The Federal Arbitration Act Preempts Any Right To A Class Action Under State Law

[authors: Adrienne Lee and Shannon Petersen]

The California Court of Appeal recently held that the Federal Arbitration Act (FAA) preempts any statutory right to a class action under the California Consumers Legal Remedies Act (CLRA). See Caron v. Mercedes-Benz Financial Services USA LLC et al., --- Cal.Rptr.3d ----, 2012 WL 2579662 (Cal.App. 4 Dist.). In doing so, the court applied the reasoning of the Supreme Court’s landmark decision in AT&T Mobility, Inc. v. Concepcion, 131 S. Ct. 1740 (2011) holding that the FAA preempts state laws refusing to enforce arbitration agreements according to their terms.

In Caron, the plaintiff purchased a vehicle under a contract that included an arbitration clause with a class action waiver. The plaintiff filed suit against the dealership and the lender, asserting class claims under the CLRA and other laws. The defendants petitioned to compel arbitration. The trial court denied the petition and refused to compel arbitration because it felt bound by Fisher v. DCH Temecula Imports LLC (2010) 187 Cal.App.4th 601, a pre-Concepcion opinion, which held that plaintiffs have an unwaiveable statutory right to a class action under the CLRA and that the FAA does not preempt the CLRA’s anti-waiver provision.

In light of Concepcion, however, Caron held that, “the CLRA’s anti-waiver provision stands as an obstacle to the FAA’s purpose and objective because it prevented the parties from enforcing their arbitration agreement according to its terms.” Accordingly, the court reversed and remanded the case to the trial court with directions to consider the plaintiff’s other argument that the arbitration provision is unconscionable for reasons unrelated to the class action waiver.

Adrienne Lee
(714) 424-2859
alee@sheppardmullin.com

Shannon Z. Petersen
(619) 338-6656
spetersen@sheppardmullin.com

 

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, Civil Remedies 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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