The Death of Class Arbitration after Concepcion?
29 Pages Posted: 18 Apr 2012 Last revised: 4 Jun 2012
Date Written: April 1, 2012
In AT&T Mobility LLC v. Concepcion, the Supreme Court potentially allowed for the evisceration of class arbitration, and indeed most class actions, in consumer and employment settings where contracts contain a pre-dispute arbitration provision that only authorizes claims brought in an individual capacity or that expressly bans representative class actions in arbitration or court (“class action waivers”). The debate over the enforceability of class action waivers, which had been percolating for years in both state and federal courts, came to the forefront in Concepcion when the Court agreed to review application of the California Supreme Court’s ruling in Discover Bank v. Superior Court, which deemed some class action waivers in adhesion contracts unconscionable, exculpatory, and thus illegal under California law. In a 5–4 decision, the Concepcion Court stated that California’s judicial rule invalidating class action waivers as unconscionable “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress [in the FAA].” Therefore, according to the Court, the FAA preempted the California law.
In light of Concepcion, a number of state and federal courts have enforced class action waivers in consumer arbitration contracts over objections that the waivers effectively immunize defendants from liability or violate state law standards of unconscionability or public policy.
This Article examines the implications of Concepcion on the future of class actions, in court or arbitration, and analyzes the federalism issues at stake in the Court’s interpretation of FAA preemption of state law. First, it sets forth the regulatory framework governing arbitration under the FAA and key Supreme Court decisions involving questions of class arbitration prior to Concepcion. Then, it analyzes Concepcion and the decision’s scope and parameters. It also contemplates Concepcion’s impact, examining how federal and state courts have since interpreted Concepcion’s application to challenges to class action waivers in cases involving statutory claims at the state and federal level. This is followed by an introduction of potential legislative responses, and an argument that the Concepcion decision, based on a dated and deluded conception of arbitration, improperly guts the FAA savings clause, violates the reserved role of states under the FAA to “regulate contracts, including arbitration clauses, under general contract law principles,” and threatens the ability of parties in some cases to vindicate their statutory rights. The Article concludes by advocating for a narrow construction of the decision and the guarantee of a procedural option by which rights, which sometimes require collective action, can be meaningfully vindicated.
Keywords: Concepcion, Supreme Court, class action, arbitration, alternative dispute resolution, ADR, class action waiver, contract, adhesion contract, California, Federal Arbitration Act, FAA, court, federalism, regulation, legislation, rights, collective action
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