Recently, some companies have dodged potential class liability by forcing would-be plaintiffs into arbitration. Other businesses have “picked off” class adversaries by paying them individual damages. Can those strategies be successfully combined?

The answer is “maybe,” and, because the possible downside to trying is nearly non-existent, prudent real estate businesses should give it a go. That is done through a “notice and cure provision” (NCP). That sort of contractual clause states that, before suing, an unhappy client must inform the company of her dispute and give the entity a chance to informally resolve the matter.

What practical effect does that have? It would skyline plaintiffs in advance and allow the company an opportunity to offer individual damages. If a plaintiff fails to do that, her later lawsuit might be barred. And if she does do it, that could raise the likelihood of success for the company’s argument that its offer of damages mooted the person’s individual claims and thus blocks her from representing a class.

Many courts refuse to permit “pick off” efforts, but the inclusion of an NCP in a contract might create in implied duty on the part of the consumer to reasonably entertain offers of individual settlement. At least that is what I would argue. And the NCP can even be coupled with an arbitration provision so that it will benefit from arbitration laws, and the chances of its being enforced will go up.

A recent decision from a federal court in California, Giotta v. Ocwen Financial Corporation [pdf], shows how a company might successfully invoke an NCP. In that case, even though his deed of trust contained an NCP, a borrower ignored it and sued anyway. The main controversy about the enforceability of the NCP was whether it applied to both contractual and non-contractual claims. Based on the broad wording of the NCP, the court found that it did, dismissing the entire case. A great result for Ocwen.