Green Tree Financial Corp.-Alabama v. Randolph

Background

A consumer, Larketta Randolph, bought a mobile home and financed it through a finance company that included a mandatory arbitration clause in the sales contract. Randolph sued, claiming the lender failed to disclose certain charges under the Truth in Lending Act and later added a claim about being forced to arbitrate statutory rights. The district court ordered arbitration, dismissed her court claims, and denied class certification. The Eleventh Circuit reversed the arbitration clause as unenforceable because it said nothing about who would pay arbitration fees, and Randolph appealed to the Supreme Court.

Reasoning

The Court addressed two questions. First, it decided whether an order that sends a case to arbitration and dismisses all claims is a “final decision” that can be appealed under the Federal Arbitration Act; the Court said yes, because the district court had disposed of the whole case. Second, it asked whether silence about arbitration costs in the contract makes the clause unenforceable. The Court held that mere silence is not enough. The person resisting arbitration must show that arbitration would be prohibitively expensive in fact, and Randolph provided no reliable evidence of such costs.

Real world impact

The decision means parties can immediately appeal a court order that sends an entire case to arbitration. It also makes it harder for consumers to invalidate arbitration clauses solely because the contract does not say who will pay arbitration fees; a specific showing of likely prohibitive costs is required. The ruling does not foreclose a later challenge if a consumer actually faces excessive fees.

Dissents or concurrances

Justice Ginsburg agreed on appealability but would have remanded for more factual development about cost practices, noting lenders often have better information about arbitration fees.