Marriott Case Will Affect Class Action Waiver Enforceability

Marriott and Accenture are challenging certification of multiple classes in a data breach case for a second time—this time with new arguments that could have sweeping implications for class actions and the enforceability of class action waivers.

Last year, following a remand from the Fourth Circuit, a Maryland judge re-ordered certification of eight classes of consumers affected by a Marriott data breach. That decision in Marriott International, Inc., Customer Data Security Breach Litigation, now on appeal, is broadly applicable to other putative class actions and how companies can enforce their contractual class action waivers.

Waivers

Often found within arbitration clauses, class action waivers are contractual provisions requiring parties waive their right to bring a class action or other aggregate or representative action.

Class action waivers work in tandem with arbitration clauses to enforce the consumer’s agreement not to bring class actions in court: The arbitration clause requires the parties to agree they will arbitrate their disputes outside court, while the class action waiver enforces that the parties won’t bring class, aggregated, or representative actions in court or arbitration.

Like arbitration clauses, class action waivers can be waived. That’s what the district court found in the recent Marriott case—a ruling Marriott recently appealed on various grounds that may have far-reaching implications for class action waivers.

The Marriott case involved several class action lawsuits brought against Marriott, wherein customers allege the hotel and its IT provider, Accenture LLC, failed to take reasonable steps to protect personal information exposed in a 2018 data breach affecting roughly 133 million individuals in the US.

The district court had granted class certification to several, but not all, of the plaintiffs’ proposed classes, and Marriott appealed to the Fourth Circuit.

In its appeal, Marriott argued the district court erred by certifying classes against it without first addressing its class action waiver defense at the certification stage.

A Fourth Circuit three-judge panel agreed, unanimously holding that the time for a district court to address a contractual class action waiver, like the one Marriott asserted, was before—not after—a class is certified, because resolving the import of class action waivers at the certification stages should be “the first order of business.” And a district court can’t simply certify a class at the behest of plaintiffs who have promised to only bring “individual actions” by signing a class action waiver.

The Fourth Circuit then vacated the district court’s ruling and remanded the matter back to the district court to first determine the impact of the class action waiver before ruling on class certification.

In a classic case of “be careful what you wish for,” on remand, the district court reinstated certification for several of the previously certified classes, and held that Marriott had waived its class action waiver by acting inconsistently with that waiver during the litigation.

Another Appeal

Now, Marriott and Accenture are appealing the district court’s class certification order.

Marriott challenges the court’s ruling that a class action waiver can be implicitly waived merely by participating in multidistrict litigation with a bellwether process. No other court in the country—besides the Marriott court—has ever so held.

On the contrary, many courts have enforced class action waivers in MDLs. A waiver is an intentionally high bar requiring clear and intentional manifestation of intent to relinquish a right.

Holding otherwise, as the court appears to have done in Marriott, creates a situation where no defendant could ever agree to streamline litigation without jeopardizing its contract defenses. This is particularly true in the Marriott case, where Marriott agreed to participate in an MDL to address dozens of different cases, each involving dozens of different contracts with different terms.

Marriott therefore arguably didn’t know which contract would form the basis of which claims when it agreed to the MDL proceeding and couldn’t have knowingly waived its rights under its contracts—particularly when it raised the defense in its motion to dismiss, during discovery, and at class certification.

Marriott challenges the court’s ruling that the Federal Rules of Civil Procedure 23 and 42 ban class action waivers, leaving “‘no room’ for ‘private agreements among litigants’ to a standalone ‘waiver of consolidated or class-wide adjudication.’” But courts have regularly upheld class action waivers as being fully consistent with the federal rules, including that the rules don’t establish a “nonwaivable” right to proceed as a class action. Upholding such provisions also enforces the as-written expectations of contracting parties.

Marriott challenges the district court’s holding that class action waivers like Marriott’s and Accenture’s are inherently “adhesive” and unfair based in part on how the class action waiver was presented in the contract—e.g., on the last page. The US Supreme Court has emphatically held that class action waivers aren’t unfair.

As Marriott argues, merely being a form contract doesn’t render the contract adhesive or procedurally unconscionable under applicable New York law—and the district court failed to address the issue of substantive unconscionability, which is also required for a finding of unconscionability under New York law.

While Marriott’s arguments are predicated on the specific class action waivers at issue in its case, these arguments on appeal could have broader implications for the fundamental viability of class action waivers in consumer contracts. A definitive ruling on any of these questions could have a lasting effect on how enforceable class action waivers are, moving forward.

The case is Maldini v. Marriott International, Inc., 4th Cir., No. 24-1064.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Daniella Main is partner in Alston & Bird’s litigation & trial practice group.

Brooke Bolender is an associate in Alston & Bird’s litigation & trial practice group.

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