Massachusetts follows at least six other state supreme courts that have issued similar decisions between 2005 and 2008, including California, Illinois, New Jersey, New Mexico, North Carolina and Washington. The U.S. courts of appeals for the 1st, 2d, 3d and 9th circuits have also weighed in with similar rulings from 2006 to 2009.
The July 2 Massachusetts opinion in Feeney v. Dell, which was authored by Chief Justice Margaret H. Marshall following a hearing attended by five of the seven justices, called Dell’s consumer contracts compelling individual arbitration “not enforceable.”
Marshall also noted that such restrictive language “is contrary to the fundamental public policy of the Commonwealth favoring consumer class actions” under the state’s consumer protection law. The law allows consumers to bring class actions, recover attorney fees and collect double and triple damages.
Marshall cited three reasons why Massachusetts public policy bans such restrictive contracts: Consumers can seek redress of small claims only by aggregating them into class actions; restrictive clauses “undermine the public’s interest in deterring wrongdoing”; and the restrictions harm unnamed class members who would benefit from a class action.
“Allowing companies that do business in Massachusetts, with its strong commitment to consumer protection legislation, to insulate themselves from small value consumer claims creates the potential for countless customers to be without an effective method to vindicate their statutory rights, a result clearly at odds with our public policy,” Marshall wrote.
The court also ruled that while the plaintiffs’ complaint didn’t meet the threshold for a state consumer protection claim, they could amend their lawsuit.
Ed Rapacki of Boston-based Ellis & Rapacki, who represented plaintiffs John A. Feeney and Dedham Health and Athletic Complex, said he and his clients are thrilled by the decision. The plaintiffs allege that Dell improperly collected Massachusetts sales tax on optional service contracts. The plaintiffs claim that Dell’s actions violate the state’s consumer protection law because Massachusetts taxing authorities did not impose taxes on the service contracts.
“We brought this case six years ago in order to address this issue of a ban on class actions in arbitration clauses,” Rapacki said. “We believe here in Massachusetts we have a very strong consumer protection act.”
Dell declined to comment on the ruling or the litigation. John Shope, Dell’s lawyer on the case and a litigation partner at Boston’s Foley Hoag, was not available for comment.
New England Legal Foundation and a couple of other business groups co-signed an amicus brief supporting Dell. The brief concluded that numerous courts, including the 4th and 11th circuits, have upheld class action waivers in consumer arbitration agreements that allow the consumers to recover their attorney fees.
“A decision enforcing the class action waiver in this case would therefore align Massachusetts with numerous courts nationwide that have considered the same issue and have recognized that the availability of reasonable attorneys’ fees ensures an effective private remedy for individual consumer claims,” stated the brief.