The Third Circuit recently refused to uphold a class action arbitration waiver in a credit card agreement as void against public policy under New Jersey law. In Homa v. American Express Company, class plaintiffs sued in New Jersey District Court claiming that Amex had misrepresented terms of a rewards program in violation of New Jersey law. The cardholder agreement provided for arbitration of all claims on an individual basis, and that it was governed by Utah law. Utah law expressly allows class-arbitration waivers. However, such waivers violate New Jersey state public policy. Amex attempted to invoke the class action arbitration waiver, arguing that Utah law should apply. But applying New Jersey state choice of laws rules, which prohibit enforcement of contractual choices which violate state public policy, the court found that the class action waiver provision could not be enforced under New Jersey public policy.

In applying a state choice of law analysis, the decision closed the door on a potential Federal Arbitration Act (FAA) argument that the FAA preempts state law on class action waivers in the Third Circuit. The Ninth Circuit has already reached the same conclusion. Thus, arbitration clauses may not prevent class exposure in key consumer states, even where the agreements expressly provide that they are to be construed under the law of a state which permits such class action waivers.