Feeney v. Dell Inc.

• Decision Date: 12 June 2013
• Docket Number: SJC–11133.
• Citation: 989 N.E.2d 439,465 Mass. 470
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: John A. FEENEY & another v. DELL INC. & others.

465 Mass. 470

989 N.E.2d 439

John A. FEENEY & another¹

v.DELL INC.² & others.³

SJC–11133.

Supreme Judicial Court of Massachusetts, Middlesex.

Submitted Dec. 4, 2012.

Decided June 12, 2013.

John A. Shope(Eric A. Haskell with him), Boston, for the defendants.

Edward D. Rapacki, Boston, for the plaintiffs.

The following submitted briefs for amici curiae:

Scott L. Nelson, of the District of Columbia, & Matthew W.H. Wessler for Public Justice, P.C., & another.

Robin S. Conrad, Kate Comerford Todd, & Shane B. Kawka, of the District of Columbia, Alan E. Schoenfeld, of New York, & Mark C. Fleming for Chamber of Commerce of the United States of America.

Deborah J. La Fetra, of California, & Donald R. Pinto, Jr., for Pacific Legal Foundation.

Ben Robbins & Martin J. Newhouse for New England Legal Foundation.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

CORDY, J.

We decide in this case whether a class action waiver provision in an arbitration clause in a consumer contract is enforceable where the plaintiff can demonstrate, as a factual matter, that the class action waiver effectively denies him or her a remedy and insulates the defendant from private civil liability for violations of State law.In doing so, we must consider the extent to which the United States Supreme Court's decision in AT&T Mobility LLC v. Concepcion,––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742(2011)( Concepcion ), abrogates our earlier decision in this case, Feeney v. Dell Inc.,454 Mass. 192, 908 N.E.2d 753(2009)( Feeney I ), which invalidated the same class action waiver after concluding that the requirement of individual arbitration was “contrary to the fundamental public policy of the Commonwealth favoring consumer class actions under [the Massachusetts consumer protection statute,]G.L. c. 93A.”Id. at 193, 908 N.E.2d 753.

In Concepcion,the Supreme Court granted certiorari to decide whether the Federal Arbitration Act (FAA),9 U.S.C. §§ 1 et seq.(2006), “prohibits States from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures.”Concepcion, supra at 1744.In answering that question, the Supreme Court identified two situations in which the FAA will preempt a State law rule: (1) where a State law “prohibits outright the arbitration of a particular type of claim,” and (2) where a State law “doctrine normally thought to be generally applicable ... is alleged to have been applied in a fashion that disfavors arbitration,” and such an application “stand[s] as an obstacle to the accomplishment of the FAA's objectives.”Id. at 1747, 1748.Because the State rule being challenged in Concepcion“classif[ied] most collective-arbitration waivers in consumer contracts as unconscionable,” it stood “as an obstacle to the accomplishment and execution of the full purposes and objectives of [the FAA]” and was therefore preempted.Id. at 1746, 1753, quotingHines v. Davidowitz,312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581(1941).

For the reasons discussed below, we conclude that Concepcion precludes the invalidation of class waiver provisions in arbitration clauses in consumer contracts, such as the one at issue here, where the reason for invalidation is that such waivers are contrary to the fundamental public policy of the Commonwealth.Because that was our primary reason in Feeney I for invalidating the class waiver provision in the arbitration agreement, Concepcion undoes the principal rationale for our decision in Feeney I.However, we also conclude that the intent of Congress in enacting the FAA was to preserve the availability of an arbitral forum and remedy for the resolution of disputes between parties to a commercial contract, and that it would be contrary to Congressional intent to interpret the FAA to permit arbitration clauses that effectively deny consumers any remedy for wrongs committed in violation of other Federal and State laws intended to protect them.We do not interpret the Supreme Court's decision in Concepcion as indorsing such a result.Accordingly, we conclude that a court is not foreclosed from invalidating an arbitration agreement that includes a class action waiver where a plaintiff can demonstrate that he or she effectively cannot pursue a claim against the defendant in individual arbitration according to the terms of the agreement, thus rendering his or her claim nonremediable.Finally, we conclude that the plaintiffs have met their burden of demonstrating that, in light of the complex nature of their claims and the modest amount of their individual damages, they cannot pursue their statutory claim under the individual claim arbitration process required by the arbitration agreement.Consequently, the arbitration agreement was properly invalidated.⁴

[465 Mass. 473]1.Factual and procedural background.A thorough recitation of the facts and procedural history can be found in our earlier opinion in this case.⁵SeeFeeney I, supra at 193–198, 908 N.E.2d 753.

The plaintiffs, John A. Feeney and Dedham Health and Athletic Complex (Dedham Health), commenced a putative class action against Dell in 2003 alleging that its “deliberate and systematic practice” of charging and collecting from the plaintiffs and other Massachusetts residents monies falsely characterized as a lawful sales tax on the purchase of optional service contracts for computers constituted “unfair or deceptive acts or practices” in violation of G.L. c. 93A and regulations issued by the Attorney General of Massachusetts.Dell collected sales tax on the plaintiffs' respective optional service contracts, totaling $13.65 from Feeney and $215.55 from Dedham Health.Asserting that they and other Massachusetts customers had suffered damages because Dell caused them to pay monies for a “tax” that had not been imposed by any Massachusetts taxing authority, the plaintiffs sought relief under provisions of the consumer protection act providing for class actions, G.L. c. 93A, §§ 9(2) and 11.⁶

In response, Dell moved to stay the proceedings and to compel arbitration according to the “Dell Terms and Conditions of Sale”(terms) and pursuant to the FAA, 9 U.S.C. § 4.The terms in effect at the time of the plaintiffs' purchases contain an arbitration clause compelling arbitration of any claim against Dell (but not binding Dell in connection with any claims it may have against a customer) and mandating that any such claims be arbitrated on an individual basis.Specifically, the terms provide that claims against Dell “arising from or relating to this Agreement” shall be resolved “exclusively and finally” by arbitration, and that the arbitration “will be limited solely to the dispute or controversy between Customer and Dell.”⁷The effect of these provisions is to prohibit a Dell customer from participating in a class action—whether by litigation or arbitration—against Dell.

The plaintiffs responded that the prohibition on class actions in the arbitration clause was unconscionable and undermined “the very purpose of the Massachusetts Consumer Protection Act.”The motion to compel arbitration should have been denied, they argued, because, inter alia, the terms unilaterally preclude class actions.A judge in the Superior Court allowed Dell's motion to compel arbitration and the plaintiffs sought interlocutory review pursuant to G.L. c. 231, § 118, first par.A single justice of the Appeals Court denied the plaintiffs' petition.

Unable to appeal from the decision of the single justice, seeAshford v. Massachusetts Bay Transp. Auth.,421 Mass. 563, 566–567, 659 N.E.2d 273(1995), Feeney and Dedham Health each filed a claim of arbitration “under protest” in November, 2004.Their requests for class certification were denied by an arbitrator of the National Arbitration Forum (NAF).Relying on the provisions of the Dell terms and on “[c]lear rules of contract interpretation and construction,” the arbitrator concluded that “class action relief has been waived, by the parties,” and was not available in the arbitration despite the plaintiffs' “compelling arguments in favor of this relief.”The arbitrator conducted a consolidated hearing on the merits of the plaintiffs' individual claims, ruled in favor of the defendants on the merits, and dismissed the plaintiffs' respective claims with prejudice.

In February, 2008, the plaintiffs moved in the Superior Court to vacate the arbitration award and to reconsider the orders allowing the defendants' motion to compel arbitration.In turn, the defendants moved to confirm the arbitration award and to dismiss the case.A different judge denied the plaintiffs' motions, allowed the defendants' motion, and dismissed the case with prejudice.The plaintiffs appealed, and we granted their application for direct appellate review and issued our first opinion in this case.SeeFeeney I, supra.

In Feeney I,we reversed the order compelling arbitration and invalidated the arbitration clause, but ordered the plaintiffs' complaint dismissed without prejudice for failure to state a claim under G.L. c. 93A.⁸Feeney I, supra at 213–214, 908 N.E.2d 753.Following dismissal on remand, the plaintiffs filed a third amended complaint in which they allege facts that, if proved, could constitute a violation of G.L. c. 93A.⁹Seeid.(suggestingplaintiffs' allegations on appeal could conceivably state claim under G.L. c. 93A if properly pleaded).

While the case was on remand, the United States Supreme Court issued its opinion in Concepcion.The defendants filed a renewed motion to confirm the arbitration award of dismissal with prejudice, arguing that Concepcion abrogated our decision in Feeney I.A judge in the Superior Court denied the defendants' motion, and we granted direct appellate review.

2.Feeney I.We invalidated the arbitration clause in Feeney I because we concluded that the class action prohibition “contravenes Massachusetts public policy.”Feeney I, supra...