Opinion ID: 1280542
Heading Depth: 2
Heading Rank: 1

Heading: Seventh Circuit Approach

Text: Green Tree urges the Court to adopt the reasoning employed by the Seventh Circuit, holding courts lack authority to order class-wide arbitration under section 4 of the FAA. 9 U.S.C. § 4. Section 4 requires arbitration in accordance with the terms of the agreement. If the arbitration agreement in question is silent on the issue, these courts reason that authorizing class-wide arbitration would not be in accordance with the terms of the agreement. See Champ v. Siegel Trading Co., Inc .; McCarthy v. Providential Corp., et. al., 1994 WL 387852 (N.D.Cal.); Gammaro v. Thorp Consumer Discount Co., 828 F.Supp. 673 (D.Minn.1993). These courts support their decisions by drawing an analogy between ordering class-wide arbitration and ordering consolidation in arbitration. [13] Id; Med Ctr. Cars, Inc. v. Smith, 727 So.2d 9 (Ala.1998)(finding the federal authority persuasive and applying the consolidation analogy to class-wide arbitration in Alabama state courts). In Champ, a class action alleging violations of the Commodity Exchange Act, RICO, and other state laws, the Seventh Circuit found no meaningful basis to distinguish between the failure to provide for consolidated arbitration and class arbitration. Id. at 275. Based on this comparison, the Champ court adopted the rationale of several other circuits and [held] that section 4 of the FAA forbids federal judges from ordering class arbitration where the parties' arbitration agreement is silent on the matter. Id.; Boeing; National Cas.; Baesler. In reaching their decision in the consolidation cases, the various courts placed strict enforcement of the terms of the agreement above the policy favoring expeditious resolution of claims. Champ. Citing a decision by the Second Circuit, the Champ court noted that the FAA's overriding goal was to place private arbitrations on the same footing as other contracts negotiated between private parties. Champ (citing United Kingdom v. Boeing, 998 F.2d 68 (2d Cir.1993)). In furtherance of this goal, the Second Circuit held the duty to enforce the agreement as the parties wrote it to be tantamount, regardless of possible inefficiencies created by such enforcement. Champ, 55 F.3d at 275 (citing Boeing, 998 F.2d at 72). The Champ court, however, failed to discuss whether the arbitration agreement was one of adhesion or was truly negotiated by the parties, and failed to discuss the differences between consolidation and class-action on a practical level.