18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 631 Plaintiffs’ right to pursue federal statutory claims by requiring arbitrators to apply tribal law. The District Court held that each delegation provision was unenforceable for the same reason. The District Court concluded that because tribal law governed the loan contracts and Plaintiffs could not present in arbitration any merits claims based on federal law, both the arbitration agreements as a whole and the accompanying delegation clauses were unenforceable prospective waivers. However, the District Court did not analyze enforceability of the delegation provisions separate from the larger agreements to arbitrate. On Defendants’ appeal, the Ninth Circuit reversed. The parties disagreed on the proper order of analysis. Defendants argued that the Ninth Circuit should first decide whether there was a clear and enforceable delegation provision that required an arbitrator to decide whether the parties’ arbitration agreement was enforceable. If the delegation provision was enforceable, Defendants maintained that the Ninth Circuit must stop there and not proceed to consider whether the arbitration agreement was also enforceable. Conversely, Plaintiffs argued that the first question was enforceability of the arbitration agreement as a whole. If the entire arbitration agreement – including the delegation provision – was unenforceable, Plaintiffs asserted that the Ninth Circuit need not apply the delegation provision. Accordingly, Plaintiffs argued that the District Court properly considered and held that the parties’ arbitration agreement was unenforceable because it required them to prospectively waive their statutory rights. The Ninth Circuit sided with Defendants and found that the focus first must be on the enforceability of the delegation provision specifically. As such, the Ninth Circuit concluded that, under recent decisions both from the U.S. Supreme Court and the Ninth Circuit, the parties’ antecedent delegation provision was enforceable because it did not preclude Plaintiffs from arguing to an arbitrator that the arbitration agreement was unenforceable under the prospective-waiver doctrine and, therefore, this general enforceability issue must be decided by an arbitrator. Accordingly, the Ninth Circuit determined that the agreement delegating to an arbitrator the gateway question of whether the underlying arbitration agreement was enforceable had to be upheld unless that specific delegation provision was itself unenforceable. Because the delegation provision in the contract at issue was not itself an invalid prospective waiver, the Ninth Circuit ruled that it was for an arbitrator to decide whether the parties’ arbitration agreement was enforceable. For these reasons, the Ninth Circuit reversed the District Court’s order denying Defendants’ motion to compel arbitration. Brito, et al. v. Major Energy Electric Services, LLC , 2021 U.S. Dist. LEXIS 3869 (D. Md. Jan. 8, 2021). Plaintiff, a Baltimore resident and electricity consumer, filed a class action against Defendant, an opt-in electricity provider, asserting violations of the Maryland Consumer Protection Act (“MCPA”), in addition to claims for unjust enrichment, common law fraud, and negligent misrepresentation. According to Plaintiff, a sales representative for Defendant visited her home in February 2017 and subsequently registered Plaintiff to receive electricity services from Defendant despite Plaintiff allegedly not agreeing to such an arrangement. Plaintiff claimed that she did not notice any changes to her electric bill for months, and that in January 2019, she formally switched her electricity provider back to Baltimore Gas & Electric. During this nearly two-year period, Defendant sent Plaintiff two separate letters containing the company’s arbitration agreement, but Plaintiff claimed that she never reviewed these letters because she must have assumed they were junk mail. Id. at *34- 35. Plaintiff alleged that Defendant obtained “many of its customers without even gaining their actual agreement or authorization to switch to its electrical services” and falsely promised “lower electric bills compared to what consumers currently pay their electric provider but then placed much higher charges on the bill.” Id. at *6. Defendant filed a motion to stay or dismiss the action under the Federal Arbitration Act (“FAA”), and the Court granted the motion. The Court noted that Defendant clearly met three of the four requirements for application of the FAA, i.e. , there was a dispute between the parties, the transaction at issue related to interstate commerce, and Plaintiff refused to arbitrate the dispute. As to the enforceability of the arbitration agreement, Defendant contended that Plaintiff “received a proposed contract and effectively accepted or assented to it by her conduct; she benefited from and paid for Defendant’s services.” Id. at *33. In support of its motion, Defendant cited evidence showing that Plaintiff received both letters containing the arbitration agreement. The Court reasoned that Plaintiff failed to rebut this presumption with any evidence or contrary case law of her own. The Court further held that Maryland case law firmly established that one can manifest assent to a contract through silence, and in this case, Plaintiff’s continued use of Defendant’s electricity services and failure to cancel these services until nearly two years later amounted to her silent assent to the agreement. Therefore, the Court granted Defendant’s motion and dismissed the case.