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Monday, November 01, 2010

AT&T v. Concepcion

Thanks a lot to the prawfs community for letting me blog here in October.  Just as a final FYI, if you're into contract law, arbitration, federalism, fed courts, cell phones, or just whacktastically difficult Supreme Court cases, be sure to check out oral arguments in AT&T v. Concepcion on November 9.  (Full disclosure/self-plug: I wrote an amicus brief on behalf of contracts professors in support of the Respondents). 

The issue is whether the Federal Arbitration Act preempts state courts from finding that the class action waiver in AT&T's wireless service agreement is invalid.  The FAA precludes courts from discriminating against arbitration clauses by subjecting them to unique anti-arbitration rules.  The California Supreme Court (and courts in many other states) have held that class action waivers can be unconscionable when they require plaintiffs to arbitrate low-value lawsuits on an individual basis.  Basically, the idea is that no one will actually bring these negative-value claims unless they can aggregate them. 

However, AT&T contends that it has cured this defect by coupling its class action waiver with incentives for plaintiffs to arbitrate low-value claims individually.  For instance, it will pay up to $10,000 to plaintiffs who recover more in arbitration than AT&T's last written settlement demand.  Thus, AT&T argues that any state law that invalidates this "pro-consumer" clause on the grounds that it's unfair--as California law did here--must be impermissibly discriminating against arbitration. 

On the other hand, the Respondents argue that (1) the Supreme Court has no business second-guessing a state court's application of its own contract law and (2) even with AT&T's bells and whistles, few consumers will arbitrate individually, meaning that the class action waiver still reduces AT&T's incentives to conform to the law.  

Should be a wild one!   

Posted by David Horton on November 1, 2010 at 07:57 PM | Permalink

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Comments

The Court second-guessed a state court's application of state law in Bush v. Gore, but Concepcion implicates many more cases than the one to which the Court limited itself in that other case. Hopefully that will serve as some sort of check. That said, the Roberts Court is notoriously pro-business, and doesn't seem to care about the collateral damage of its holdings.

Posted by: Adam Richardson | Dec 21, 2010 9:37:39 PM

There's no hard and fast rule forbidding the federal courts from second-guessing state court applications of state law-- at least so long as those applications allegedly implicate a federal law guarantee. Hopefully the question in Concepcion will be whether federal law does implicate such a guarantee.

Posted by: Not rocket science | Dec 21, 2010 10:14:15 PM

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