The Supreme Court Favors Arbitration -- Again

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[author: Mark W. Batten]

In recent years the U.S. Supreme Court has consistently favored arbitration against efforts to limit it, so long as the parties' intent to arbitrate is clear.  In 14 Penn Plaza v. Pyett, in which Proskauer represented the Petitioner, the Court held that parties to a collective bargaining agreement can require bargaining unit members to arbitrate discrimination claims if the agreement clearly calls for arbitration of such claims.  Then, last year, in Stolt-Nielsen v. AnimalFeeds, the Court authorized class arbitrations, again so long as the parties clearly agreed.

Today, in AT&T Mobility v. Concepcion, the Supreme Court overturned a Ninth Circuit decision and held that AT&T's agreements with customers, which require individual arbitration of all disputes and prohibit class claims, were enforceable. 

The dispute arose from a complaint by the Concepcions that AT&T had charged sales tax on mobile phones that AT&T had advertised as free.  The Concepcions doubly ignored the service agreement, by filing a lawsuit rather than an arbitration and pursuing it as a class claim.  The Ninth Circuit rejected AT&T's argument based on the agreement terms, based on a well-worn tradition under California law and in the Ninth Circuit (which has been reversed on this subject before) that agreements like AT&T's are unconscionable.

The Supreme Court ruled, 5-4, that the Federal Arbitration Act protected AT&T's agreement.  Using arguments that have become familiar, Justice Scalia wrote that the purpose of arbitration is to offer a faster, less expensive alternative to litigation, and those aims would be substantially undermined by permitting class claims.  Justice Breyer, in dissent, noted that the Federal Arbitration Act preserves courts' ability to invalidate arbitration agreements on state law grounds, and saw no reason that California should not be permitted to legislate in that area.

Although Concepcion was a consumer case, the Court's reasoning would seem equally applicable to the employment context, and employers with existing arbitration policies, or who are considering adopting such policies, would be well advised to adopt a class action waiver as well. 


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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