Court of Appeals upholds enforceability of Arbitration Agreement that prohibits Class Action Relief.
In rendering its recent opinion in Chapman v. H.R. Block, the Court of Appeals addressed the enforceability of an allegedly unconscionable arbitration agreement. The Plaintiff argued that the arbitration agreement she signed as part of a loan contract was unconscionable for a host of reasons…one of which was that it prevented the Plaintiff from pursuing the arbitration on a Class Action basis. In affirming the judgment in favor of H.R. Block, the Court of Appeals noted two considerations relevant to determining the enforceability of an arbitration agreement that prohibits Class Action relief: (1) whether the Plaintiff could effectively prosecute his or her claims through arbitration without recourse to class action, and (2) whether a class was actually certified by the trial court. Finding that neither of these considerations weighed in Plaintiff’s favor, the Court ruled that the Class Action prohibition did not invalidate the enforceability of the agreement.
The opinion raises an interesting question. Under the Court's prior ruling in Pyburn v. Bill Heard Chevrolet, it appeared as though these kind of Class Action prohibitions were specifically sanctioned. 63 S.W.3d 351, 365 (Tenn.Ct.App. 2001). However, given the way this case was analyzed, it leaves open the possibility that such a clause may be unconscionable if class action relief is found to be the only means of effectively prosecuting the Plaintiff's claim.