October 2011: Class Action Update

Class-Less Actions: Depending on which side of the class action divide you are on, 2011 has been either a very good year or a disaster. In April, and again in June, the United States Supreme Court issued decidedly pro-business decisions, cutting back on the availability of class actions to address large-scale consumer and employment practices.

In the first of the decisions, AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), a 5-4 Court decided that contracts of adhesion with arbitration clauses containing class action waivers are enforceable. Prior to Concepcion, trial courts frequently struck down such clauses as unconscionable, recognizing that class actions are necessary to remedy wide-spread consumer frauds or unfair business practices, because individual claims are almost always too small to motivate or justify individual action. California, for example, followed the Discover Bank rule, which held that class action waivers were not enforceable if they served as exculpatory clauses, letting companies off the hook for large schemes to defraud. Discover Bank v. Super. Court, 36 Cal. 4th 148 (2005). In Concepcion the Court held that Discover Bank was preempted by the Federal Arbitration Act.

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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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