By Donald R. Frederico and Clifford H. Ruprecht
In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the United States Supreme Court, by a 5-4 decision, held that the Federal Arbitration Act (“FAA”) preempted a California rule invalidating provisions in consumer contracts that require individual arbitration and that waive any right to bring a class action. Although the case before it involved the application of a California rule premised on the doctrine of unconscionability, the Court’s holding effectively overrules the Massachusetts Supreme Judicial Court’s decision in Feeney v. Dell Inc., 454 Mass. 192 (2009), that class action waivers in consumer contracts contravene Massachusetts public policy. See D. Frederico, “Feeney v. Dell Inc.: Consumer Class Actions and Public Policy,” Boston Bar Journal, Winter 2010, at 6-7. Barring circumstances, such as fraud or duress, that negate the elements of contract formation, companies that sell consumer goods or services in Massachusetts may again rely on class action waivers contained in properly framed arbitration provisions of their consumer contracts.
In Concepcion, plaintiffs brought a putative class action, claiming that their cell-phone provider engaged in an unfair sales practice by charging them sales tax on phones that were advertised as free. The cell-phone contract required arbitration and provided that consumers could arbitrate in their individual capacity only, not as representatives of a class. The California Supreme Court had struck down such class action waivers as unconscionable in Discover Bank v. Superior Court, 36 Cal. 4th 148, 162 (2005). The Supreme Court in Concepcion held that the Discover Bank rule is preempted by Section 2 of the FAA, 9 U.S.C. § 2, which provides that a written agreement to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
Click here to read the full article.
Interested in learning more about the AT&T Mobility LLC v. Concepcion case? The Labor & Employment Section is hosting a brown bag program on Wednesday, March 28 at 12:00 titled "AT&T v. Concepcion: One Year Later: Explore the Post-Concepcion Landscape in Employment Law: Cases, Trends and Issues." The panel of employer, employee and in-house attorneys will discuss the impact of the US Supreme Court decision in Concepcion since its issuance in April 2011. Click here for more information and to register for this program.