Thursday, June 3, 2010
Businesses love arbitration because they use it to manage litigation costs with pre-dispute limits on plaintiffs' procedural rights -– foremost of which is the ability to contract around plaintiff collective action, whether in the form of the class action or class arbitration. (I’ve written about this here). Class action waivers are now a common staple in form arbitration clauses. Consumers and employees have challenged these waivers, with varying results, on unconscionability grounds. There are two notable recent developments on this front.
Early last month, a divided en banc U.S. Third Circuit Court of Appeals held, by a 6-4 margin, that the enforceability of a class action waiver provision is a question of “arbitrability” for a court (not an arbitrator) to decide. Puleo v. Chase Bank USA, No. 08-3837 (3d Cir. May 10, 2010). Attorneys at Pepper Hamilton provide a nice synopsis of the decision here.
Last week, the U.S. Supreme Court granted certiorari in AT&T Mobility LLC v. Concepcion, No. 09-893 (cert. granted May 24, 2010). The question presented is:
Whether the Federal Arbitration Act preempts States from conditioning the enforcement of an arbitration agreement on the availability of particular procedures -- here, class-wide arbitration -- when those procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims.
AT&T Mobility sought certiorari after the U.S. Ninth Circuit Court of Appeals, affirming the court below, held that AT&T Mobility's standard-form mandatory no-class-action arbitration provision was unconscionable under California law, which the FAA did not preempt. Laster v. AT&T Mobility LLC, No. 08-56394 (9th Cir. Oct. 27, 2009). In its certiorari petition, AT&T Mobility argues that the FAA preempts California decisions holding that class action waivers are unconscionable because the state courts are applying unconscionability law more rigorously to arbitral class action prohibitions than to other kinds of contracts. Professor Jean Sternlight provides a good summary at Today’s Workplace.
[Meredith R. Miller (with an assist from Keith A. Rowley)]