Ballard Spahr Prevails in Third Circuit Appeal Challenging Class Action Waiver in Consumer Arbitration Agreement

Despite the predictions of many that class action waivers have run their course, Ballard Spahr's lawyers have shown that such waivers are alive and well in the Third Circuit. In a case in which the named plaintiff seeks less than $900 in damages, the U.S. Court of Appeals for the Third Circuit, in a precedential opinion, affirmed a Pennsylvania district court ruling upholding the validity under Pennsylvania law of an arbitration clause in an automobile title loan agreement containing a class action waiver.Alan S. Kaplinsky and Mark J. Levin represented the defendant/appellee in Kaneff v. Delaware Title Loans, Inc. The decision was handed down on November 24, 2009, by Judge Dolores Korman Sloviter. A petition for rehearing was denied by the court on December 21, 2009.In Kaneff, the plaintiff brought a class action alleging that the defendant’s loans are usurious under Pennsylvania law. The defendant moved under the Federal Arbitration Act to compel the plaintiff to arbitrate her claims on an individual (non-class) basis pursuant to the terms of the arbitration agreement. The plaintiff opposed arbitration, contending that the class action waiver is unconscionable under Pennsylvania law where small-dollar consumer form contracts are involved. The Third Circuit, however, summarily rejected that contention, stating that "[w]e have little difficulty concluding that Kaneff's agreement to arbitrate would not be considered unconscionable under Pennsylvania law." This is the eighth case in which the Third Circuit has enforced consumer arbitration agreements requiring individual arbitration. Ballard Spahr lawyers were involved in five of those cases. Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). For more information, please contact Alan S. Kaplinsky, group Chair, 215.864.8544 or kaplinsky@ballardspahr.com; or Mark J. Levin, 215.864.8235 or levinm@ballardspahr.com.