In AT&T Mobility v. Concepcion, U.S., No. 09-893, 4/27/11, an ideologically divided U.S. Supreme Court held that the Federal Arbitration Act (FAA) trumped California law to uphold class action waivers in arbitration.
According to the majority opinion authored by Justice Antonin Scalia, a blanket prohibition on arbitration provisions requiring individual arbitration in favor of class-wide procedures would undermine the FAA’s "liberal federal policy in favor of arbitration." In so holding, the Court rejected the California Supreme Court rule in Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005) that voided as unconscionable an arbitration clause containing a class action waiver. The Ninth Circuit Court of Appeals had upheld the Discover Bank rule. The U.S. Supreme Court, however, disagreed with both courts and held that the Discover Bank rule impermissibly "interferes with arbitration" under the FAA.
AT&T Mobility v. Concepcion, involving a consumer arbitration provision, has important implications for employers. Employers with mandatory pre-dispute arbitration agreements for employees should consider amending them to make collective class action relief impermissible.
Stay tuned for further insight into arbitration and class action issues, including the eagerly awaited U.S. Supreme Court decision in WalMart over whether the court-certified class size is too broad. But, in pre-dispute arbitration, AT&T offers potential insulation from class action claims to at least employers and commercial service providers.