Ninth Circuit Limits the FAA in a Case with Potentially Far-Reaching Implications
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“Sign this contact, which contains an arbitration clause, and pay up, or you’re going to jail!” Consumers in California faced this situation, which was addressed by the Ninth Circuit this week in a case called Breazeale v. Victim Services, Inc., No. 15-16549 (9th Cir. Dec. 27, 2017) (click here for a copy of the opinion). I was involved as an amicus in this case.
The defendants were basically collections agencies working together with local district attorneys to help administer a deferred prosecution program for consumers accused of writing bad checks. If you wrote a bad check, you would receive a letter, on the letterhead of the local district attorney’s office, describing probable criminal prosecution and jail time for writing a bad check. The letter also states you could avoid criminal prosecution by enrolling in a bad check diversion program, which is administered by private entities under contract with the local district attorney. To successfully complete this diversion program and avoid prosecution, the individual must complete classes, pay restitution to the victim, and pay fees for the diversion program. The letter sent to the individuals also included an arbitration clause for any dispute arising from this diversion program.
The plaintiffs filed a class action alleging that the defendants’ administration of the diversion program violated state and federal consumer protection laws governing collection abuses. The district court refused to enforce the arbitration clause contained in the letters received by the plaintiffs, and the Ninth Circuit affirmed.
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