Class Action Waivers After Concepcion: The Emergence of a Circuit Split Over the Decision's Impact on Federal Claims Makes a Return to the Supreme Court Likely

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A year ago, the U.S. Supreme Court handed down its ruling in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), which enforced a contractual waiver of class arbitration in an arbitration clause under the Federal Arbitration Act (“FAA”) in the face of an unconscionability challenge based on state law. Since then, the federal circuit courts have digested the ruling’s impact in numerous cases. The arbitration clause in Concepcion had several “consumer- riendly” provisions, prompting some commentators to question whether the Court’s ruling was limited to clauses containing such provisions. The consensus in the circuit courts is that the answer is no, at least with respect to claims under state law. However, a circuit split has emerged regarding the impact of Concepcion when the plaintiff’s claim is based on federal statutory law.

The “Consumer-Friendly” Arbitration Clause in Concepcion -

In Concepcion, the Supreme Court held that a California state law rule invalidating class-action waivers in consumer contracts where the defendant has allegedly cheated large numbers of consumers out of small amounts of money was preempted by the FAA because that rule stood “as an obstacle to the accomplishment of the FAA’s objectives.” The majority opinion rejected the dissent’s argument “that class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system.” The majority responded that “States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” Moreover, the majority noted that “the claim here was most unlikely to go unresolved” because the arbitration clause at issue included several consumer friendly provisions, including provisions that required AT&T to pay for the costs of all non- frivolous claims that proceeded to arbitration and to pay a minimum amount of $7,500.00 plus twice the amount of the claimant’s attorney’s fees in the event that the claimant were to win an award larger than AT&T’s final written settlement offer.

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Published In: Alternative Dispute Resolution (ADR) Updates, Antitrust & Trade Regulation Updates, Civil Procedure Updates, General Business Updates, Conflict of Laws Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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