District Court Holds SCRA Class Action Not Limited by Arbitration Agreement

The U.S. District Court for the Eastern District of North Carolina recently held that the Servicemembers Civil Relief Act (SCRA), which allows SCRA claims to be brought on a class basis, overrides the Federal Arbitration Act’s general mandate requiring enforcement of arbitration agreements.  In so holding, the court denied a large national bank’s motion to compel arbitration in a putative class action brought under the SCRA by accountholders whose card agreements with the bank contained an arbitration provision.

The court found that the plain terms of the applicable arbitration agreement did not allow any class claims to be arbitrated.  A 2019 amendment to the SCRA, however, allows plaintiffs to bring class actions under the statute “notwithstanding any previous agreement to the contrary.”  Thus, even an arbitration agreement entered into prior to the 2019 amendment cannot limit the ability to bring SCRA claims as a class action.  This argument was also advocated by the DOJ, which filed a statement of interest in the case.

The bank has appealed this ruling to the U.S. Court of Appeals for the Fourth Circuit.