Diamond Post

 Class Action Newsletter

Gallivan, White & Boyd's class action experience encompasses a variety of industries, including healthcare, commercial transportation, product liability, insurance, and unfair trade practices, and includes practice in both state and federal courts. Our attorneys stay abreast of class action law and approach class actions creatively, with our client's goal foremost in our handling of the litigation. We hope you find the information in this newsletter helpful.  If you have any questions or would like additional information, please contact any of our Team members. 

South Carolina Supreme Court Decision Calls Class Action Waivers Into Doubt
 

Agreements that limit a party's ability to bring a class action lawsuit are increasingly common.  These agreements are useful to a business that does not want to see its liability compounded by class action litigation.  However, a recent decision by the South Carolina Supreme Court throws some doubt on the enforceability of these limitations.

In Herron v. Century BMW, 2010 WL 1541297 (S.C. April 19, 2010), the plaintiff signed an arbitration agreement as part of his contract to purchase a car from Century BMW.  The arbitration agreement stated "by entering into this agreement, the parties are waiving their right to... bring or participate in any class action or multi-plaintiff or claimant action in court or through arbitration."  Later, the plaintiff brought a class action lawsuit against Century BMW, and other dealers, alleging that the dealers charged an illegal administrative fee in violation of the South Carolina Dealers Act, S.C. Code Ann. Section 56-15-10, et. seq.  Century BMW moved to dismiss the class action based on the language in the agreement.  The plaintiff argued that the provision was unenforceable on public policy grounds.  The Supreme Court agreed. First the Court acknowledged that numerous courts across the country have held class action waivers unenforceable on public policy grounds.  The Court then looked to statutory intent and public policy controlling the transaction between the plaintiff and Century BMW. According to the Supreme Court, the Dealers Act, which controlled the transaction between the parties, authorized multi-plaintiff suits to vindicate statutory rights.  Because the class action waiver conflicted with statutory language, the agreement was void on public policy grounds.  

In reaching its determination, the Supreme Court relied on a case out of Washington state.  The Washington Supreme Court noted the plaintiff's argument that there is an emerging hostility towards class action waivers.  Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007)(cataloguing cases that show the majority of jurisdictions disallow class action waivers on public policy grounds). While the South Carolina Supreme Court did not foreclose the possibility that some class action waivers may be valid, their enforceability will depend in large part on whether or not they run afoul of statutes or public policies controlling the transaction.  Common examples are class action waivers that prevent multi-plaintiff suits based on violations of unfair trade practices acts or similar consumer protection codes.  See Scott 161 P.3d at 850.  For instance, in the Scott case the Washington Supreme Court found that the goals of the Washington Consumer Protection Code were undermined by class action waivers because individuals in certain cases could not vindicate consumer rights effectively without bringing multi-plaintiff actions. 

So, it is advisable to include a class action waiver in your standard contract or employment agreements?  In instances where the class action waiver is enforceable, it can be an effective tool for limiting class lawsuits.  The most important consideration is whether the class action waiver runs afoul of statutory intent or public policy mandates. If so, it will not be enforceable despite your best efforts to limit your exposure.  Assessment of enforceability will be a helpful tool in evaluating whether or not the waiver is appropriate depending on the transaction at issue.