Supreme Court Backs Businesses, Curbs Class Arbitration

and on Bloomberg dot com slash podcast. Businesses one over workers at an ideologically divided Supreme Court this week, the Justice has voted five to four with the Conservative Justice is in the majority that the workers at a California lighting retailer could not band together in arbitration to get compensation from their employers failure to protect their data. Joining me is Mark Rifkin, a senior partner Wolf Hollden Stain.

He is the securities and class action attorney. So, Mark, this isn't the type of case that we're familiar with. Can we sue or do we have to arbitrate? This was can we arbitrate as a group? That's right, June. And this is not the first time the Supreme Court

has written on this. The law has of all a little bit, but since two thousand three, there have been three or four cases having to do with this issue, and and we've seen it grown to the point now where I think the Court, at least as it's currently constituted, the pro business faction of the Court is going to protect businesses and and compel individual arbitrations almost at any expense. The Chief Justice wrote the majority opinion, what was the

reasoning of the conservatives? So the Chief Justice said that the f a A. The Federal Arbitration Act, essentially pre empt any state law, including the California state law, that would interpret a contract against the draft an ambiguous contracted against the drafter. And that's a bit of a reversal from what we have generally seen from the Court in

terms of how they approach state law rights. And it's certainly a change from the two thousand three decision in green Tree Financial versus Basil, where the Court left to the arbitrators the question of whether an arbitration could or could not proceed on a class wide basis. Justice the Lena Kagan said that the majority had gone well beyond what they've done in previous rulings. So Roberts also said that class arbitrations where it odds with the basic goals

of arbitration, which he said were speed and simplicity. Is that true? How does class arbitration work. Class arbitration works uh much the same way that it would in a courtroom. Uh. It adds a layer of complication to an arbitration, but plenty of other procedures adding layers of complications to arbitrations too.

And I think where the where the court is deeply divided is the extent to which arbitration on a class wide basis is a question of absolute consent or or clear consent, or whether it's the sort of thing that a state court or state law can can supply in the case of an agreement that's at least ambiguous. The first of these cases, the Basil case, there was no

agreement to arbitrate on a class wide asis. The Court said it was up to the arbitrators to determine, and the arbitrators in fact determined in that instance that h class wide arbitration will be allowed. It's not inconsistent with the purpose of the Federal Arbitration Act to allow class wide arbitration. Now, I take it from from what you said since the departure that all four the liberal justices felt the need to write descents to send a message.

They don't always do that or often do that. What did you get from their descents. Well, a few things. First, I think it's it's highly unusual that there are four descents in a case that really should not involve too much consternation. I thought some of the language was extremely provocative. Uh. Some of the ways that the Court described the disagreement suggests to me a very deeply divided court between in this case, between a pro business faction and the pro

consumer and pro worker faction. I don't I don't like to think of them as liberals or conservatives, although that may be the way they also line up. But but there is a clear pro business wing of the court and a clear pro consumer, pro worker wing of the court, and and we are seeing more and more evidence of

the division between them. Yes, Justice Ruth Bader Ginsburg, quoting in earlier descent, said the decision was the court's latest effort quote to deny employees and consumers effective relief against powerful economic entities. Let's talk about some of those earlier decisions. This is the latest in a line of Supreme Court decisions that have backed arbitration. Tell us about the progression

of these cases. So let's begin at the very beginning, which is when when the Federal Arbitration Act was first enacted, it was primarily meant to allow businesses to be able to settle disputes in a reasonably efficient, speedy way without need to go to court. And so when Congress passed the f A, and they did it really at the

behest of the business community. It's now become not so much a tool of business disputes, but it's become a way for businesses to be able to limit their exposure to um, whether it's workers or consumers or individuals, to limit their exposure in a way that does away with class actions and really keeps the playing field very un leveled.

I think that the descent gets exactly to the heart of that issue, because you have a huge corporation, oftentimes spending shareholder money, not even its own money, and they're aligned against an individual with a relatively small claim. And most of these arbitration agreements provide that if if the arbitration were to proceed on a class wide basis, then the arbitration agreement itself would be null and void. This

one did not. It had no provision in it that addressed class arbitration one way or another, but it did refer to procedures that allowed arbitrations to proceed on a class wide basis, and so the division in the court was whether that created an ambiguity such that the California state law of the contra preferendum law would allow the court to interpret that ambiguity against the draft or against the company and give the individual workers the right to

proceed on a class wide basis, which is a realistic, practical manner is the only way these cases can proceed. And the divided court said no, So how big a loss is this for consumers or employees? A scale of one to ten? Is it huge? Is it three? It's incremental. I mean, we we've seen this constant drumbeat. Now this is not new news. Um. I think to some of the justices on the on the pro individual side, it's

a bridge too far. And I think the fact that we saw for very strong dissents suggests that they're really reaching the limit of their willingness to sit quietly and watch the rights of individuals eroded in a very business friendly Supreme Court. But in terms of the change we've we've come a long way since two thousand three when

the Court decided basil on this class action question. We went from that to Stults Nielsen, where the court says, look, if if the agreement is silent on whether a class can arbitrate or not, and the parties agree that that silence implies there was no agreement on the issue, then we won't require class wide arbitration. To concepcion, where the

court says class action waivers are valid and enforceable. Now to the Lamps Plus case, where the court says, in silence, we're not going to allow it, and even in ambiguitus, in cases of ambiguity, we're not going to allow it. All right, Thanks so much, Mark, it's a pleasure having you here again. That's Mark Rifkin, senior partner at Wolf Called and stay. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

and on Bloomberg dot com slash podcast. I'm June Brosso. This is Bloomberg