In Bess v. Direct TV, No. 99-L-55A (8/24/04), the Fifth District reversed a determination by the trial court that an arbitration clause was unenforceable, but remanded so that the trial court could consider plaintiff's other arguments why arbitration should not be compelled.
The decision offers an interesting look at the interplay between the law of arbitration and class actions. In the Bess case, plaintiff filed a putative class action arguing that the defendant's late fee violated consumer laws. The plaintiff's agreement with the defendant included an arbitration clause, which the defendant moved to enforce in the trial court. The motion was denied, but the defendant took an interlocutory appeal.
The Bess court reversed, disagreeing with the trial court that the failure of the arbitration clause to provide for a class action remedy made it unenforceable. In so holding, the Bess court relied on the recent U.S. Supreme Court case on arbitration clauses, Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 156 L.Ed. 2d 414, 123 S.Ct. 2402 (2003).
[Below the fold: More about arbitration and class actions in Illinois.]
In Green Tree, the U.S. Supreme Court held:
Under the terms of the parties' contracts, the question--whether the agreement forbids class arbitration--is for the arbitrator to decide. The parties agreed to submit to the arbitrator '[a]ll disputes, claims, or controversies arising from or relating to this contract or the relationships which result from this contract.' [Citation] (emphasis added). And the dispute about what the arbitration contract in each case means (i.e., whether it forbids the use of class arbitration procedures) is a dispute 'relating to this contract' and the resulting 'relationships.' Hence the parties seem to have agreed that an arbitrator, not a judge, would answer the relevant question. [Citation.] And if there is doubt about that matter--about the ' "scope of arbitrable issues" '--we should resolve that doubt in ' "favor of arbitration.'
Green Tree, supra, as quoted in Bess. Applying these rules, the Bess court stated that the question of class-wide arbitration must be answered according to the following procedure: "[T]he arbitrator must decide whether 'the applicable arbitration clause permits the arbitration to proceed on behalf of *** a class.' If the arbitrator is satisfied that the arbitration clause permits the arbitration to proceed as a class arbitration, then the arbitrator must decide whether class arbitration is the best method to resolve the case" (some citations omitted).
Even though the Bess court disagreed that the arbitration clause was unenforceable, it did not hold that arbitration was a certainty. Instead, it ruled that a trial court must make a ruling on all arguments relating to the enforceability of an arbitration clause, and it remanded for consideration of the plaintiff's other arguments about unenforceability: that "(1) the arbitration provision is void because it is procedurally and substantively unconscionable, being a contract of adhesion and lacking mutuality of remedy while limiting remedies that would be available in Illinois courts, and (2) she did not voluntarily and knowingly waive her right to a trial by jury." Bess, supra.
Related post: Those Pesky Arbitration Clauses (7/9).
Comments