April 27, 2011

Continuing the Discussion of the AT&T v. Concepcion Decision: Implications for the future

By Sarah Cole

Well, it would appear that Congress is the only hope for consumers who wish to vindicate their low value claims following the Supreme Court’s decision today in AT&T v. Concepcion. I agree with my fellow blogger Paul Kirgis’s insightful analysis of the case. But, I thought I would add my two cents. The Court was more explicit in Concepcion that class arbitration and bilateral arbitration are not the same thing. According to the majority, class arbitration is slower and less efficient than bilateral arbitration. The majority was also concerned that given the limited bases that courts have for reviewing arbitral awards, class arbitration may lead companies to abandon arbitration entirely. The Court failed to cite any evidence for that assertion, though, and evidence from AAA’s database, which shows that no class arbitration has yet been resolved on the merits, provides little support. Moreover, the dissent pointed to several instances in which businesses have expressly opted for class arbitration. In my opinion, class arbitration could prove to be a useful ADR mechanism. But, the Court is cutting it off at the knees. As Paul suggests, every lawyer representing a business should tell the business to insert class action arbitration waivers immediately (if not sooner). It would thus appear that the era of class arbitration is over before it ever really began — unless Congress can be persuaded to amend the FAA to permit class arbitration, at least in cases involving low value claims, where consumers are unlikely to have practical recourse to a remedy through traditional bilateral arbitration.
And, incidentally, I believe the dissenters have the better of the preemption argument. In dissent, Justice Breyer noted that California applies the same rule both to class arbitration waivers and class action waivers in all contracts. According to Justice Breyer, that should have ended the inquiry; concerns about whether class arbitration is a good thing or a bad thing should not have figured into the analysis. In Justice Breyer’s words, “[b]ecause California applies the same legal principles to address the unconscionability of class arbitration waivers as it does to address the unconscionability of any other contractual provision, the merits of class proceedings should not factor into our decision. If California had applied its law of duress to void an arbitration agreement, would it matter if the procedures in the coerced agreement were efficient?”
These are some just initial thoughts. I will certainly think more about this decision in the days to come. As a proponent of arbitration generally, I would have preferred a different outcome — one where consumers could actually afford to take their claims to arbitration and hire a lawyer to represent them. For consumers like the Concepcions, the absence of class arbitration likely will mean little practical ability to pursue justice in any forum (despite the Court’s assurances to the contrary). And AT&T’s provision is more favorable than most; woe to the rest of the consumers out there who will have to pay filing fees and will not receive a bounty if the business’s last settlement offer is less than the arbitrator’s award.

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