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CPR Files Petition for Certiorari in United States Supreme Court for Plaintiff Class Arbitration

A team of Cohen, Placitella & Roth lawyers, led by Robert L. Pratter, has filed a Petition for Certiorari on behalf of our client, Scout Petroleum, LLC, asking the U.S. Supreme Court to review a Third Circuit decision affecting Scout’s putative class arbitration against Chesapeake Appalachia LLC. Scout alleges that Chesapeake has breached the terms of hundreds of identical oil and gas leases in the Marcellus Shale Region by charging the lessors for costs not agreed to and underpaying royalties due under the leases. Chesapeake has filed suit in federal court seeking to deny Scout and the other lessors’ the right to litigate their claims on a class basis.

The legal issue presented to the Supreme Court is whether the arbitrators or the federal court has the authority to decide if Scout may bring a class arbitration. The Third Circuit ruled that the court shall decide that issue. Cohen, Placitella & Roth maintains in the petition that the leases clearly give the arbitrators the authority to decide if class treatment is permitted, and that the Supreme Court should hear the matter in order to resolve a conflict between the Third Circuit decision and Supreme Court precedent, decisions in the vast majority of other federal circuits and state law upholding the arbitrators’ power to decide on class arbitrations.

The question before the Court has important practical implications for thousands of consumers, employees and small businesses in Pennsylvania, New Jersey and Delaware who are parties to agreements which require arbitration of all disputes in accordance with the rules of the American Arbitration Association. “If the Third Circuit decision stands,” Pratter said, “people who have agreed to arbitrate disputes, and have a basis to file their claims on a class or collective basis, will be forced to endure time-consuming, costly civil litigation on the preliminary issue of ‘who decides,’ often in federal court, that the arbitration agreement was intended to avoid.” He added, “Also, given increased judicial hurdles to maintain class actions and class arbitrations, many plaintiffs subject to arbitration agreements may not pursue single arbitration if the amount at issue for each person does not justify the arbitration fees and other burdens of individual arbitration.” Pratter also commented that, “the Third Circuit decision puts persons in the Third Circuit at a disadvantage as compared to citizens in the vast majority of states where courts have upheld the arbitrators’ right to decide the class arbitration question.”

One of the takeaways for clients is knowing whether they are being asked to sign agreements which waive their right to bring claims in court and/or waive all forms of class or collective action. People should also be aware that many companies doing business on the internet include such waivers in their standard terms and conditions. If clients do not have the bargaining power to refuse to waive these important rights, they should clearly understand what rights they have in arbitration.

The Supreme Court is not expected to rule before June 2016 on whether it will accept the case for review.

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