Greenwood v. CompuCredit Corp.: The Ninth Circuit’s Misdirected Interpretation of the Credit Repair Organizations Act

I. INTRODUCTION In Greenwood v. CompuCredit Corp.1 the United States Court of Appeals for the Ninth Circuit was asked to decide whetiier the Credit Repair Organizations Act ("CROA")2 permitted the enforcement of an arbitration agreement in a credit-repair contract.3 The Nindi Circuit glibly announced diat the issue in the case was as simple as making a determination about whether the word "sue" could really mean "arbitrate" and light-heartedly suggested diat "perhaps the question [was], as Alice put it: 'whether you can make words mean so many different things?'"4 Although two other circuits had previously concluded that similar arbitration agreements did not run afoul of the CROA,5 the Ninth Circuit nonetheless created a circuit split by holding that the plain meaning of the CROA afforded consumers the definitive right to adjudication of all CROA disputes in a judicial forum.6 The court's decision wrongly created a circuit split because it misapplied relevant Supreme Court precedent; specifically, it adopted an interpretive methodology that was insufficiently hospitable towards arbitration agreements. This Note begins by summarizing the relevant facts and procedural history of Greenwood. Next, the Note provides a brief background for the key federal statute governing agreements to arbitrate, die Federal Arbitration Act, and then discusses some of the crucial Supreme Court precedent regarding statutory challenges to arbitration agreements. The Note then presents a brief discussion of die other circuit court decisions from which the Nindi Circuit split in its interpretation of the CROA in Greenwood. Finally, the Note provides a detailed discussion of die Ninth Circuit's reasoning in Greenwood before concluding with an analysis of how the Greenwood decision erred by interpreting the CROA in a way that was too inhospitable to arbitration agreements. II. FACTS AND PROCEDURAL HISTORY CompuCredit Corporation was a business that used direct mail solicitation to market credit cards allegedly designed to help individuals repair their credit.7 These cards had an initial credit limit of just $300. Although no deposit was required for card membership, the "subprime" cards actually carried first-year fees of $257.8 These fees were disclosed in card promotional materials, but these disclosures were buried within small print.9 The promotional materials for the card also included a "PreApproved Acceptance Certificate" that stated, among other things, that by signing the certificate consumers represented diat tiiey had both read and accepted die "Terms of the Offer."10 One of the provisions of the "Terms of the Offer" stated the following: "Important- The agreement you receive contains a binding arbitration provision. If a dispute is resolved by binding arbitration, you will not have the right to go to court or have the dispute heard by a jury, [or] to engage in pre-arbitration discovery . . . ."" The plaintiffs in Greenwood were consumers of CompuCredit credit cards.12 The plaintiffs brought suit, alleging that CompuCredit's failure to provide adequate fee disclosures had violated both the CROA and California state law.13 CompuCredit moved to compel arbitration, seeking to enforce the arbitration agreements contained in the "Terms of the Offer."14 The district court declined to uphold the arbitration agreement contained in the "Terms of die Offer" and held that the CROA precluded such agreements.15 CompuCredit appealed the district court's denial of its motion to compel arbitration.16 III. SIGNIFICANT LEGAL BACKGROUND After briefly explaining the impact of the Federal Arbitration Act on arbitration jurisprudence, this section surveys the relevant Supreme Court precedent regarding statutory challenges to arbitration agreements. Finally, this section concludes by briefly examining the decisions from which Greenwood split by holding that the CROA precludes arbitration. A. Federal Arbitration Act - Abandonment of Common Law Arbitration Animosity Historically, courts disfavored arbitration. …