In two putative class actions pending in the Eastern District of North Carolina, the Department of Justice has filed statements of interest urging the Court to deny defendants’ motions to compel arbitration of plaintiffs’ claims for violations of the Servicemembers Civil Relief Act.

In Padao v. American Express National Bank, No. 5:22-cv-00145-BO-RN (E.D.N.C.), and Espin v. Citibank, No. 5:22-cv-00383-BO-RN (E.D.N.C.), plaintiffs alleged that defendants American Express and Citibank violated the interest rate cap imposed by the SCRA on certain debts in connection with periods of military service.  Both defendants moved to compel arbitration based on arbitration clauses and waivers of representative proceedings in their credit card agreements.

In statements of interest filed in both cases, the DOJ urged the Court to deny defendants’ motions, contending that Congress amended the SCRA in 2019 to allow servicemembers to enforce their rights under that law on a class or representative basis “in accordance with the Federal Rules of Civil Procedure” and “notwithstanding any previous agreement to the contrary.”  These explicit references to the federal rules and to previous agreements, the DOJ argued, evince Congressional intent to override the Federal Arbitration Act’s mandate to enforce arbitration agreements according to their terms.  Moreover, according to the DOJ, this aspect of the 2019 amendment is not impermissibly retroactive because it introduces only “jurisdictional or procedural changes” and does not affect the parties’ underlying substantive rights.

While Padao and Espin focus on the narrow issue of arbitration agreements involving servicemembers under the SCRA, the DOJ’s filings provide an interesting perspective on arguments that might be made to interpret statutory provisions as conveying a Congressional command contrary to the FAA.