In Picardi v. Eighth Judicial Dist. Court of State, ex rel. County of Clark, — P.3d —-, 2011 WL 1205284 (Nev. 2011), the Nevada Supreme Court struck down an arbitration clause in an automobile retail installment sales contract on the basis that the class action arbitration clause violated Nevada state public policy. The Supreme Court set the stage for the issue as follows:
After purchasing the vehicle, the Picardis filed in the district court a proposed class action complaint against United Hyundai alleging, among other things, fraud and violations of the Nevada Deceptive Trade Practices Act and the Nevada Retail Installment Sales Act. The class action claims were grounded on United Hyundai’s alleged practices of erroneously charging new vehicle purchasers $38 for an emissions test, failing to properly disclose a $1,459 charge for an after-market paint protection product, and adding the “negative equity” of a purchaser’s trade-in into the new “vehicle selling price” on the retail installment sales contract without disclosing and/or itemizing the amount of “negative equity.” The complaint sought special and exemplary damages, restitution, attorney fees and costs, and declaratory and injunctive relief. ¶ When the Picardis refused United Hyundai’s request to submit the matter to neutral, binding arbitration, United Hyundai filed a motion to compel arbitration in accordance with the arbitration clause and to stay the district court proceedings. The Picardis opposed the motion and filed a countermotion for a declaratory judgment, arguing, among other things, that the arbitration agreement was procedurally and substantively unconscionable and contrary to public policy and that it should therefore be held unenforceable. According to the Picardis’ opposition and supporting declarations from local attorneys, the class action waiver was exculpatory because, in cases such as the Picardis’ where the individualized claims are relatively small, it is almost impossible to secure legal representation unless those claims are aggregated with the claims of other similarly situated individuals. The district court disagreed, granted the motion to compel arbitration, stayed any further district court proceedings, denied the Picardis’ countermotion for a declaratory judgment, and prohibited the Picardis from participating in any form of class action against United Hyundai.
In granting the writ of mandamus instructing the lower court to reverse the Order referring the matter to arbitration, the Supreme Court explained, in part:
NRCP 23(b)(3) is one of the provisions that authorizes maintenance of a class action and demonstrates a state policy favoring class actions when the class members present common questions of law or fact that predominate over any questions affecting only individual members. Nevada caselaw similarly demonstrates that class actions effectively provide a forum for “individuals [who would] be unable to obtain any redress for ‘wrongs otherwise irremediable because the individual claims are too small….’ “ Shuette v. Beazer Homes Holdings Corp., 121 Nev. 837, 846, 124 P.3d 530, 537 (2005) (quoting Johnson v. Travelers Insurance Co., 89 Nev. 467, 470, 515 P.2d 68, 71 (1973)). Additionally, class actions serve a valuable function in Nevada’s judicial system by increasing efficiency because the courts do not have to use their limited resources deciding a litany of cases that stem from a single incident and present similar issues. D.R. Horton v. Dist. Ct., 125 Nev. ––––, ––––, 215 P.3d 697, 703 (2009). This recent caselaw further evinces Nevada’s strong public policy in favor of class actions in order to provide multiple plaintiffs, who individually may have a valid but small claim, an adequate remedy at law. This public policy is consistent with the growing number of jurisdictions that favor aggregating small consumer claims. See, e.g., Deposit Guaranty Nat. Bank v. Roper, 445 U.S. 326, 339 (1980) (“Where it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device.”); Scott, 161 P.3d at 1005 (“Washington’s [class action rule] … demonstrates a state policy favoring aggregation of small claims for purposes of efficiency, deterrence, and access to justice.”). The class action mechanism is important in cases involving small claims consumer cases because “[t]he realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.” Carnegie v. Household Intern., Inc., 376 F.3d 656, 661 (7th Cir.2004). Therefore, we hold that the class action waiver within the Picardis and United Hyundai’s arbitration agreement is unenforceable because it violates Nevada’s public policy favoring class actions by prohibiting class status in both litigation and arbitration. ¶ Because we conclude that the class action waiver in the arbitration agreement violates public policy, it is unenforceable. Because United Hyundai did not argue for severability, and because the arbitration agreement provides that it is void if the class action waiver is found unenforceable, there is no basis on which to compel arbitration. Therefore, we conclude that the district court abused its discretion in compelling arbitration and writ relief is warranted. Accordingly, we grant the Picardis’ petition and direct the clerk of this court to issue a writ of mandamus instructing the district court to set aside its order granting United Hyundai’s motion to compel arbitration so that the district court action may proceed.