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On December 1, 2016, Parker Hannifin Corporation and CLARCOR Inc. announced that the companies have entered into a definitive agreement under which Parker will acquire CLARCOR for approximately $4.3 billion in cash, including the assumption of net debt. The transaction has been unanimously approved by the board of directors of each company. Upon closing of the transaction, expected to be completed by or during the first quarter of Parker’s fiscal year 2018, CLARCOR will be combined with Parker’s Filtration Group to form a leading and diverse global filtration business. Bass, Berry & Sims has served CLARCOR as primary corporate and securities counsel for 10 years and served as lead counsel on this transaction. Read more here.

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Securities Law Exchange BlogSecurities Law Exchange blog offers insight on the latest legal and regulatory developments affecting publicly traded companies. It focuses on a wide variety of topics including regulation and reporting updates, public company advisory topics, IPO readiness and exchange updates including IPO announcements, M&A trends and deal news.

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Consumer Financial Protection Bureau Proposed Rule Bans Arbitration Class Action Waivers

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May 6, 2016

On Thursday, the Consumer Financial Protection Bureau (CFPB) released its long-awaited proposed regulation banning consumer financial companies and their affiliates from including in their contracts arbitration provisions that customers agree to arbitrate individually their complaints rather than bringing or being part of a class action lawsuit.  The CFPB first announced it was considering such a ban in October of last year.

Although arbitration provisions have been challenged on multiple grounds, including unconscionability and violation of state consumer protection acts, the U.S. Supreme Court and lower courts have consistently upheld their legality.  In the face of those decisions, and the authorization of such provisions in the Federal Arbitration Act, the CFPB nonetheless has concluded that its proposed Rule is in "the public interest and for the protection of consumers" (Dodd-Frank Act, Sec. 1028 (b)) because such arbitration provisions result in consumer financial companies getting a "free pass" to "side step the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm countless consumers." (CFPB press release, October 7, 2015) (CFPB press release, May 5, 2016).

The proposed Rule:

1) Prohibits use of pre-dispute arbitration provisions that compel a consumer to arbitrate claims individually rather than by participating in a class action lawsuit.

2) Requires covered consumer financial companies  providing financial and consumer products and services include the following in their arbitration agreements:

We agree that neither we nor anyone else will use this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it.

3) If several products or services are being provided, but some of are not covered by the Rule, the following notice may be included:

We are providing you with more than one product or service, only some of which are covered by the Arbitration Agreements Rule issued by the Consumer Financial Protection Bureau. We agree that neither we nor anyone else will use this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it. This provision applies only to class action claims concerning the products or services covered by that Rule.

4) Requires consumer financial companies provide to the CFPB records relating to all arbitrationsconcerning consumer financial products and services within 60 days of filing or receipt.

5) Applies not only to covered consumer financial companies, but also their affiliates.

A challenge to the CFPB's regulation is inevitable. CFPB's efforts to eliminate class action waivers in consumer arbitration agreements depends upon a determination it did not exceed its rule making authority by restricting or prohibiting the use of arbitration agreements.

The CFPB justifies the Rule based on data used and conclusions reached in its March 2015 Arbitration Study Report to Congress.  This  empirical study is certain to be analyzed and tested  by the consumer financial services industry to determine whether it supports the CFPB's view that the public interest and protection of consumers requires a regulation restricting, or even outlawing, otherwise enforceable arbitration terms in consumer contracts.

The CFPB's Proposed Rule and interpretation can be found here.


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