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Lawyers for consumers and for a credit repair company on Tuesday tangled over the meaning of "right to sue" in the latest arbitration challenge before the U.S. Supreme Court.

Michael McConnell of Kirkland & Ellis, representing CompuCredit Corp., argued that language in the 1996 Credit Repair Organizations Act telling consumers "You have a right to sue" for violations of the act, was actually a colloquial way of expressing a cause of action. And, "This Court has held just because Congress creates a cause of action, which is a right to sue, does not preclude arbitration," he said, adding, the words "right to sue" do not mean "exclusively a right to be in court."

But a somewhat skeptical Chief Justice John Roberts Jr. countered that it may mean more than a colloquial way to express a cause of action. "If somebody hits your car, you jump out angrily and you say, ‘I’m going to sue you.’ You are not likely to say, `I’m going to bring a cause of action against you.’"

And Justice Ruth Bader Ginsburg told McConnell that if the act were written for lawyers, his argument on the language might be more persuasive. "This is meant for consumers," she said. "When they read ‘a right to sue,’ they’re not going to think about cause of action. They don’t know what cause of action is. But they do know that a right to sue is the right to bring a lawsuit."

The 1996 law creates a right to sue and treats as void any waiver of any protection or right of the consumer under the act. The case before the justices — CompuCredit Corp. v. Greenwood — arose out of a consumer class action claiming that fees charged for a credit card violated the act. CompuCredit marketed a subprime credit card to consumers with weak credit scores. The marketing materials promised a credit limit of $300, but consumers receiving the card were charged $257 in fees in the first year — fees that were disclosed in small print. Before receiving the card, consumers had to agree to binding arbitration of disputes and no class action participation.

When the consumer plaintiffs sued in federal court, CompuCredit moved to compel arbitration. The district court found that the arbitration agreement was invalid under the act’s prohibition of the waiver of a consumer’s right to sue. The U.S. Court of Appeals for the 9th Circuit affirmed.

McConnell emphasized that the Court "has consistently rejected the argument that federal statutes that both create a right to sue and also bar waiver of rights under the statute are sufficiently explicit to override the strong federal policy in favor of arbitrability expressed in the Federal Arbitration Act." Although "magic words" are not required to bar arbitration, he said, "something more" is required by Congress than the right to sue and waiver language in the act’s disclosure provisions.

But Scott Nelson of Public Citizen, representing the consumers, told the justices that Congress "was concerned with an industry that it saw as overreaching pervasively in relation to the people that it was — it was trying to sign up for its services. And that’s why Congress wanted a very strong prohibition of waiver of rights."

He rejected the argument that "right to sue" was a colloquial way of expressing cause of action. "This is a statute where Congress prescribed a notice, prescribed it in statutory terms, did it so people would have an understanding of what their rights were, and did it in a way that no reasonable consumer would understand meant, ‘Oh, this non-waiver-able right is not really to sue in the way that I would ordinarily understand the word, and even the way that courts use it, but actually to do something else.’"

However, Justice Elena Kagan noted that McConnell was correct in arguing that "the rules in this area have been fairly clear, that Congress knew it had to make especially clear that it wanted to void arbitration agreements. So if that’s the case, why didn’t Congress do what it has the done in a thousand other statutes — or maybe that’s an overstatement, but a number of other statutes — which is to say so?"

The rules, replied Nelson, are not that Congress has to be especially clear in this context. "It merely has to be discernible from the text or the legislative history or the structure and policies of the act that there’s an intent to preclude waiver of the right to judicial remedies."

But Justice Antonin Scalia noted that the right to sue and the waiver provisions are not in the substantive part of the statute, but in the part that details what must be disclosed to consumers. "It’s a very strange way for Congress to say, `no arbitration’ by putting this language in a section that has nothing to do with the rights under the act. It is intended to be a summary of the rights under the act."

Marcia Coyle can be contacted at [email protected].

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