District of Rhode Island Rules that Class Action Waivers are Not Enforceable Outside of Arbitration

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Earlier this month, in Elsie Metcalfe v. Grieco Hyundai, LLC, the Rhode Island Federal District Court invalidated a class action waiver in an agreement without an arbitration clause that was therefore not subject to the Federal Arbitration Act.

In Metcalfe, Plaintiff Elsie Metcalfe leased a car from Defendant Grieco Hyundai, LLC, in May 2019.  The lease agreement included an option to purchase the vehicle at a specific price at the end of the lease.  When the Defendant raised the price, Ms. Metcalfe brought a class action for breach of contract and violation of the Rhode Island Deceptive Trade Practices Act, among other claims.  The Defendant moved to dismiss based on a provision in the lease agreement that waived the lessor’s right to bring or join a class action related to the lease.

Class Action Waivers Held to Violate Rhode Island and Massachusetts Public Policy

The District Court held the waiver violated Rhode Island public policy and was thus unenforceable.  The Court relied on a provision of the Rhode Island Deceptive Trade Practices Act that conferred on consumers a right to bring class action claims, noting that statutes are declarations of public policy and agreements that attempt to limit statutorily granted rights thus violate public policy.

The District Court’s reasoning is similar to that of the First Circuit’s in a 2020 case invalidating a class waiver provision in an employment contract not governed by the Federal Arbitration Act.  As in Metcalfe, the First Circuit found the waiver unenforceable as a matter of Massachusetts public policy because the Massachusetts Wage Act, among other state statutes, granted plaintiffs the right to proceed as a class.

The District Court also declined to dismiss the class action claim on other independent grounds, finding the original lease agreement was superseded by a later purchase agreement and installment contract that did not contain a similar class action waiver. The Metcalfe decision is a reminder to businesses that they should draft and regularly review their dispute resolution clauses in consumer contracts with experienced counsel in light of recent decisions on enforceability.