Summary
The Supreme Court held that a district court order compelling arbitration and dismissing all underlying claims is a final decision immediately appealable under § 16(a)(3) of the Federal Arbitration Act. The Court further held that an arbitration agreement's silence regarding arbitration costs and fees does not, by itself, render the agreement unenforceable. The party challenging arbitration on the ground that costs would be prohibitive bears the burden of showing a likelihood of incurring such costs.
Topics
Practice areas
Questions Presented
- Whether a district court order compelling arbitration and dismissing all underlying claims with prejudice is a final decision with respect to an arbitration that is immediately appealable under 9 U.S.C. § 16(a)(3).
- Whether an arbitration agreement is unenforceable merely because it is silent regarding arbitration costs and fees and therefore creates a speculative risk that a party may incur prohibitive expenses.
- Whether the Court should decide the alternative argument that the arbitration agreement was unenforceable because it precluded class treatment of Randolph's statutory claims.
Holdings
- An order that compels arbitration and dismisses all claims before the district court with prejudice is a final decision with respect to an arbitration under § 16(a)(3) and is immediately appealable.
- Silence regarding arbitration costs and fees does not by itself render an arbitration agreement unenforceable. A party seeking to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive bears the burden of showing the likelihood of incurring such costs.
Key quotations
“We therefore conclude that where, as here, the District Court has ordered the parties to proceed to arbitration, and dismissed all the claims before it, that decision is “final” within the meaning of § 16(a)(3), and therefore appealable.” (89)
“Similarly, we believe that where, as here, a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs.” (91-92)
Factual background
Larketta Randolph purchased a mobile home and financed the purchase through Green Tree Financial Corporation and its Alabama subsidiary. The installment contract required binding arbitration of disputes arising from or relating to the contract, but did not specify how arbitration fees and costs would be allocated. Randolph alleged violations of the Truth in Lending Act and the Equal Credit Opportunity Act and argued that the absence of cost provisions could force her to forgo her statutory claims.
Procedural history
Randolph sued petitioners under the Truth in Lending Act and the Equal Credit Opportunity Act and sought class certification. The District Court compelled arbitration, denied a stay, dismissed the claims with prejudice, denied class certification, and denied reconsideration. The Eleventh Circuit held that the order was final and appealable but invalidated the arbitration agreement based on the speculative risk of prohibitive arbitration costs. The Supreme Court granted certiorari, affirmed the appealability ruling, and reversed the unenforceability ruling.