Aviation Data, Inc. v. American Express Travel Related Services Co.

May a party lose its contractual right to compel arbitration if, when negotiating and seeking approval of a class action settlement, it misrepresents the benefits of the proposed settlement to the court, opposing counsel and others? Here the trial court refused to approve a class action settlement when it concluded that counsel for defendant American Express Travel Related Services Company, Inc. (Amex), misled plaintiffs in the course of negotiations by offering to make significant modifications to its travel insurance program that, unbeknownst to plaintiffs, it had already made for reasons unrelated to the lawsuit. We hold the court did not err in ruling that due to its misleading conduct, Amex lost its right to compel arbitration. Accordingly, we affirm.

BACKGROUND

Amex offers flight and baggage insurance programs, under which cardholders are automatically charged a premium from $4 to $14 for each flight they charge. In September 2001, William D. Hoffman sued Amex on behalf of the general public of California under the California unfair competition law. (Bus. & Prof. Code, §§ 17200, 17500.) The complaint, as ultimately amended, alleged that Amex represented to card…