Supreme Courts Says Federal Law Trumps Calif. Law on Class Action Arbitration

April 27, 2011

The Supreme Court led by its conservative wing issued an opinion limiting states’ ability to nullify contracts that prohibit class action arbitration.

In AT&T Mobility v. Concepcion, Justice Antonin Scalia writing for the 5-4 majority concluded that a provision of the Federal Arbitration Act (FAA) bars enforcement of a California law that nullifies contracts that prohibit class-action arbitration. Scalia was joined by Chief Justice John Roberts, Anthony Kennedy, Clarence Thomas and Samuel Alito. The opinion overturns a ruling by the U.S. Court of Appeals for the Ninth Circuit, which found that the FAA provision did not preempt the California law.

Scalia wrote that the “overarching purpose of the FAA … is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”

Justice Stephen Breyer, joined by Justices Ginsburg, Sotomayor and Kagan, lodged a dissent, arguing that California’s law “is consistent with the federal Act’s language and primary objective.”

Breyer added, “California is free to define unconscionability as it sees fit, and its common law is of no federal concern so long as the state does not adopt a special rule that disfavors arbitration.”

The Associated Press says today’s opinion “could greatly restrict the use of class actions, in which a party represents a much larger group, in disputes over contracts.”

In a guest post for ACSblog, Public Justice’s Paul Bland Jr. charged that the “corporatist idea that the FAA preempts all state law limiting class-action bans hasn’t caught on in the lower courts because there is no serious legal or intellectual basis for it. If the Supreme Court decides to completely federalize the law in this area, it will have to invent from whole cloth new federal law that is not supported by anything in the language of the FAA or in its history.”

Bland also participated in an ACS briefing on the AT&T Mobility v. Concepcion case. Video of the briefing, which included a panel discussion, is available here.

Update: Senate Judiciary Chairman Patrick Leahy, in a statement on the opinion, said, "The opinion of five Supreme Court Justices in AT&T v. Concepcion will further weaken protections for consumers. The divided court decided that state laws which would protect consumers' rights to band together are preempted by Federal law. This is the latest in a series of cases where five conservative justices have hampered the rights of consumers to be protected by state laws. Class actions are an effective way to ensure consumer protection, but today's opinion by the Roberts Court continued to move in a direction that undermines this access to justice for hardworking Americans."