Arbitration Clause of a Loan Agreement Containing a Class Action Waiver – Not Void as Being Against Public Policy

Posted on: September 24, 2012

Baldwin v. Regions Financial Corp., — So.3d —-, 2012 WL 4094147 (Fla. 3d DCA 2012)

On September 19, 2012, the Third District Court of Appeal of the Third District of Florida held that an arbitration clause of a loan agreement containing a class action waiver was not void as being against public policy despite the argument that the clause defeated the remedial provisions of the Florida Consumer Collection Practices Act (FCCPA), Florida Statute section 559.77(2).  Baldwin v. Regions Financial Corp., — So.3d —-, 2012 WL 4094147 (Fla. 3d DCA 2012).

In this case, Bruce Baldwin (“Baldwin”) appealed a non-final order granting Regions Financial Corporation’s (“Regions”) amended motion to compel arbitration, which the Court ultimately affirmed.  Baldwin had obtained a vehicle loan from Regions containing an arbitration clause which provided that either party could choose to arbitrate any dispute between them, and if a dispute is arbitrated, Baldwin waived his class action rights.  In the initial action, Baldwin filed a putative class action suit alleging that Regions violated Florida Statutes section 559.72(16) by sending him and other debtors of Regions envelopes with the words “Consumer Collections” printed on the outside. Baldwin asserted that the envelopes were meant to embarrass the debtors. Florida Statute section 559.72(16) states that a person attempting to collect a consumer debt cannot mail communications to a debtor in an envelope with any words on the outside calculated to embarrass the debtor. Fla. Stat. § 559.72(16) (2010).  Pursuant to the vehicle loan, Regions made a motion to compel arbitration.

At the hearing on the motion, Baldwin alleged that the arbitration clause waiving the right to a class action was in violation of the remedial provisions of the FCCPA, Florida Statute section 559.77(2), not that the clause was unconscionable. Baldwin argued that this section of the FCCPA allowed for twice the amount ($2,000 cap) of statutory damages if a claim was brought as a class action as opposed to an individual action ($1,000 cap). Baldwin also argued that the allowance for punitive damages and other equitable relief under the same section was greater for a class action claim than for an individual claim.

The Court disagreed with both arguments.  Florida Statute section 559.77(2) provides that, if an action is filed on an individual basis, a prevailing plaintiff may recover “additional statutory damages” not exceeding $1,000. § 559.72(2). Similarly, if an action is filed as a class action, and the class prevails, the named plaintiff can receive “additional statutory damages of up to $1,000” and all remaining class members may receive “an aggregate award of additional statutory damages up to the lesser of $500,000 or 1 percent of the defendant's net worth,” but “the aggregate award may not provide an individual class member with additional damages in excess of $1,000.”  Baldwin’s argument failed due to this final statement.  The Court held that the statute applies uniformly to actions brought either as a class action or as an individual action.

To read the entire opinion, click here.