In the last five years in Missouri, challenges to arbitration clauses that prohibit all class actions and class arbitrations have become more common. The general argument against class action waivers is as follows: Especially in cases involving small damages, a prohibition of class actions is the functional equivalent of banning the resolution of all claims. This argument is premised on the fact that consumers are unlikely to pursue small damage claims because:
· consumers are unable to find counsel who will pursue what are likely unprofitable claims;
· pursuing pursuing claims whose value is likely exceeded by the cost of arbitration is economically irrational;
· many consumers with claims against the same defendant would not be in a position to learn about similar small damage claims, especially if those claims would arise from the violation of statutes not familiar to most consumers; and
· a class action waiver can serve to immunize a defendant from court precedent, mass liability, negative publicity, and even individual claims, a class action waiver is essentially a "get-out-of-jail-free" card for defendants - it would remove any incentive for the defendant to comply with the law.
Until five years ago, arguments against class waivers were novel in Missouri (and in most other jurisdictions). The first successful Missouri attack on class waivers was made by the plaintiff in Whitney v. Alltel Communications, Inc., 173 S.W.3d 300, 309 (Mo. App. W.D. 2005). Based on the class action waiver, and other issues with the defendant's clause, the court struck the clause as unconscionable. In doing so, the court set out a simple test for future cases considering these attacks: "The Court is persuaded by the line of cases holding 'that an arbitration clause that defeats the prospect of class-action treatment [in] a setting where the practical effect affords the defendant immunity is unconscionable.'" Whitney, 173 S.W.3d at 309 (quoting Leonard v. Terminix Int'l Co., L.P., 854 So.2d 529, 536 (Ala. 2002)).
With this test in mind, the authors brought several challenges to arbitration clauses beginning in 2006. See,e.g.:
· Woods v. QC Fin. Servs., Inc., 280 S.W.3d 90 (Mo. App. E.D. 2008)
· Shaffer v. Royal Gate Dodge, Inc., 300 S.W.3d 556 (Mo. App. E.D. 2009)
These issues have recently been settled by the Supreme Court of Missouri case of Brewer v. Missouri Title Loans, Inc., No. SC 90647, 2010 WL 3430411 (Mo. banc Aug. 31, 2010). In Brewer, the Supreme Court of Missouri invalidated the class arbitration waiver in the contract of a title...
