The Eleventh Circuit recently held that a district court lacked jurisdiction to determine, pre-certification, that a defendant’s waiver of its right to compel named plaintiffs to arbitrate their claims precluded it from asserting its arbitration rights against putative unnamed class members.
The case involved five putative class actions against the defendant bank and its predecessor related to allegedly improper checking account overdraft fees. Plaintiffs’ customer agreements included class arbitration waivers, which were potentially unenforceable under relevant state laws. Believing it would be futile, defendant did not move to compel arbitration by the court’s deadline, although it did seek to reserve its arbitration rights against future class members. However, after the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), which held that the Federal Arbitration Act preempts state laws prohibiting class arbitration waivers, defendant moved to compel the named plaintiffs to submit to arbitration. The court denied the motion, finding the bank had waived its rights by failing to make a timely motion, and the Eleventh Circuit affirmed.
Defendant next sought to defeat class certification by arguing that customers whose agreements contained enforceable arbitration provisions would have to be excluded from the class, resulting in a lack of numerosity. At the same time, defendant filed conditional motions to compel the unnamed putative class members to arbitrate their claims, which the district court denied. The court found that no case or controversy existed between the bank and the unnamed putative class members and the defendant lacked standing to assert its arbitration rights against them. When defendant moved to clarify that its motion was denied as premature rather than with prejudice, the court denied the motion without comment.
The Eleventh Circuit noted that the district court’s decision effectively precluded defendant from asserting its arbitration rights against future class members and, on appeal, held that the district court lacked jurisdiction to make this determination prior to certification. The court stated that until a class was certified, no justiciable controversy existed between the defendant and unnamed putative class members, and any claims by such plaintiffs were merely hypothetical. Thus, the court vacated the district court’s order denying the conditional motions, as “[i]n the absence of both live claims and cognizable plaintiffs, the District Court’s pronouncement purporting to definitively foreclose the arbitration of the hypothetical claims that might be raised in the future by hypothetical plaintiffs cannot be regarded as anything but an impermissible ‘advisory opinion[] on [an] abstract proposition[] of law.’” Additionally, the court held that the named plaintiffs lacked standing to argue the defendant was estopped from compelling arbitration of unnamed putative class member’ claims, as they had no cognizable stake in the outcome of the issue.
In re Checking Account Overdraft Litig., No. 13-12082 (11th Cir. Feb. 10, 2015).
