This multi-district litigation, which involves bank customers suing for overcharges with overdraft fees, is spawning several interesting arbitration decisions. In the latest appellate decision, In Re: Checking Account Overdraft Litigation, No. 13-12082 (11th Cir. Feb. 10, 2015) (click here for a copy of the decision), the district court found that Wells Fargo had waived its right to compel arbitration of the named plaintiff’s claims. When Wells Fargo filed a conditional motion to compel arbitration of the claims of unnamed members of the putative class in the event of class certification, the district court denied the motion and ruled that the waiver that had occurred with the named plaintiff also applied to the entire class.
On appeal, the Eleventh Circuit vacated the district court’s finding of waiver regarding the unnamed class members because no class existed yet. The district had not certified a class at the time of its waiver ruling. Absent certification of a class, the district court had no jurisdiction over the unnamed class members, and there was no justiciable controversy between these unnamed putative class members and Wells Fargo. Hence, the district court lacked jurisdiction to consider Wells Fargo’s conditional motion to compel arbitration of the unnamed class members’ claims. The Eleventh Circuit found that the district court’s ruling of waiver regarding the putative class members’ claims amounted to an improper advisory opinion.
Trying to apply the FAA in the context of class proceedings is challenging because the FAA was never designed to handle class action issues. Suppose the court in this case eventually does certify a class, can the defendant banks now move to compel arbitration of the class members’ claims once a class comes into existence? Before a court compels arbitration, the FAA envisions individualized proceedings to examine the circumstances regarding the making of a particular agreement, and as a part of these individualized proceedings, the FAA guarantees the right to a jury trial if the making of an arbitration agreement is at issue. Members of a class may have entered into agreements under different circumstances. I cannot see how a court can comprehensively order an entire class to arbitrate without individualized findings regarding the validity of each class member’s agreement to arbitrate (although some courts have forced an entire class into arbitration in the past).