United States Supreme Court Approves Enforcement of Waivers of Class-Wide Arbitration

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On April 27, the United States Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion. The Supreme Court held that the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"), preempted a California law that invalidated class action arbitration waivers. The Court, in a 5-4 decision, overturned the Ninth Circuit's prior ruling striking down a class action waiver contained in AT&T Mobility's consumer arbitration agreements as unconscionable under California state law.

In this case, the Concepcions contracted for phone services and the purchase of new cell phones from AT&T Mobility through a wireless services agreement. The agreement included an arbitration provision requiring any dispute be arbitrated and a class action waiver clause. The Concepcions filed suit against AT&T Mobility, arguing that the company's practice of charging a sales tax on a cell phone advertised as "free" was fraudulent. The Concepcions' claim was joined to a putative class action alleging the same claims. AT&T Mobility moved to compel individual arbitration of the Concepcions' claims. The federal District Court, sitting in California, denied that motion, finding that the class action waiver was unconscionable under California law and further finding that the California unconscionability law was not preempted by the FAA. The Ninth Circuit affirmed.

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