On August 30, the Northern District of California thwarted a disgruntled timeshare owner’s attempt to arbitrate her dispute against a timeshare developer on a classwide basis. A timeshare purchaser alleged that Wyndham, the timeshare developer, improperly changed her “use year” and demanded an arbitration. Wyndham responded by filing a declaratory judgment action against the purchaser and also filed a motion to compel the purchaser to arbitrate her individual claims and to preclude her from pursuing her class claims in arbitration. The court ruled that this was a decision for the arbitrator to make. The arbitrator found that the case could not proceed on a classwide arbitration basis. The court affirmed.
The purchaser had not shown that the arbitrator’s decision was “completely irrational” or that it exhibited a “manifest disregard of the law.” The arbitrator had ruled that the parties’ agreement did not “reveal any expectations of the parties … that class action arbitration was an option.” Although the agreement did not contain an explicit class action waiver, the Supreme Court in Stolt-Nielsen declared that no party may be compelled to arbitration unless there was a contractual basis to submit to class arbitration. The arbitrator was not unreasonable in holding that no such basis was present in the parties’ contract.
This decision underscores how important it is for companies to examine their contracts to ensure they contain (i) arbitration clauses; and (ii) explicit class action arbitration waivers.