Banned ItemsIn 2016, despite contracts that mandate one-on-one arbitrations, consumers will likely gain the right to bring claims against banks, credit card issuers, and other lenders in class actions. The new rule, which the Consumer Financial Protection Bureau announced on October 7, 2015 it will probably issue next year, will partially reverse a string of recent Supreme Court decisions that made class-banning arbitration clauses broadly enforceable.

The action by the Bureau will vastly raise the stakes for disputes involving practices affecting large numbers of consumer finance customers.

Impact of arbitration clauses on class actions

An arbitration clause can have dramatic impact. The outcome of a case that I tried as a class action several years ago provides an illustration.

The defendant in that case, a telephone company, had lost a trial over the enforceability of its arbitration clauses under California law. But the trial court in the class case granted the defendant’s motion to compel arbitration as to consumers who lived outside the Golden State. The jury awarded about $16 million in damages to the California consumers, who represented about 10 percent of the defendant’s nationwide overcharges. But for the arbitration clause, the verdict would have cost the defendant closer to $160 million.

The arbitration clause saved the company — and cost its customers — $146 million!

Similarly, in antitrust litigation against American Express, the vast majority of merchants who accept American Express cards lost the right to seek damages in court for Sherman Act violations — violations that a district court in New York found the company to have committed after a trial earlier this year. In Am. Express Co. Italian Colors Restaurant, 133 S. Ct. 2304 (2013) (post here), a 5-4 majority concluded that the federal Arbitration Act requires enforcement of a class action ban even if it makes vindicating the claimants’ rights so costly that no rational person would attempt to vindicate them. That decision alone may have saved American Express hundreds of millions in damages — all at the expense, of course, of the merchants.

Consumers have no idea. According to the CFPB’s report, which it published in March 2015, consumers “are generally unaware” that their contracts with lenders often include arbitration clauses or that the clauses surrender their right to sue in court. The study also found that credit card issuers moved to compel arbitration in two-thirds of the cases that consumers filed and that courts granted half of all motions to compel arbitration in cases that consumers brought as class actions.

No one knows how much that saved wrongdoers — or how much it cost their victims. But it’s safe to say that it’s a lot.

The Bureau and its authority

The CFPB describes itself as “a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.” The Bureau’s prime mover — Senator Elizabeth Warren of Massachusetts — liked to compare consumer finance with toasters, noting that as of the early 21st century far more safety rules protected consumers against defective toasters than against defective financial products like mortgages, credit card accounts, and payday loans.

Section 1028 of Dodd-Frank provides the CFPB with broad “Authority to Restrict Mandatory Pre-Dispute Arbitration.” Subsection (b) provides as follows (with my italics):

The Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers.

The Bureau’s proposal

In its Outline of Proposals Under Consideration and Alternatives Considered, the Bureau gives notice that it may “prohibit[] the application of arbitration agreements as to class cases in court” and may also “requir[e] submission to the Bureau of arbitral disputes (i.e., claims in arbitration) and awards and potentially also publication of those disputes and awards on the Bureau’s website.”

The agency notes that it “is not considering at this time a proposal that would prohibit entirely the use of pre-dispute arbitration agreements.” The CFPB also points out that the proposals “would not affect the ability of consumers and companies to agree to arbitrate disputes after they arise.”

The new rule would apply broadly to firms that provide consumer credit products and services. Although the Bureau could extend the rule to companies that extend credit for purchases of their own goods and services (e.g., wireless voice and data service providers), the agency chose not to consider doing so, at least for now.

Roll-back of Supreme Court decisions

In the last half decade, the Supreme Court has issued a series of pro-arbitration decisions that have enabled companies to use arbitration clauses to prevent class treatment of consumer claims, whether in court or in arbitration. In AT&T Mobility LLC v. Concepcion, 563 U.S. 321 (2011), for instance, the Court ruled that the federal Arbitration Act (FAA) pre-empts state law against bans on class treatment of claims). The same majority ruled in the Am. Express Co. v. Italian Colors Restaurant case that the FAA trumps the Sherman Act.

Under the new CFPB rule, neither case will stand in the way of class litigation.


The new rule will allow consumers (and their counsel) to aggregate small-dollar claims that would make no economic sense to bring individually. Lenders may want to invest more in their compliance departments. Because once the rule takes effect, they will no longer have the ability to derail class actions by citing the class-banning arbitration clauses that they inserted into the standard-form contracts they require customers to enter into.

Consumers can also hope that the Bureau’s example will encourage Congress to enact an across-the-board ban on arbitration clauses that prohibit class actions.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.