The U.S. Supreme Court will hear oral argument next week in a case involving one of the hottest issues in class action law these days, the enforceability of class arbitration waivers. Class arbitration waivers are contract clauses that require arbitration, combined with an agreement to waive the right to pursue any dispute as a class action.
AT&T Mobile LLC v. Concepcion, docket no. 09-893, is an appeal of the Ninth Circuit’s opinion in Laster v. AT&T Mobile LLC, No. 08-56394 (9th Cir. Oct. 27, 2009), which held that a class arbitration waiver in a mobile phone terms of service agreement was unconscionable as a matter of California law.
The Ninth Circuit opinion was in line with a trend among state and federal courts in striking down class arbitration waivers in consumer contracts on unconscionability grounds. However, the case involved what the Ninth Circuit called a “new wrinkle”. The clause at issue had provided for a “premium” payment of $7,500 to a consumer who obtained an arbitrator’s award higher than the company’s last settlement offer. This provision arguably provided the incentive to pursue an individual suit that courts had found to be lacking in previous cases involving class arbitration waivers. Despite the wrinkle, the court found that the case was not distinguishable from an earlier case in which it had found a class arbitration waiver unconscionable, and it rejected the defendant’s argument that the Federal Arbitration Act preempted the application of state law in determining the enforceability of the waiver.
The supreme Court granted certioriari to consider:
Whether the Federal Arbitration Act preempts States from conditioning the enforcement of an arbitration agreement on the availability of particular procedures-here, class-wide arbitration-when those procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims.
SCOTUS Blog has this preview of the upcoming oral argument.