Originally published in Competition Law360 on May 15, 2012.
Last year, in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), the U.S. Supreme Court held that the so-called “collective arbitration waivers” (also called “class action waivers”) in AT&T’s consumer contracts — i.e., provisions that simultaneously required individuals to arbitrate their claims but which also prohibited any form of collective redress — could not be invalidated on the basis of California’s so-called “Discover Bank” rule, because that rule was “preempted by the [Federal Arbitration Act]." (“FAA”) Id. at 1746, 1753-55.
Concepcion’s holding is limited to instances where plaintiffs attempt to use “state-law” rules to challenge class action waivers that would otherwise be permitted under the FAA. See, e.g., id. at 1748. The central issue discussed in Conception was “whether the FAA prohibits States from conditioning the enforceability of certain arbitration agreements on the availability of class-wide arbitration procedures.” Id. at 1744 (emphasis added).
Following Concepcion, however, it was an open question whether a collective arbitration agreement would be enforceable where it would effectively prevent the enforcement of federal statutory rights. The Second Circuit recently answered this question, holding that plaintiffs can challenge the enforceability of collective arbitration waivers in cases where they can “demonstrate that the practical effect of enforcement would be to preclude their ability to vindicate their federal statutory rights.” See In re American Express Merchants’ Litigation, 667 F.3d 204, 212 (2d Cir. 2012) (“AmEx III”).
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