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Friday, November 12, 2010

Horton on AT&T v. Concepcion

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: 

Aa 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!

FGS

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My firm is currently engaged in class action litigation with AT&T and its subsidiaries. In addition to the "usual" arbitration disputes, we are doing something that may interest you. In surveying the vast body of arbitration decisons, I noticed that no court has ever discussed the question of whether the Commerce Clause (the foundation upon which the legitimacy of the FAA depends) outweighs the Bill of Rights and, in particular, Amendments 5,7,9, and 14. (I know that there is an old case discussing the 7th Amendment). My own background is in criminal law See Spaziano v. Fla. , SCOTUS 1984) , and it has always perplexed me that in the context of jury trial waivers the average criminal defendant is entitled to the protections of Boykin/Faretta/ etc., yet a consumer can be forced into waiving trial rights even with a contract of adhesion. (As an aside) I noticed that Justice Scalia, in the recent gun case from D.C., actually mentioned the 9th Amendment (I thought 9th Amendment arguments were essentially dead) , and I wonder if the Court may be waking up to the notion of individual rights. Anyway, I would be interested in your thoughts. Thank you for reading this.

Posted by: mark menser | Dec 10, 2010 7:25:11 AM

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