CHICAGO and
NEW YORK ―
Edward K. Lenci and
Joel D. Bertocchi, respectively partners in the
New York and
Chicago offices of Hinshaw & Culbertson LLP, recently persuaded the U.S. Supreme Court to vacate the decision of the U.S. Court of Appeals for the Second Circuit in
Fensterstock v. Affiliated Computer Services, Inc., 611 F.3d 124 (2d Cir. 2010). The Second Circuit had declared a class arbitration waiver in a promissory note to be unconscionable under California law.
In
Fensterstock, plaintiff, a New York attorney, brought a class action lawsuit in the U.S. District Court for the Southern District of New York against his lender and its loan servicer, ACS, a Xerox company, with respect to his consolidation student loan. The attorney plaintiff claimed he was charged “hidden” penalties. Hinshaw, representing ACS, moved to compel arbitration under the Federal Arbitration Act (FAA), citing the promissory note’s arbitration provisions, which included a broad waiver of the right to pursue either a class action lawsuit or a class arbitration. The district court denied the motion to compel arbitration, finding that the class arbitration waiver was unconscionable under California’s "
Discover Bank rule" (see
Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005)). The Second Circuit affirmed.
Messrs. Lenci and Bertocchi filed a petition for certiorari in January 2011, asserting that the FAA preempts the Discover Bank rule. On June 13, 2011, the U.S. Supreme Court issued the following order: “The petition for a writ of certiorari is granted. The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Second Circuit for further consideration in light of
AT&T Mobility LLC v. Concepcion, 563 U.S. ___ (2011).” In
AT&T Mobility, the Supreme Court held, 5-4, that the FAA preempts the
Discover Bank rule, which has been the basis for many decisions, including the Second Circuit’s, denying enforcement of class arbitration waivers where California law applies.
Founded in 1934, Hinshaw & Culbertson LLP is a national law firm with approximately 500 lawyers in 24 offices spanning 12 states, including
Arizona,
California,
Florida,
Illinois,
Indiana,
Massachusetts,
Minnesota,
Missouri,
New York,
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Rhode Island and
Wisconsin.
Hinshaw offers a full-service practice, with an emphasis in litigation, business law and corporate transactions, environmental, intellectual property, labor and employment law, professional liability defense, estate planning and taxation matters. The firm represents a range of for-profit and not-for-profit clients in industries that include alarm and security services, construction, financial services, health care, hospitality, insurance, lawyers and law firms, manufacturing, real estate, retail and transportation. Hinshaw clients also include government agencies, municipalities and schools.