US Supreme Court - Hearing on Class Action Waivers in Arbitrations

As reported in an article on our website today, on November 9, the United States Supreme Court heard oral argument on a case that could have sweeping implications for class action litigation and consumer class actions in particular.  The case is AT&T Mobility Services v. Concepcion and is an appeal of an action filed in California, and that has also been ruled on by the 9th Circuit Court of Appeals.  The underlying case involves the Plaintiffs, the Concepcions, having entered into a contract with AT&T Mobility that included the provision of free phones.  However, AT&T Mobility charged taxes of approximately $30, which the Concepcions claimed to be in breach of the contract for “free” phones. 

The contract between the Concepcions and AT&T Mobility provided that any disputes between the parties would be resolved by arbitration, and waived any right to proceed on a class action basis.  Notwithstanding that, the Concepcions filed a lawsuit, seeking class status, and asserted that the waiver of class action and arbitration provision violated a California law which limited the enforceability of those types of clauses.  The district court judge agreed with the Concepcions and found the ban to be unenforceable as a violation of that California state law.  AT&T appealed to the 9th Circuit alleging that the California law is preempted by the Federal Arbitration Act and that the contractual waiver should therefore be enforced.  The 9th Circuit also agreed with the Concepcions and AT&T Mobility appealed to the U.S. Supreme Court. 

In the event that the U.S. Supreme Court sides with AT&T Mobility, it would have sweeping implications for a vast range of contracts entered into by consumers.  Many contracts already include arbitration and waiver of class action provisions.  If the U.S. Supreme Court Agrees with AT&T Mobility, it is reasonable to expect there to be a significant increase in the inclusion of those clauses, which would be enforceable notwithstanding state laws designed to restrict the enforceability of such provisions.