Tuesday, November 16, 2010
Edward Brunet, an eminent civil procedure scholar and expert on arbitration, sent the following to me regarding the recent NY Times coverage of the AT&T Mobility case:
Adam Liptak’s excellent treatment of the AT&T Mobility oral argument would have been even better if he had just used this word: FEDERALISM..
The case and context of this case scream out unforgivable breaches of federalism policy. Both the Times coverage and oral argument undervalue federalism theory
The dispute is not one about state regulation of class action arbitration. Rather, the case concerns a dispute of state contract interpretation and asks simply whether the cell phone contract’s ban on class actions is unconscionable. This is a state contract law issue, traditionally left to the state because of respect for state common law regulation. There is very little federal contract law. Alternatively, the issue presented is one of consumer protection, a subject matter also left to state regulation. This litigation involves a double dose of federalism deference to the states based on questions of contract law and consumer protection
This analysis appears to have been understood by Justice Scalia who nicely asked whether the Supreme Court would “tell the State of California what it has to consider unconscionable?”
There exists a textual basis to reach the same result for the respondent. Under section 2 of the FAA the courts are to treat arbitration agreements as enforceable, except when matters of state contract law require a contrary result. The end of the prior sentence, termed the “savings clause of the FAA,” should control this case. Essentially section 2 requires that a court enforce as written agreements to arbitrate unless some rule of state contract doctrine(e.g., adhesion , covenant of good faith and fair dealing, unconscionablity, or lack of mutuality) requires the opposite result. Here the California Supreme Court offered what should have been the last word on the subject Its ability to do so advances federalism values in a collaborative manner not unlike the interactive federalism notions set forth by Professor Robert Shapiro.
This case has nothing to do with preemption despite the efforts of AT&T”S counsel to twist the case out of context. There is no difference between California’s law of unconcionability and federal law presented. Indeed, there is no relevant federal conflicting norm involving unconscionability. That should have been the end of the matter but kudos to AT&T counsel for a great job of (mis)framing the issue here to try to take advantage of a lame and disappointing group of arbitration preemption decisions. The Casarotto opinion of Justice Ginsburg used a strange preemption approach by asking whether arbitration had been “singled out” for special treatment and failed to follow a more conventional “obstacle” test used several years earlier by Chief Justice Rehnquist in the Volt decision. Under either test the respondent should prevail here The interpretation of the contract ban on class actions fails to single out arbitration and represents little threat to the FAA.
Readers who want more should consult the following: Brunet, The Minimal Role of Federalism and State Law in Arbitration, 8 Nev. L.J. 326 (2007) (arbitration symposium), Brunet, Speidel, Sternlight & Ware, Arbitration Law in America: A Critical Appraisal (Cambridge 2007); Robert Schapiro, Monophonic Preemption, 102 Nw. L. Rev.(2007).
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I am a big fan of both Brunet and Schapiro's work. ADL