Sixth Circuit Rejects Class Claims Against LexisNexis
In a case brought by a lawyer who objected to LexisNexis's billing practices, the U.S. Court of Appeals for the Sixth Circuit ruled Tuesday that the lawyer can't attempt to bring a class arbitration, even if the governing arbitration contract is unfair. The court relied primarily on the Supreme Court's June ruling in American Express v. Italian Colors Restaurant, in which the court upheld a ban on class arbitrations that arguably precluded plaintiffs from bringing individual claims.
The Sixth Circuit case was brought by Craig Crockett, a lawyer in Forth Worth, who complained that LexisNexis should have alerted him when he was about to incur additional fees by using a database outside his plan. He brought an arbitration action in 2010 seeking damages of more than $500 million on behalf of a class. Individually his damages were less than $5,000. The user contract, which required the arbitration of customer disputes, did not address whether class arbitrations were allowed.
Reed Elsevier, which owns LexisNexis, sued Crocket in federal court in Dayton, seeking a declaration that the customer agreement didn't permit class arbitration. The district court granted the company summary judgment.
Sixth Circuit Judge Raymond Kethledge, writing for a unanimous panel, agreed with Crockett that the arbitration agreement between LexisNexis and its customers is a one-sided contract of adhesion. "The clause favors LexisNexis at every turn, and as a practical matter makes it economically unfeasible for Crockett or any other customer to assert … individual claims," the judge wrote. The court noted that the contract required that all arbitrations take place in Dayton, and that the customer pay his own legal fees even if he wins.
Nonetheless, the court ruled that under the Supreme Court's recent ruling in Italian Colors, it could not allow a class arbitration. That case also involved a one-sided contract that favored American Express, the court noted. The court also rejected Crockett's argument that the arbitrator, not the judge, should decide if class claims are allowed.
The court suggested that market forces might provide a solution for plaintiffs. It noted that Westlaw's user agreement doesn't have an arbitration clause.
Charles Faruki of Dayton's Faruki, Ireland & Cox represented Reed Elsevier. "The Sixth Circuit got it right," he told the Litigation Daily. "What the Sixth Circuit did is apply the teachings of the U.S. Supreme Court." Asked about the terms of the arbitration agreement, Faruki noted that LexisNexis usually resolves its billing disputes without litigation. "LexisNexis has a long history of readily crediting customer accounts when there is a dispute," he said. He added that in this case, the company had already given a credit for the amount contested by Crockett.
Crockett's lawyer, Blair Fenterstock of Fenterstock & Partners in New York, said he was disappointed in the ruling. "Decisions like this deprive small businesses of due process," he said.