{"id":1862,"date":"2024-12-04T16:33:15","date_gmt":"2024-12-04T20:33:15","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1862"},"modified":"2024-12-04T16:33:15","modified_gmt":"2024-12-04T20:33:15","slug":"rhode-island-federal-court-rules-that-defendants-waived-their-right-to-arbitration-by-refusing-to-pay-aaa-filing-fees","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/12\/04\/rhode-island-federal-court-rules-that-defendants-waived-their-right-to-arbitration-by-refusing-to-pay-aaa-filing-fees\/","title":{"rendered":"Rhode Island Federal Court Rules That Defendants Waived Their Right To Arbitration By Refusing To Pay AAA Filing Fees"},"content":{"rendered":"
\n
\"\"<\/a><\/figure>\n<\/div>\n\n\n

By Gerald L. Maatman, Jr., Rebecca S. Bjork, and Eden E. Anderson<\/strong><\/p>\n\n\n\n

Duane Morris Takeaway: In <\/em><\/strong>5-Star General Store, et al. v. American Express Co., 2024 U.S. Dist. LEXIS 217246 (D.R.I. Dec. 2, 2024), Judge Mary McElroy of the U.S. District Court for the District Court of Rhode Island held <\/a>that the defendants could not move to compel arbitration on the issue of whether it was required to pay filing fees to the American Arbitration Association. This ruling presents an unusual twist to arbitration issues typically resolved by federal courts and is a cautionary warning for companies.<\/em><\/p>\n\n\n\n

Background<\/strong><\/p>\n\n\n\n

The 5-Star General Store<\/em> case is an antitrust action brought by merchants who resolved certain claims with American Express entities in arbitration relating to the acceptance of the defendants\u2019 credit cards for purchases at their stores. After the final order was issued, the defendants refused to pay their share of the filing fees to the American Arbitration Association, which totaled more than $17 million. The AAA administratively closed the case and the plaintiffs filed a class action relative to those fees. The defendants moved to compel arbitration of the lawsuit\u2019s claims and to strike the plaintiffs\u2019 class allegations.<\/p>\n\n\n\n

The Court\u2019s Ruling<\/strong><\/p>\n\n\n\n

The court denied the defendants\u2019 motion to compel arbitration on whether they were required to pay the AAA filing fees and denied the defendants\u2019 motion to strike the plaintiffs\u2019 class allegations. The plaintiffs sought to represent more than 5,000 merchants accepting the defendants\u2019 cards. They argued that the defendants had waived their right to arbitration by failing to pay their share of the arbitration fees because they were in default of the agreement under \u00a7 3 of the FAA. First, the court ruled that it, not an arbitrator, had the authority to decide whether the defendants defaulted on the arbitration agreement. Although the court found no controlling case law authority directly on point, it decided to follow the Fifth, Ninth, Tenth and Eleventh Circuits, which have held that courts may decide whether failure to pay arbitration fees constitutes a default under \u00a7 3.<\/p>\n\n\n\n

Second, the court focused on whether the defendants were in default of the agreement. Relying on Black\u2019s Law Dictionary<\/em>, which defines \u201cdefault\u201d as \u201cthe omission or failure to perform a legal or contractual duty; esp., the failure to pay a debt when due,\u201d the court found the issue to be clear and concluded that the defendants defaulted on the arbitration agreement. Id<\/em>. at *12. It also opined that a second arbitration likely would not fare any better than the first and the parties would end up before the court again.<\/p>\n\n\n\n

Third, the court rejected the defendants\u2019 claim that the plaintiffs lacked clean hands and therefore should not be allowed to pursue their claims in court. The court reasoned that the plaintiffs did not change their theory of their case sufficiently when filing the instant case to rescind the defendants\u2019 waiver of arbitration. Therefore, the court denied the defendants\u2019 motion to compel arbitration.<\/p>\n\n\n\n

Finally, the court also denied the defendants\u2019 motion to strike the plaintiffs\u2019 class allegations because the class was ascertainable by objective means and the class definition was not \u201cfail safe\u201d because it did not contain a legal conclusion that determines eligibility for class membership. Id<\/em>. at *32-33. The court further considered and rejected the defendants\u2019 claims that the plaintiffs\u2019 requests for injunctive and declaratory relief under Rule 23(b)(2) and 23(c)(4), including certification of issues classes, should be stricken at the pleading stage.<\/p>\n\n\n\n

Implications For Companies:<\/strong><\/p>\n\n\n\n

This ruling should serve as a cautionary tale to companies that regularly seek to enforce mandatory arbitration agreements when those agreements require individual arbitration. The defendants\u2019 failure to pay filing fees for thousands of individual arbitrations could lead to a complete waiver of the ability to compel arbitration of the claims in the future.<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Rebecca S. Bjork, and Eden E. Anderson Duane Morris Takeaway: In 5-Star General Store, et al. v. American Express Co., 2024 U.S. Dist. LEXIS 217246 (D.R.I. Dec. 2, 2024), Judge Mary McElroy of the U.S. District Court for the District Court of Rhode Island held that the defendants could not … <\/p>\n

Continue reading “Rhode Island Federal Court Rules That Defendants Waived Their Right To Arbitration By Refusing To Pay AAA Filing Fees”<\/span><\/a><\/p>\n","protected":false},"author":575,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[41],"tags":[],"ppma_author":[7,11,92],"class_list":["post-1862","post","type-post","status-publish","format-standard","hentry","category-arbitration-issues"],"authors":[{"term_id":7,"user_id":575,"is_guest":0,"slug":"gmaatman","display_name":"Gerald L. Maatman, Jr.","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2022\/09\/maatmangerald-100x100.jpg","author_category":"","last_name":"Maatman Jr.","first_name":"Gerald L.","job_title":"","user_url":"https:\/\/www.duanemorris.com\/attorneys\/geraldmaatman.html","description":"Read Gerald's bio.<\/a>"},{"term_id":11,"user_id":579,"is_guest":0,"slug":"rsbjork","display_name":"Rebecca S. Bjork","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2022\/09\/bjorkrebecca-100x100.jpg","author_category":"","last_name":"Bjork","first_name":"Rebecca S.","job_title":"","user_url":"","description":"Read Rebecca's bio.<\/a>"},{"term_id":92,"user_id":651,"is_guest":0,"slug":"eeanderson","display_name":"Eden Anderson","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2023\/07\/andersoneden-100x100.jpg","author_category":"","last_name":"Anderson","first_name":"Eden","job_title":"","user_url":"https:\/\/www.duanemorris.com\/attorneys\/edeneanderson.html","description":"Read Eden's Bio<\/A>"}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1862","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/575"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=1862"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1862\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=1862"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=1862"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=1862"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=1862"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}