Friday, November 12, 2010
David Horton (Loyola-L.A.) filed one of the amicus briefs in the AT&T Mobility LLC v. Concepcion case in the Supreme Court. We asked him for his take on the likely outcome, and he graciously responded:
I could see Breyer, Ginsburg, Kagan, Sotomayor, Kennedy, and perhaps even Thomas (who has routinely expressed his belief that the FAA doesn't apply in state court) affirming the Ninth Circuit. But I can't imagine them employing broad strokes and holding that the Court can never second-guess a state's purported application of its own contract law. That would create too broad a loophole for states to regulate arbitration under the guise of unconscionability holdings.
Thus, if there's a liberal majority, I think it'll have to delve into the nitty-gritty of California unconscionability law. I actually think that there's plenty of grist for a majority opinion there: AT&T's evidence of discrimination isn't very persuasive. For example, AT&T faults the Discover Bank opinion for deviating from traditional unconscionability analysis by gauging unconscionability from an ex post perspective. But the supposedly ex post aspects of the Discover Bank test are its requirement that a plaintiff allege that a defendant cheated many customers out of small sums of money. That's a limit on the unconscionability doctrine, not an aggrandizement of it. Moreover, AT&T's strongest point--that the lower court insinuated that litigants would prefer to arbitrate under AT&T's supposedly "pro-consumer" rules than participate in a class action--also adopts an ex post perspective. The relevant perspective for assessing the clause's fairness isn't after a dispute has arisen, but rather at the time of contracting. And the relevant question is whether it's unfair for AT&T to impose a class arbitration waiver on consumers that gives them incentives to arbitrate individually but also saddles them with the responsibility of policing AT&T's misconduct themselves.
I could also see a conservative majority of Roberts, Alito, Kennedy, Thomas, and Scalia (who at first seemed surprisingly hostile to AT&T's position, but then swung around). I envision a relatively short opinion that basically says: (1) the default rule under the FAA is bilateral arbitration, see Stolt-Nielsen v. AnimalFeeds, and (2) thus it can't be unconscionable for AT&T to insist on the default rule. One downside to this approach is that it would totally eviscerate class arbitration, rather than simply holding that AT&T's "pro-consumer" clause is fair.
Finally, there's always the possibility of a wild card. The Court has punted before when asked to square the FAA and the class action device (see Green Tree v. Bazzle). Although it never came up in the briefing and oral argument, there's a similar way out here: the AT&T contract incorporates by reference the rules of the American Arbitration Association, including a rule that empowers the arbitrator to rule on the validity of the arbitration clause. In Rent-a-Center v. Jackson, the Court recently explained that these "delegation clauses" require the parties to arbitrate the issue of the arbitration clause's enforceability unless a party can specifically show why the delegation clause itself is invalid. The Court could always "split the baby" by holding that because only the arbitrator may resolve the issue of the class arbitration waiver's validity, the district court here never had jurisdiction.
We shall see!