Making Waives: Reining in Class Action Waivers in Consumer Contracts of Adhesion
Volume 80, No. 3, Fall 2007
By Michael C. Duffy

You arrive home after a long day at work to discover the usual pile of junk mail. As you shuffle through the drab stack of envelopes, you realize that it is time to pay your monthly cell phone bill. You open and glance over the bill and are once again annoyed to discover that you have been double-billed for the unlimited text messaging service you signed up for a while back. As you fume and grumble under your breath, you note in the back of your mind that if this is happening to other customers, your cell provider could be making a killing off of this “little” billing glitch, even though it only costs you alone a few dollars each month. Frustrated, but resigned to the fact that these things happen, you dutifully file away your bill and toss the envelope with its typical junk mail inserts into the trash can.

Now, lying at the bottom of your trash can, stuffed between an advertisement for the hottest new ringtones and an insert for a limited-time credit card offer, there rests a contract with the following terms:

Revised Terms of Service:

CLASS ACTION WAIVER. Whether in court or arbitration, a party to this contract may only bring claims against the other in an individual capacity and not as a class member in a class mechanism.

Continued use of this service constitutes your acceptance of these terms. Assuming you continue using your cell phone, you are now bound by this contract and probably a number of others like it. You have become a party to a consumer contract of adhesion. In waiving your right to any type of class mechanism for redressing grievances, you may have closed off the most effective and practical means of redressing small but substantial wrongs without even realizing what you have done.

The validity of class action waivers in consumer contracts of adhesion has been a hotly contested topic in contract law. There is a split in authority in both state and federal courts. This split has allowed savvy business contract drafters to choose the law of business-friendly jurisdictions that would likely allow such terms, while the consumers, as the adhering parties, have relatively little say in the matter.

This Comment will examine the circuit split among federal courts on this issue and will argue for the adoption of a clearer and more uniform standard to protect consumers and deter businesses from engaging in careless or unscrupulous business practices. Part II of this Comment will review the circuit split existing among the federal courts on this issue. Part II.A.1 will pay particular attention to the reasoning of the Third Circuit in Johnson v. West Suburban Bank and the supporting reasoning of other circuits following that case. This line of authorities has adopted the view that class actions are purely procedural, and, therefore, unless expressly preserved by Congress in the relevant statute, class actions can be contractually waived if the plaintiff is still “capable” of pursuing redress individually in an arbitral forum. Part II.A.2 will analyze the reasoning of the recent First Circuit decision in Kristian v. Comcast Corp. This reasoning involved a broader analysis of the policy goals of the statute at issue, the purpose of class actions, and contract doctrine. Finally, Part II.B will discuss the parallel split among state courts on this issue and analyze the similarities and differences between state and federal court reasoning on both sides of the issue.

Part III.A of this Comment will discuss the strengths of the First Circuit’s argument in using federal precedent and terminology to reach a holding consistent with important policy goals of class actions that state courts have addressed but previous federal court decisions have overlooked. Part III.B looks at some of the flaws in the reasoning of the Third Circuit decision and its progeny, which make the holdings of those cases less consistent with the purposes and policy goals of class action remedies. These goals include more than just ensuring the ability of an individual plaintiff to pursue redress for harm done; they also provide redress for others harmed in the same way and create a meaningful deterrent against similar offenses in the future. Part III.C explains why the policy of states routinely upholding class action waivers per se is inapplicable under a Kristian analysis. Finally, Part III.D proposes a legislative course of action that might help resolve certain difficulties in future application of the Kristian analysis.

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