In an 8–1 decision, the U.S. Supreme Court this week ruled in favor of firm client CompuCredit Corporation, upholding the enforceability of a contractual arbitration clause in a credit card agreement. A team of McGuireWoods attorneys served as lead counsel for CompuCredit in the district court and before the U.S. Court of Appeals for the Ninth Circuit, and associated with O’Melveny & Myers and Kirkland & Ellis in Washington, D.C., for the Supreme Court appeal.
The case began as a putative nationwide class action filed in the U.S. District Court for the Northern District of California in 2008. Plaintiffs alleged that CompuCredit violated the federal Credit Repair Organizations Act (CROA) in connection with marketing and servicing a credit card product designed for subprime or underserved consumers. CompuCredit moved to compel arbitration pursuant to the terms of the cardholder agreement, but the district court, adopting a minority view, held that claims brought under the CROA were not subject to arbitration, notwithstanding the “liberal federal policy favoring arbitration agreements” established by the Federal Arbitration Act (FAA). The district court was affirmed by a divided panel in the Court of Appeals for the Ninth Circuit, even though two other circuit courts had previously ruled differently in similar cases.
The Supreme Court reversed, in a opinion authored by Justice Scalia, finding that when Congress “has restricted the use of arbitration in other contexts, it has done so with a clarity that far exceeds the claimed indications in the CROA” and, if Congress meant to do so here, “it would have done so in a manner less obtuse than what respondents suggest.” As such, because the CROA “is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms.”
McGuireWoods partners David Hartsell and Susan Germaise led a team of attorneys representing CompuCredit in this matter, including briefing the case before the Supreme Court.