On February 2, 2016, the Fourth Circuit Court of Appeals unanimously struck down an arbitration agreement and reinstated a dismissed consumer class action in Hayes v. Delbert Servs. Corp., No. 15-1170. This is a noteworthy breath of fresh air in light of the United States Supreme Court upholding a string of arbitration agreements.
The Fourth Circuit found the entire arbitration agreement in Hayes unenforceable because it purported to extinguish the claimants’ substantive rights under Federal law by wholesale prospective waiver of the same, i.e., was a “farce” that brazenly took a “plainly forbidden step”. Hence the Hayes Court refused to save the arbitration agreement by simply severing its “errant provisions”: “severance should not be used when an agreement represents an ‘integrated scheme to contravene public policy’.” Id. at 16-22.
