ASAP
Relying on Concepcion, the Fourth Circuit Reiterates Broad FAA Preemption and Holds Class Action Waiver in Arbitration Agreement Is Enforceable
The court first addressed the enforceability of the class action waiver in light of Concepcion. In Concepcion, the U.S. Supreme Court upheld a class action waiver in an arbitration agreement and invalidated a state law that conditioned the enforceability of such an agreement on the availability of class-wide arbitration. Although the plaintiff argued that Concepcion was inapposite because its holding should be limited to the preemption of a California state law, the Fourth Circuit found that “Concepcion sweeps more broadly,” and that its holding “was not merely an assertion of federal preemption, but plainly prohibited application of the general contract defense of unconscionability to invalidate an otherwise valid arbitration agreement.”
Next, the court found that the plaintiff failed to meet his burden to show that the fee-splitting provision would prevent him from vindicating his statutory rights (he merely offered evidence of what arbitrators were charging in another locale and offered no evidence of the value of his claim). Lastly, the court found that the challenge to the one-year limitations provision should not have been decided by the district court because the term was applicable to the franchise agreement generally and not part of the arbitration clause. As a result, and because the scope of a motion to compel arbitration is restricted to challenges specific to the arbitration clause, the plaintiff’s challenge to the limitations period should be decided by an arbitrator.
This opinion is significant because it is yet another federal appellate court opinion upholding a class action waiver in the context of a collective action, and it articulates an expansive view of the holding of Concepcion.
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