IN THE DISTRICT COURT OF APPEAL FOR THE FOURTH DISTRICT OF FLORIDA. Case Nos. 4D & 4D08-494

Transcription

1 IN THE DISTRICT COURT OF APPEAL FOR THE FOURTH DISTRICT OF FLORIDA Case Nos. 4D & 4D MCKENZIE CHECK ADVANCE OF FLORIDA, LLC STEVE A. MCKENZIE, and BRENDA G. LAWSON, v. Appellants, WENDY BETTS, DONNA REUTER, et al., Appellees. On Review from the Fifteenth Judicial Circuit Court In and For Palm Beach County, Florida BRIEF AMICUS CURIAE OF AARP IN SUPPORT OF APPELLEES On the brief: Deborah Zuckerman James Kowalski, Jr. (852740) AARP Foundation Litigation Counsel of Record 601 E Street, NW Law Offices of James A. Kowalski, Jr., PL Washington, DC San Jose Blvd., Suite 203 (202) (ph) Jacksonville, FL (202) (fax) (904) (ph) (904) (fax)

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... ii STATEMENT OF INTEREST... 1 ARGUMENT... 3 I. CLASS ACTION BANS THAT EXCULPATE CORPORATIONS FROM LIABILITY SHOULD NOT BE ENFORCED A. Class Actions Provide the Only Meaningful Legal Recourse for Consumers With Small Claims... 3 B. Courts Have Refused to Enforce Class Action Bans in Arbitration Clauses When They Prevent Consumers From Effectively Vindicating Their Rights CONCLUSION CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE i

3 TABLE OF AUTHORITIES CASES Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997)...5 BankWest, Inc. v. Baker, Att y Gen., 446 F.3d 1358 (11th Cir. 2006) Coady v. Cross Country Bank, 729 N.W.2d 732 (Wis. Ct. App. 2007) Cooper v. QC Fin. Servs., Inc., 503 F. Supp. 2d 1266 (D. Ariz. 2007) Creighton v. Blockbuster, Inc., No KI, 2007 WL (D. Or. May 25, 2007) Deposit Guar. Nat l Bank v. Roper, 445 U.S. 326 (1980)...4, 5 Discover Bank v. Shea, 827 A.2d 358 (N.J. Super. Ct. Law Div. 2001) Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005) , 10, 14 Dix v. ICT Group, Inc., 161 P.3d 1016 (Wash. 2007)...8, 9 Doerhoff v. Gen. Growth Props., No CV-C-SOW, 2006 WL (W.D. Mo. Nov. 6, 2006) Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)...12 In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283 (3d Cir. 1998)... 6 King v. Advance America, C.A. 07-cv-237 (E.D. Pa. Compl. filed Jan. 18, 2007)... 2 Kinkel v. Cingular Wireless LLC, 857 N.E.2d 250 (Ill. 2006) Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006)...14 Lake v. First Nationwide Bank, 156 F.R.D. 615 (E.D. Pa. 1994) ii

4 Lowden v. T-Mobile, USA, Inc., No. C P, 2006 WL (W.D. Wash. Apr. 13, 2006) Luna v. Household Fin. Corp. III, 236 F. Supp. 2d 1166 (W.D. Wash. 2002) Macarz v. Transworld Sys., Inc., 193 F.R.D. 46 (D. Conn. 2000) Maffei v. Alert Cable TV, 342 S.E.2d 867 (N.C. 1981)...5 McKenzie Check Advance of Fla., LLC v. Betts, 928 So. 2d 1204 (Fla. 2006) Muhammad v. County Bank of Rehoboth Beach, Del., 912 A.2d 88 (N.J. 2006)...5, 12, 13 Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985)...5 Powertel, Inc. v. Bexley, 743 So. 2d 570 (Fla. 1st DCA 1999) Purdie v. ACE Cash Express, Inc., Civ. A. No. 301CV1754L, 2003 WL (N.D. Tex. Dec. 11, 2003) Riensche v. Cingular Wireless, LLC, No. C Z, 2006 WL (W.D. Wash. Dec. 27, 2006)... 17, 18 Rollins, Inc. v. Garrett, 176 Fed. App x 968, 2006 WL (11th Cir. Apr. 19, 2006) Rollins, Inc. v. Garrett, No. 6:05-CV-671-PCF-KRS, 2005 WL (M.D. Fla. Sept. 6, 2005) Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007) , 8 State ex rel. Dunlap v. Berger, 567 S.E.2d 265 (W. Va. 2002) , 12 Szetela v. Discover Bank, 118 Cal. Rptr. 2d 862 (Ct. App. 2002) , 11 Thibodeau v. Comcast Corp., 912 A.2d 874 (Pa. Super. Ct. 2006) iii

5 Ting v. AT&T, 182 F. Supp. 2d 902 (N.D. Cal. 2002), aff d in relevant part, 319 F.3d 1126 (9th Cir. 2003), cert. denied, 540 U.S. 811 (2003)... 3, 14 U.S. Parole Comm n v. Geraghty, 445 U.S. 388 (1980)...4 Vasquez v. Superior Court of San Joaquin County, 484 P.2d 964 (Cal. 1971) Vasquez-Lopez v. Beneficial Oregon, Inc. 152 P.3d 940 (Or. Ct. App. 2007) Whitney v. Alltel Commc ns, Inc., 173 S.W.3d 300 (Mo. Ct. App. 2005) OTHER Alba Conte and Herbert B. Newberg, 6 Newberg on Class Actions (4th ed. 2002)... 4 iv

6 STATEMENT OF INTEREST AARP is a non-partisan, non-profit organization with nearly 40 million members, approximately 3 million of whom live in Florida. As the leading organization representing the interests of people aged 50 and older, AARP has a keen interest in stopping the many unfair and deceptive consumer lending practices that have a disproportionate impact on older people. AARP is particularly concerned about high-cost lenders that target low- and moderate-income consumers, those on fixed incomes, including people dependent on Social Security benefits, and those with impaired credit who cannot access traditional sources of credit. These lenders, often referred to as the fringe banking industry, take advantage of borrowers already in financial distress by imposing exploitative terms such as astronomical annual percentage rates (APRs) and extreme default penalties. Payday loans, such as those made by Appellants, are among the key products marketed by an industry that targets necessitous borrowers, the very people for whose benefit usury and other interest rate limits exist. Because these loans are so exploitative, AARP has assisted in state legislative efforts to enact protections for borrowers and has filed amicus curiae briefs in many cases, including a prior appeal in this case, urging courts to enforce these protections. See, e.g., McKenzie Check Advance of Fla., LLC v. Betts, 928 So. 2d 1204 (Fla. 2006); BankWest, Inc. v. Baker, Att y Gen., 446 F.3d 1358 (11th Cir. 2006). In addition, AARP attorneys represent a class of consumers alleging that a payday lender that charges in excess of

7 700% APR is violating Pennsylvania s usury and consumer protection statutes. King v. Advance America, C.A. 07-cv-237 (E.D. Pa. compl. filed Jan. 18, 2007). See also Purdie v. ACE Cash Express, Inc., Civ. A. No. 301CV1754L, 2003 WL (N.D. Tex. Dec. 11, 2003) (counsel for class alleging payday lender s practices violated federal and state laws). The contracts of payday and other fringe lenders invariably include arbitration clauses that place significant restrictions, such as class action bans, on borrowers ability to seek redress. This has the untoward effect of exculpating corporations from liability for their exploitative practices. These clauses are not limited to fringe banking products and, in fact, are found in contracts for numerous other products and services. AARP is concerned about the many deceptive and unfair corporate practices that affect older people in connection with these other products and services. While many of these people lose large amounts of money to such practices, many others lose relatively small amounts or are subjected to statutory violations with low damage claims. These losses nevertheless are significant to these individuals, as is their ability to obtain adequate relief through private litigation. Yet, access to justice is being severely curtailed by corporations that impose binding arbitration and do not merely prevent individual consumers from bringing court suits, but also preclude class action lawsuits and class-wide arbitration. This makes it virtually impossible for many consumers to seek relief and effectively immunizes corporations from liability. AARP has filed amicus briefs in numerous cases challenging 2

8 these bans and in other cases seeking to preserve class actions. See, e.g., Ting. v. AT&T, 319 F.3d 1126 (9th Cir. 2002), cert. denied, 540 U.S. 811 (2003); Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007); Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005). AARP is interested in the Court s ruling because of the impact it will have if Florida consumers, particularly those with small claims, are forced to forfeit the option of bringing class actions and thus effectively forgo any remedy. AARP is concerned that this would allow corporations such as Appellant to continue making loans at illegal interest rates without fear of liability. AARP likewise is interested in the ruling s implications for older consumers, including its members, throughout Florida who may be victimized by other corporate practices and for whom class actions represent the only realistic way to obtain legal redress. ARGUMENT I. CLASS ACTION BANS THAT EXCULPATE CORPORATIONS FROM LIABILITY SHOULD NOT BE ENFORCED. A. Class Actions Provide the Only Meaningful Legal Recourse for Consumers With Small Claims. Class actions often are the only effective way to stop corporate wrongdoing and obtain relief for victims. While many individuals are harmed by the same corporation in identical ways, many corporations essentially are immune from individual suits because recoveries will be too small to justify litigation. Thus, corporations escape scrutiny, keep 3

9 the profits from their wrongdoing, and have little, if any, reason to change their unlawful practices. Class actions are particularly appropriate in consumer cases where individual damages or amounts in dispute are small but which, in the aggregate, involve substantial amounts, often many millions of dollars. Beyond obtaining compensation for victims of corporate wrongdoing, class counsel and class representatives fulfill the important role of serving as private attorneys general to vindicate cumulative wrongs and obtain significant injunctive relief and disgorgement of unlawfully obtained profits. See, e.g., Deposit Guar. Nat l Bank v. Roper, 445 U.S. 326, 338 (1980) (noting the financial incentive that class actions offer to the legal profession is a natural outgrowth of the increasing reliance on the private attorney general for the vindication of legal rights.... ); U.S. Parole Comm n v. Geraghty, 445 U.S. 388, 403 (1980) (recognizing that the right to have a class certified if the requirements of the Rules are met... is more analogous to the private attorney general concept.... ). See also Alba Conte & Herbert B. Newberg, 6 Newberg on Class Actions 21:30 (4th ed. 2002) ( The desirability of providing recourse for the injured consumer who would otherwise be financially incapable of bringing suit and the deterrent value of class litigation clearly render the class action a viable and important mechanism in challenging fraud on the public. ). The U.S. Supreme Court repeatedly has recognized this value, stating: The use of the class-action procedure for litigation of individual claims may offer substantial advantages for named plaintiffs; it may motivate them to bring cases that for 4

10 economic reasons might not be brought otherwise.... Where it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device. Deposit Guar. Nat l Bank, 445 U.S. at (footnote omitted). See also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997); Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 809 (1985). Many state courts have likewise noted the importance of class actions. For example, the North Carolina Supreme Court stated: We recognize that one of the basic purposes of class actions is to provide a forum whereby claims which might not be economically pursued individually can be aggregated in an efficient and economically reasonable manner. Maffei v. Alert Cable TV, 342 S.E.2d 867, 871 (N.C. 1981). According to the New Jersey Supreme Court, the merits of the class-action procedure have been acknowledged many times in the context of court litigation. By permitting claimants to band together, class actions equalize adversaries and provide a procedure to remedy a wrong that might otherwise go unredressed. Muhammad v. County Bank of Rehoboth Beach, Del., 912 A.2d 88, 97 (N.J. 2006) (citation omitted). Similarly, West Virginia s highest court recognized that [c]lass action relief... is often at the core of the effective prosecution of consumer, employment, housing, environmental, and similar cases. State ex rel. Dunlap v. Berger, 567 S.E.2d 265, 278 (W. Va. 2002). See also Vasquez v. Superior Court of San Joaquin County, 484 P.2d 964, (Cal. 1971) 5

11 (stating that [i]ndividual actions by each of the defrauded consumers is often impracticable because the amount of individual recovery would be insufficient to justify bringing a separate action; thus an unscrupulous seller retains the benefits of its wrongful conduct. ) (citations omitted). Federal courts similarly have recognized the important role played by class actions. The Third Circuit affirmed that a class action was superior to other means of handling litigation, where the trial court had examined the relatively modest size of individual claims and the sheer volume of those claims in the aggregate, and concluded a class action presented the only rational avenue of redress for many class members. In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283, 316 (3d Cir. 1998) (quoting 962 F. Supp. 450, 523 (D.N.J. 1997)). Finding that plaintiffs met the superiority requirement for class certification, a Pennsylvania federal court stated: Given the relatively small amount recoverable by each potential litigant, it is unlikely that, absent the class action mechanism, any one individual would pursue his claim or even be able to retain an attorney willing to bring the action.... The public interest in seeing that the rights of consumers are vindicated favors the disposition of the instant claims in a class action form. Lake v. First Nationwide Bank, 156 F.R.D. 615, 626 (E.D. Pa. 1994). Connecticut s federal court found a class action the superior means of adjudicating Fair Debt Collection Practices Act claims, rejecting defendant s argument that 15,000 individual actions 6

12 would somehow provide for greater fairness and efficiency than the streamlined procedure of a class action. Defendant would no doubt benefit from such a result, as the vast majority, if not all, of those potential plaintiffs would fail to pursue what this Court has already determined are meritorious claims. But defendant s desire to limit its exposure in damages cannot be a criteria for assessing the appropriateness of a class action.... If only those recipients of the [collection] letter with significant damages, and thus incentive to sue, brought actions to challenge its legality, the FDCPA would not have the deterrent and curative effect of eliminating abusive collection practices intended by Congress. Macarz v. Transworld Sys., Inc., 193 F.R.D. 46, 55 (D. Conn. 2000) (citations omitted). Given these and many other iterations of the importance of class actions, the trend among courts to invalidate class action bans in arbitration clauses as substantively unconscionable or against public policy is not surprising. B. Courts Have Refused to Enforce Class Action Bans in Arbitration Clauses When They Prevent Consumers From Effectively Vindicating Their Rights. Numerous courts have applied generally applicable state contract law to the context of particular cases to find class action bans in arbitration clauses substantively unconscionable or against public policy and unenforceable. Many of these courts note that these bans have the effect of depriving injured consumers, employees, and others of any forum in which to vindicate their claims, and thus serve as exculpatory clauses that allow corporations to violate the law without fear of liability. Several recent decisions are illustrative. The Supreme Court of Washington refused to enforce an arbitration clause s 7

13 class action waiver in a cellular phone service contract, finding it violated public policy and was substantively unconscionable. Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007). The subscribers alleged the company overcharged them between $1 and $45 per month, and the court found the waiver deprived them of a forum to vindicate the consumer protections guaranteed by Washington law and effectively exculpates its drafter from liability.... Where many customers of the same company have the same or similar complaint and each is damaged a small amount, class action litigation or arbitration is the only practical remedy available. Id. at The court noted that on its face, the class action waiver does not exculpate Cingular from anything; it merely channels dispute resolution into individual arbitration proceedings or small claims court. But in effect, this exculpates Cingular from legal liability for any wrong where the cost of pursuit outweighs the potential amount of recovery. Id. at In another cased decided the same day, the Washington Supreme Court refused to enforce a forum selection clause that designated Virginia, which does not allow class actions for consumer protection lawsuits such as the one at issue. Dix v. ICT Group, Inc., 161 P.3d 1016 (Wash. 2007). The underlying lawsuit alleged that individual class members suffered damages ranging from $23.90 to less than $250.00, and the court found that a forum selection clause that seriously impairs the plaintiff s ability to go forward on a claim of small value by eliminating class suits in circumstances where there is no feasible alternative for seeking relief violated public policy and is unenforceable. Id. at

14 This policy was not undercut by the fact the consumer protection law did not contain an express class action antiwaiver provision. Id. at It is clear that the legislature s addition of the private right of action to enforce [the Consumer Protection Act] was intended to encourage individuals to enforce the act and fight restraints of trade, unfair competition, and unfair, deceptive, and fraudulent acts or practices. This public policy is violated when a citizen s ability to assert a private right of action is significantly impaired by a forum selection clause that precludes class actions in circumstances where it is otherwise economically unfeasible for individual consumers to bring their small-value claims. In a class action challenging a bank s debt collection practices, a Wisconsin court affirmed that the arbitration clause was substantively unconscionable because it prevents the plaintiffs from obtaining any of the relief they seek... and because it unfairly prohibits class-wide relief. Coady v. Cross Country Bank, 729 N.W.2d 732, 745 (Wis. Ct. App. 2007). The court noted the growing number of courts to find that a waiver of class-wide relief is a significant factor (and in at least one instance a determinative factor) in invalidating an arbitration provision as unconscionable. These courts have recognized that the availability of class-wide relief is often the only means of vindicating consumer rights.... In addition, the prospect of class-wide relief ordinarily has some deterrent effect on a manufacturer or service provider,... but any such effect is eviscerated by arbitration clauses like Cross Country s. Id. at (citations and footnotes omitted). 9

15 The Illinois Supreme Court made a similar ruling in a case alleging that a $150 early termination fee was an illegal penalty. The class action waiver was substantively unconscionable where Cingular used it to insulate itself from liability to a potential class of customers... where the cost of vindicating the claim is so high that the plaintiff s only reasonable, cost-effective means of obtaining a complete remedy is as either the representative or a member of a class. Kinkel v. Cingular Wireless LLC, 857 N.E.2d 250, (Ill. 2006). In a similar vein, California s Supreme Court held that a credit card issuer s contractual waiver of class actions was an unconscionable exculpatory clause. Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005). Such waivers are not, in the abstract, exculpatory clauses, but can be in effect because damages in consumer cases are often small and because [a] company which wrongfully exacts a dollar from each of millions of customers will reap a handsome profit... the class action is often the only effective way to halt and redress such exploitation. Id. at (citation omitted). While styled as a mutual prohibition, the waiver was indisputably onesided. Id. at 1109 (quoting Szetela v. Discover Bank, 118 Cal. Rptr. 2d 862, 867 (Ct. App. 2002)). The Szetela court expressed this concern more forcefully: It is the manner of arbitration, specifically, prohibiting class or representative actions, we take exception to here. The clause is not only harsh and unfair to Discover customers who might be owed a relatively small sum of money, but it also serves as a disincentive for Discover to avoid the type of conduct that might lead to class action litigation in the first place.... Discover has essentially granted itself a license to push the 10

16 118 Cal. Rptr. 2d at 868. boundaries of good business practices to their furthest limits, fully aware that relatively few, if any, customers will seek legal remedies, and that any remedies obtained will only pertain to that single customer without collateral estoppel effect. The potential for millions of customers to be overcharged small amounts without an effective method of redress cannot be ignored. In Missouri, wireless phone customers sought class certification of claims that their provider violated state law by deceptively implying that a monthly charge was governmentally mandated. An appeals court affirmed that a class action prohibition rendered an arbitration clause substantively unconscionable. Whitney v. Alltel Commc ns, Inc., 173 S.W.3d 300 (Mo. Ct. App. 2005). Any customers Id. at 314. wishing to challenge the eighty-eight cent charge would face the same economic hurdle. Yet because of the many customers affected, Alltel would be entitled to retain millions and millions of dollars from what were allegedly improper and deceptive charges. Moreover, since no single customer could undertake a case against Alltel, the company could continue its improper and deceptive charges ad infinitum since none of its customers would have a practical remedy to bring a stop to the conduct. West Virginia s highest court ruled that prohibitions on class actions and punitive damages made an arbitration clause unconscionable and unenforceable in a case involving modest damages. A pre-dispute agreement to use arbitration as an alternative to 11

17 litigation in court may be enforced pursuant to the FAA only when arbitration, although a different forum with somewhat different and simplified rules, is nonetheless one in which the arbitral mechanisms for obtaining justice permit a party to fully and effectively vindicate their rights. State ex rel. Dunlap v. Berger, 567 S.E.2d 265, 272 (W. Va. 2002) (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)). The small insurance charges ($8.46) at issue are precisely the sort of smalldollar/high volume (alleged) illegality that class action claims and remedies are effective at addressing. In many cases, the availability of class action relief is a sine qua non to permit the adequate vindication of consumer rights. Id. at 278. Thus, in adhesive contracts so commonly involved in consumer and employment transactions, permitting the proponent of such a contract to include a provision that prevents an aggrieved party from pursuing class action relief would go a long way toward allowing those who commit illegal activity to go unpunished, undeterred, and unaccountable. Id. at New Jersey s highest court found a class action ban unconscionable in a case challenging payday loans in which the alleged damages are small on an individual-byindividual basis, but are substantial when aggregated into a class claim. Muhammad v. County Bank of Rehoboth Beach, Del., 912 A.2d 88, 91 (N.J. 2006) The ban had the effect of acting as an exculpatory clause where permitting the defendants to contest liability with each claimant in a single, separate suit, would, in many cases give defendants an advantage which would be almost equivalent to closing the door of justice to all small 12

18 claimants. Id. at 99. This was similar to an earlier New Jersey court ruling striking a bank s arbitration clause as unconscionable where the only purpose of the provision purporting to prevent class-wide litigation is to effectively remove the only legitimate remedy for cardholders with small claims. Discover Bank v. Shea, 827 A.2d 358, 365 (N.J. Super. Ct. Law Div. 2001). While Discover can use the provision to preclude class actions and therefore, effectively immunize itself completely from small claims, individual cardholders gain nothing, and in fact, are effectively deprived of their small individual claims. Discover can completely avoid accountability whenever the harm to each class member is small enough.... This type of power cannot be the purpose of arbitration.... Id. at See also Thibodeau v. Comcast Corp., 912 A.2d 874, (Pa. Super. Ct. 2006) (applying general principles of state contract law to find an arbitration clause that mandated individual arbitration and precluded class actions and classwide arbitration was unconscionable and unenforceable. Should the law require consumers to litigate or arbitrate individually, defendant corporations are effectively immunized from redress of grievances.... It is clearly contrary to public policy to immunize large corporations from liability by allowing them to preclude all class action litigation or [] arbitration. ). A long line of federal courts have made similar rulings. One of the earliest was the Ninth Circuit s affirmance of a lower court s finding that the class action ban in an arbitration provision violated California s contract law relating to unconscionability. The trial court said: 13

19 It would not have been economically feasible to pursue the claims in these cases on an individual basis, whether the case was brought in court or in arbitration.... The actual damages sought by the named plaintiffs are relatively insubstantial. [T]he prohibition on class action litigation functions as an effective deterrent to litigating many types of claims... and, ultimately, would serve to shield AT&T from liability even in cases where it has violated the law. Ting v. AT&T, 182 F. Supp. 2d 902, 918 (N.D. Cal. 2002), aff d in relevant part, 319 F.3d 1126, 1150 (9th Cir. 2003), cert denied, 540 U.S. 811 (2003). More recently, the First Circuit held that a class arbitration ban was invalid because it prevented consumers from vindicating their statutory rights. Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006). The bar on class arbitration threatens the premise that arbitration can be a fair and adequate mechanism for enforcing statutory rights. Id. at 54 (citation omitted). The Court emphasized the need to look at the ban s real world effect of making it difficult, if not impossible, to challenge widespread practices. [C]lass actions and arbitrations are, particularly in the consumer context, often inextricably linked to the vindication of substantive rights. Id. at 60 (quoting Discover Bank, 113 P.2d at 1109). Further, [i]f the class action mechanism prohibition here is enforced, Comcast will be essentially shielded from private consumer antitrust enforcement liability, even where it has violated the law. Plaintiffs will be unable to vindicate their statutory rights. Id. at 61. Similarly, the Eleventh Circuit held that under Florida law a consumer contract that prohibits class arbitration is unconscionable because it preclude[s] the possibility that 14

20 a group of... customers might join together to seek relief that would be impractical for any of them to obtain alone. Rollins, Inc. v. Garrett, 176 Fed. App x 968, , 2006 WL , at *1 (11th Cir. Apr. 19, 2006) (quoting Powertel, Inc. v. Bexley, 743 So. 2d 570, 576 (Fla. 1st DCA 1999)). The lower court had found that Florida law would support classwide arbitration due to important public policy considerations, namely, the advantage a large corporate defendant would have against diffuse individuals and the substantive unfairness of forcing hundreds of individuals to assert claims involving common issues of fact and law against a sole party.... Rollins, Inc. v. Garrett, No. 6:05-CV-671-PCF-KRS, 2005 WL , at *4 (M.D. Fla. Sept. 6, 2005). In Powertel, the court found an arbitration clause unconscionable and unenforceable where it effectively removes Powertel s exposure to any remedy that could be pursued on behalf of a class of consumers.... The potential claims are too small to litigate individually, but collectively they might amount to a large sum of money. The prospect of class litigation ordinarily has some deterrent effect on a manufacturer or service provider, but that is absent here. By requiring arbitration of all claims, Powertel has precluded the possibility that a group of its customers might join together to seek relief that would be impractical for any of them to obtain alone. 743 So. 2d at 576 (citation omitted). Oregon s federal court recently found an arbitration clause that banned class actions in arbitration and court substantively unconscionable in a case involving statutory 15

21 penalties of $200 per class member. The court considered the small recoveries at issue, and the resulting disincentive to litigate individual claims to find that the ban gives defendant a virtual license to commit, with impunity, millions of dollars worth of smallscale fraud. Creighton v. Blockbuster, Inc., No KI, 2007 WL , at *3 (D. Or. May 25, 2007) (quoting Vasquez-Lopez v. Beneficial Oregon, Inc., 152 P.3d 940, 1/ 951 (Or. Ct. App. 2007)). A Missouri federal court similarly declared a class action ban substantively unconscionable in a case involving $2.00 monthly service fees charged on gift cards. The gift card agreement forces customers to individually arbitrate claims that only amount to a few dollars and pay the accompanying fees. Few plaintiffs would likely undertake such a scheme if not allowed to join in a class action. Doerhoff v. Gen. Growth Props., No CV-C-SOW, 2006 WL , at *6 (W.D. Mo. Nov. 6, 2006). The court noted that neither the Federal Arbitration Act nor any policy favoring arbitration gives a party carte blanche to eliminate the ability of consumers to challenge provisions of an unconscionable contract. Id. at *7. In another case challenging payday loans made at annual percentage rates in excess of 400%, Arizona s federal court held that a class action ban in an arbitration clause was 1/ The Vasquez court rejected defendant s argument that the ban applied equally to both parties stating: Although the arbitration rider with majestic equality forbids lenders as well as borrowers from bringing class actions, the likelihood of the lender seeking to do so against its own customers is as likely as the rich seeking to sleep under bridges. 152 P.3d at

22 against public policy and substantively unconscionable. Arizona recognizes that consumer protection statutes are necessary to counteract the disproportionate bargaining power which is typically present in consumer transactions. Cooper v. QC Fin. Servs., Inc., 503 F. Supp. 2d 1266, 1286 (D. Ariz. 2007) (citation omitted). Arizona courts also recognize that when individual recoveries are relatively small, a class action is the only possible device which would afford relief to numerous plaintiffs with such claims. Id. Moreover, [i]ndividualizing each claim absolutely and completely insulates and immunizes Defendant from scrutiny and accountability for its business practices and also serves as a disincentive for [Defendant]... to avoid the type of conduct that might lead to class action litigation in the first place. Id. at 1288 (citations omitted). A Washington federal court likewise declared that a class action ban was unilateral and excessively favors Cingular, and is therefore substantively unconscionable. Riensche v. Cingular Wireless, LLC, No. C Z, 2006 WL , at *12 (W.D. Wash. Dec. 27, 2006). The ban effectively prevents consumers from seeking redress whenever the monetary value of the claim is so small that it is not worth the time or money to pursue in small claims court or arbitration, while allowing Cingular to allegedly cheat large numbers of consumers out of individually small sums of money. (citation omitted). The ban does not affect Cingular because there is no circumstance under which Cingular would bring a class action against consumers. But it deprives consumers of an important means for enforcing their rights under the [Consumer 17

23 Protection Act]. Id. The court relied on its prior decision in Luna v. Household Fin. Corp. III, 236 F. Supp. 2d 1166, 1179 (W.D. Wash. 2002), where it found an arbitration clause banning class actions was substantively unconscionable because it was being used as a sword to strike down access to justice instead of a shield against prohibitive costs. (citation omitted). See also Lowden v. T-Mobile, USA, Inc., No. C P, 2006 WL , at *6 (W.D. Wash. Apr. 13, 2006) (finding class action ban deprive[d] Plaintiffs of the means to effectively vindicate their rights under the [Consumer Protection Act], and was effectively one-sided because there is no conceivable set of facts under which T- Mobile would bring a class action against its customers. ). This is a small sample of the increasing number of courts holding class action bans in arbitration clauses unenforceable. The lower court s decision is consistent with this persuasive analysis and reasoning. 18

24 CONCLUSION Amicus curiae AARP respectfully urges the Court to affirm the lower court and find Appellants class action ban void. Dated: April 25, 2008 Respectfully submitted, On the brief: Deborah Zuckerman James Kowalski, Jr. (852740) AARP Foundation Counsel of Record 601 E Street, NW Law Offices of James A. Kowalski, Jr., PL Washington, DC San Jose Blvd., Suite 203 (202) (ph) Jacksonville, FL (202) (fax) (904) (ph) dzuckerman@aarp.org (904) (fax) kowalski.law@mac.com 19

25 CERTIFICATE OF SERVICE I certify that a copy of the foregoing brief amicus curiae was served on counsel listed below by Federal Express next day on April 25, Virginia B. Townes Claudia Callaway Akerman Senterfitt Manatt, Phelps & Phillips 420 S. Orange Ave., Suite 1200 th Street, NW, Suite 1100 Orlando, FL Washington, DC Attorney for Defendant Attorney for Defendants Lawrence P. Rochefort Theodore J. Leopold Akerman Senterfitt Ricci-Leopold, P.A. th Esperante Bldg. - 4 Fl PGA Blvd., Suite Lakeview Avenue, Suite 400 Palm Beach Gardens, FL West Palm Beach, FL Attorney for Plaintiffs Attorney for Defendant Richard A. Fisher Christopher C. Casper Richard Fisher Law Office James, Hoyer, Newcomer 1510 Stuart Road, Suite 210 & Smiljanich, PA Cleveland, TN One Urban Centre, Suite 550 Attorney for Plaintiffs 4830 W. Kennedy Blvd. Tampa, FL F. Paul Bland, Jr. Attorney for Plaintiffs Public Justice, P.C K Street, NW, Suite 200 E. Clayton Yates Washington, DC Yates & Mancini, LLC Attorney for Plaintiffs 311 S. Second Street, Suite 102 Fort Pierce, FL Attorney for Plaintiffs James Kowalski, Jr. (852740) Counsel of Record for Amicus Curiae AARP Law Office of James A. Kowalski, Jr., PL San Jose Blvd., Suite 203 Jacksonville, FL (904) (ph) (904) (fax) 20

26 CERTIFICATE OF COMPLIANCE I hereby certify that the foregoing brief amicus curiae has been prepared in Times New Roman 14 point font and complies with Fla. R. App. P (a)(2). James Kowalski, Jr. (852740) 21