' characteristics that generally make arbitration an attractive vehicle for the resolution of low-value claims.").
Given the affordability and accessibility of consumer arbitration, there is no need for class-wide proceedings. In fact, class-wide relief is likely to result in an individual consumer obtaining only a fraction of what they are entitled to receive for a meritorious case. See, e.g., City of Detroit v. Grinnell Corp., 495 F.2d 448, 455 (2d Cir. 1974) ("The fact that a proposed [class action] settlement may only amount to a fraction of the potential recovery does not, in and of itself, mean that the proposed settlement is grossly inadequate and should be disapproved.").
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