AT&T Mobility v. Concepcion

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AT&T Mobility v. Concepcion
Seal of the United States Supreme Court.svg
Argued November 9, 2010
Decided April 27, 2011
Full case name AT&T Mobility LLC, Petitioner v. Vincent Concepcion, et ux.
Docket nos. 09-893
Citations 563 U.S. 321 (more)
131 S. Ct. 1740
Prior history Motion to compel arbitration denied sub nom. Laster v. T-Mobile USA, Inc., 2008 WL 5216255 (S.D. Cal., 2008); affirmed sub nom. Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir., 2009); certiorari granted, 560 U. S. ___ (2010)
Holding
The Discover Bank test adopted by California to invalidate certain arbitration agreements with class action waivers is preempted by the Federal Arbitration Act.
Court membership
Case opinions
Majority Scalia, joined by Roberts, Kennedy, Thomas, Alito
Concurrence Thomas
Dissent Breyer, joined by Ginsburg, Sotomayor, Kagan
Laws applied
Federal Arbitration Act

AT&T Mobility v. Concepcion, 563 U.S. 321 (2011), is a legal dispute that was decided by the United States Supreme Court.[1][2] On April 27, 2011, the Court ruled, by a 5–4 margin, that the Federal Arbitration Act of 1925 preempts state laws that prohibit contracts from disallowing class-wide arbitration, such as the law previously upheld by the California Supreme Court in the case of Discover Bank v. Superior Court.[3] As a result, businesses that include arbitration agreements with class action waivers can require consumers to bring claims only in individual arbitrations, rather than in court as part of a class action.[4]:708–09 The decision was described by Jean Sternlight as a "tsunami that is wiping out existing and potential consumer and employment class actions"[4]:704 and by law professor Myriam Gilles as "the real game-changer for class action litigation".[5] By April 2012, Concepcion was cited in at least 76 decisions sending putative class actions to individual arbitration.[6][7] After the decision, several major businesses introduced or changed arbitration terms in their consumer contracts (some of which were based on the consumer-friendly terms found in the AT&T Mobility agreement), although the hypothesis of massive adoption of consumer arbitration clauses following the decision has been disputed.

Background[edit]

In 2006, Vincent and Liza Concepcion sued AT&T Mobility over their mobile phone contract, contending that the cell phone company had engaged in deceptive advertising by falsely claiming that their wireless plan included free cell phones. Their suit became a class action. AT&T asked the U.S. District Court for Southern California to dismiss the suit, because AT&T's contract required the Concepcions to submit any disputes to individual arbitration rather than filing any class action lawsuits.

Unlike other arbitration agreements, AT&T Mobility's arbitration agreement was designed to facilitate the pursuit of small claims in arbitration. The arbitration agreement provided that AT&T Mobility would pay the entire cost of arbitration (unless the claim was determined to be frivolous). The arbitration would take place in the county where the consumer was located, by telephone, or through document submission, and forms for the arbitration were made available on AT&T Mobility's website. The arbitrator was not limited in the damages it could award to a consumer, and if the consumer received an award greater than AT&T Mobility's last written settlement offer, the award would be increased to $7,500, and the consumer would be entitled to double attorney's fees. This led the United States District Court for the Southern District of California to state that arbitration under AT&T Mobility's agreement was "quick, easy to use, and prompts full or, as described by Plaintiffs, even excess payment to the customer without the need to arbitrate or litigate."[8]

Nevertheless, the district court declined to dismiss the suit, ruling that California law prohibits contracts that unfairly exculpate one party from its wrongdoing, such as clauses that do not allow class action lawsuits in consumer adhesion contracts where the individual damages are small. AT&T appealed the case, saying that the Federal Arbitration Act should preempt state law. On October 27, 2009, the Ninth Circuit Court of Appeals upheld the lower court decision. AT&T, represented by Andrew J. Pincus of Mayer Brown, then appealed to the Supreme Court.[9][10] After the Supreme Court granted review, appellate lawyer Deepak Gupta of Washington, D.C. was brought in to represent the Concepcions.

The Court heard oral arguments on November 9, 2010.[2][11] Justices Scalia and Sotomayor questioned Pincus (attorney for AT&T Mobility) about when unconscionability doctrines are made under state law.[12] Pincus argued that the California law was not being applied uniformly. Scalia challenged that assertion when he asked, "Are we going to tell the State of California what it has to consider unconscionable?".[13] Other justices questioned different procedural issues arising from the unconscionability discussion and the scope of the rule AT&T was proposing. Deepak Gupta, representing the Concepcions, argued that the contract AT&T imposed on Respondents was clearly unfair. He asserted that state law should be a guidepost in these questions. Some of his arguments drew criticism from Chief Justice John Roberts. Gupta concluded by arguing that California "has made a judgment that if you preclude class-wide relief... that will gut the State's substantive consumer protection laws..."[13]

Opinion of the Court[edit]

The majority opinion was written by Justice Antonin Scalia, and joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito. "Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration," Scalia wrote. "We find it hard to believe that defendants would bet the company with no effective means of review, and even harder to believe that Congress would have intended to allow state courts to force such a decision."[14][15] Justice Scalia focused on the impact California's unconscionability law was having on arbitration clauses - since the rule was invalidating a large proportion of arbitration agreements, the rule must violate the policy in favor of arbitration.[16] Therefore, it was preempted by the FAA.

The dissent was written by Justice Stephen Breyer, and joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan. Breyer stated that class arbitrations are appropriate ways to resolve claims that are minor individually but significant in the aggregate. "Where does the majority get its contrary idea — that individual, rather than class, arbitration is a fundamental attribute of arbitration?" He said that without class actions, minor frauds would not be remedied. "What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?"[14][15]

Subsequent developments[edit]

Following Concepcion, many businesses introduced or renewed motions to move pending lawsuits to arbitration. In September 2011, J. Russell Jackson described the Supreme Court's ruling in Concepcion as "the decision that has launched a thousand motions", as defendants sought to compel arbitration of cases that had been pending "for some time", especially in California.[17] In April 2012, Public Citizen published a list of 76 putative class actions where a court cited Concepcion in granting a motion to compel individual arbitration.[6][7]:32–33 Myriam Gilles said that the Concepcion decision had a greater impact on class actions than Wal-Mart v. Dukes, since Concepcion allowed businesses to avoid class actions by including arbitration clauses in boilerplate terms.[5]

The Concepcion decision also impacted the usage of arbitration clauses in consumer contracts, including the usage of "consumer-friendly" arbitration terms like the ones in AT&T's agreement. Jean Sternlight said that the Concepcion decision would cause businesses to include arbitration clauses with class action waivers, saying that the Concepcion decision removed the possibility of "costly litigation" over whether such terms are enforceable.[4]:718 In a 2012 research paper, Myriam Gilles wrote that Justice Antonin Scalia's majority opinion in Concepcion led to a "race to the top" in implementing arbitration procedures that are more friendly to consumer claims and more likely to allow their vindication.[18]:828 Gilles wrote that corporate lawyers encouraged companies to implement terms similar to the ones used by AT&T Mobility and upheld in Concepcion.[18]:844–45 According to Gilles, many large consumer-oriented businesses changed their arbitration provisions in 2011 and 2012.[18]:853 However, Gilles noted that only 6 out of the 37 companies she examined had arbitration clauses that "offered anything close to AT&T's set of incentives, and none were quite as generous".[18]:853 George Padis, though, suggested that the ruling in Concepcion might cause businesses to "scale down ... procedural protections" for consumers in arbitration.[19]:706–07 In September 2011, Charles Silver and Maria Glover wrote that after Concepcion, companies would, instead of adopting the provisions of the AT&T Mobility agreement, implement arbitration terms favoring the business akin to those found in the earliest consumer arbitration clauses, adding that after the Concepcion decision, those clauses may be enforceable.[20] Suzanna Sherry said that the broad holding of the decision would make harsh arbitration clauses, similar to the earliest consumer arbitration clauses, enforceable, since the unconscionability doctrine that had been used to strike down those harsh clauses could be found preempted based on Concepcion.[8]

Several large businesses introduced arbitration provisions after Concepcion, and several companies' addition of arbitration clauses was reported by the media to have been prompted by the Supreme Court's ruling in Concepcion. According to a September 2011 CNN article, a Sony spokesperson said that Sony added an arbitration clause to its PlayStation Network terms of service because "[t]he Supreme Court recently ruled in the AT&T case that language like this is enforceable".[21] PCWorld writer Jared Newman cited Sony and Microsoft as examples of companies that took advantage of Concepcion to add arbitration agreements with class action waivers.[22] Rutledge and Drahozal wrote that Sony and Netflix added arbitration provisions following data breach class action litigation.[23]:1000[24] Other companies reported to have added arbitration provisions to their consumer contracts after Concepcion include Umpqua Bank, Valve, eBay, PayPal, Instagram, and StubHub.[23]:1001 American Arbitration Association Senior Vice President Richard Naimark said that a number of companies increased their usage of consumer arbitration after Concepcion, while before Concepcion, the number of consumer arbitrations administered by the AAA had been declining.[25]:10:17:50 Rutledge and Drahozal wrote that the adoption of arbitration in franchise contracts did not significantly increase after Concepcion or American Express Co. v. Italian Colors Restaurant, casting doubt on the hypothesis that Concepcion would cause businesses to adopt arbitration en masse.[23]:955–56

References[edit]

  1. ^ "AT&T Mobility LLC, Petitioner v. Vincent Concepcion, et ux.". Supreme Court of the United States web site. Archived from the original on 27 September 2010. Retrieved November 8, 2010. 
  2. ^ a b "AT&T Mobility v. Concepcion". SCOTUSblog. Archived from the original on 11 November 2010. Retrieved November 8, 2010. 
  3. ^ Slip Opinion. Retrieved April 27, 2011.
  4. ^ a b c Sternlight, Jean (2012). "Tsunami: AT&T Mobility LLC v. Concepcion Impedes Access to Justice". Oregon Law Review 90 (3): 703–727. Retrieved 29 October 2013. 
  5. ^ a b Gilles, Myriam (2011-09-15). "AT&T Mobility vs. Concepcion: From unconscionability to vindication of rights". SCOTUSblog. Retrieved 29 October 2013. 
  6. ^ a b Weise, Karen (2012-04-27). "Consumer Protection Faces a 'Tsunami' in Court". Bloomberg Businessweek. Retrieved 7 November 2013. 
  7. ^ a b Public Citizen (April 2012). "Justice Denied: One Year Later: The Harms to Consumers from the Supreme Court's Concepcion Decision Are Plainly Evident". Retrieved 7 November 2013. 
  8. ^ a b Sherry, Suzanna (2011). "Hogs Get Slaughtered at the Supreme Court". The Supreme Court Review 2011 (1): 1–37. doi:10.1086/665012. 
  9. ^ Lazarus, David (November 5, 2010). "Consumers' Right to File Class Actions is in Danger". Los Angeles Times. Archived from the original on 7 November 2010. Retrieved November 8, 2010. If a majority of the nine justices vote the telecom giant's way, any business that issues a contract to customers — such as for credit cards, cellphones or cable TV — would be able to prevent them from joining class-action lawsuits. 
  10. ^ Fitzpatrick, Brian T. (November 7, 2010). "Supreme Court Case Could End Class-Action Suits". San Francisco Chronicle. Archived from the original on 10 November 2010. Retrieved November 8, 2010. If the case is decided the way many observers predict, it could end class-action litigation in America as we know it. 
  11. ^ Liptak, Adam (November 9, 2010). "Supreme Court Weighs Class-Action Suits". New York Times. Archived from the original on 11 November 2010. Retrieved November 10, 2010. 
  12. ^ Howe, Amy (November 10, 2010). "Argument Recap: AT&T v. Concepcion". SCOTUSblog. Archived from the original on 10 January 2011. Retrieved December 28, 2010. 
  13. ^ a b "Oral Argument Transcript: AT&T Mobility LLC, Petitioner, v. Vincent Concepcion, et. ux.". November 9, 2010. Retrieved December 28, 2010. 
  14. ^ a b Liptak, Adam (April 27, 2011). "Supreme Court Allows Contracts That Prohibit Class-Action Arbitration". New York Times. Archived from the original on 29 April 2011. Retrieved April 28, 2011. Businesses may use standard-form contracts to forbid consumers claiming fraud from banding together in a single arbitration, the Supreme Court ruled on Wednesday in a 5-to-4 decision that split along ideological lines. Though the decision concerned arbitrations, it appeared to provide businesses with a way to avoid class-action lawsuits in court. All they need do, the decision suggested, is use standard-form contracts that require two things: that disputes be raised only through the informal mechanism of arbitration and that claims be brought one by one. 
  15. ^ a b Savage, David G. (April 28, 2011). "Companies Can Block Customers' Class-Action Lawsuits, Supreme Court Rules". Los Angeles Times. Retrieved April 28, 2011. The Supreme Court dealt a blow to class-action lawsuits that involve small claims affecting thousands or even millions of people by ruling that corporations may use arbitration clauses to block dissatisfied consumers or disgruntled employees from joining together.... The ruling was 'the biggest ever' on class actions, said Vanderbilt University law professor Brian Fitzpatrick, an expert on such litigation. 'It gives companies a green light to exempt themselves from all class actions from their customers or from their employees,' Fitzpatrick said. 'Companies can basically escape from the civil justice system. And why wouldn't a company take advantage of that?' 
  16. ^ Tracey, Ann Marie; McGill, Shelley (2012). "Seeking a Rational Lawyer for Consumer Claims After the Supreme Court Disconnects Consumers in AT&T Mobility LLC v. Concepcion". Loyola of Los Angeles Law Review 45: 435–475, 454. 
  17. ^ Jackson, J. Russell (2011-09-06). "An analysis of the Supreme Court's class action decisions from the 2010-2011 term". SCOTUSblog. Retrieved 10 November 2013. 
  18. ^ a b c d Gilles, Myriam (2012). "Killing Them with Kindness: Examining "Consumer-Friendly" Arbitration Clauses after AT&T Mobility v. Concepcion". Notre Dame Law Review 88 (2): 825–869. Retrieved 24 November 2013. 
  19. ^ Padis, George (2013). "Arbitration Under Siege: Reforming Consumer and Employment Arbitration and Class Actions". Texas Law Reivew 91 (3): 665–710. 
  20. ^ Silver, Charles; Glover, Maria (2011-09-08). "Zombie class actions". SCOTUSblog. Retrieved 31 October 2013. 
  21. ^ Milian, Mark (2011-09-21). "Sony: Supreme Court ruling spurred changes to PlayStation terms". CNN. Retrieved 21 February 2013. 
  22. ^ Newman, Jared (2012-02-06). "Top EULA Gotchas: Website Fine-Print Hall of Shame". PCWorld. Retrieved 21 February 2013. 
  23. ^ a b c Rutledge, Peter B.; Drahozal, Christopher R. (May 2014). "'Sticky' Arbitration Clauses? The Use of Arbitration Clauses After Concepcion and Amex". Vanderbilt Law Review 67 (4): 955–1013. 
  24. ^ Frankel, Alison (2013-08-22). "How SCOTUS's Amex ruling may help businesses evade class actions". Reuters. Retrieved 16 May 2014. 
  25. ^ "Waiving Your Right to Sue". The Diane Rehm Show. WAMU-FM (NPR). 2012-03-08. Retrieved 12 October 2013.