By F. Paul Bland, Jr., senior attorney at Public Justice.
The consumer and civil rights communities are closely watching AT&T Mobility v. Concepcion, a case that will be argued in the Supreme Court this November. The case could decide the fate of most consumer and employee class actions for years to come.
The Concepcion case involves the widespread corporate practice of using standard-form contract terms that purport to prevent consumers and employees from ever participating in class proceedings. Consumers and employees rarely have time to read the lengthy agreements companies send them, let alone the ability to understand their dense legalese. And even if they did, few consumers or employees could negotiate the contracts' terms.
Many federal and state courts have held such class-action bans unenforceable under state laws providing that contract terms that block individuals from enforcing their rights under consumer protection and civil rights laws. Hoping to sweep aside many of those cases, AT&T Mobility ("ATTM") has asked the Supreme Court to find that at least some of that state law is preempted by the Federal Arbitration Act ("FAA").
Class-action bans dramatically undermine enforcement of consumer- and employee-protection laws. In many circumstances, very few individuals would ever bring a claim (in court, or in a small claims court, or in arbitration) even when those laws are broken. Many people never realize when their rights are violated, for example, and many people do not have the knowledge or skills to begin to pursue a case to protect their rights. For those who know to seek out a lawyer, very few lawyers will handle cases that are quite small, and few if any lawyers will handle fairly complex cases that involve only a few thousand dollars. There are many situations where a case will either be handled on a class action basis or it will never be brought at all.
In the worst case scenario, Concepcion could wipe away the vast majority of consumer and employee class actions for years to come. But that result is far from inevitable. For one thing, ATTM submitted a narrow question in its petition for certiorari, and if the Court sticks to the question presented (as it should), then the decision should be limited. On the merits, if the Court agrees with the vast majority of lower courts, then the decision will change little. If the Court uses this case to grant the fondest wishes of some corporate lawyers for immunity, however, then this case could have the kind of impact on class actions that an asteroid landing in Mexico millions of years ago had on dinosaurs.
For the court to rule for ATTM, it will have to sweep aside a widespread consensus of lower courts. Every single state supreme court to consider the enforceability of a class-action ban embedded in an arbitration clause has resolved the question of enforceability as a matter of state law. The last eight state supreme courts to consider the validity of class bans also happen to have struck them down, but even courts that have upheld class bans have done so by applying state law. In addition, federal circuit courts that have both struck down and upheld class action bans in unconscionability challenges have all examined the issue as one of state law. See here for a much longer blog offering case cites for these propositions.
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.
The only language in the FAA that relates to the question presented in Concepcion provides that agreements to arbitrate will be enforceable only if the agreement is not counter to laws that would lead to revocability of any contract. 9 U.S.C. § 2. In this case, the state laws at issue are the common-law doctrine that exculpatory get-out-of-jail-contract-terms that undermine statutes are unconscionable. This body of law applies to all contracts, does not mention or target arbitration, and thus does not conflict with the Federal "Arbitration" Act.
Also, the Supreme Court has said a number of times that arbitration clauses are only enforceable under the FAA if they let people "effectively vindicate their statutory legal rights." The Court will have to ignore those decisions if it's going to find that the FAA preempts state contract laws that insist that contract terms may not bar individuals from effectively vindicating their rights.
Will the majority of the Court abandon the humble role of umpire to invent sweeping and radical new law? Will scores of state and federal appellate cases be disregarded? Will the FAA be put on an inevitable collision course with the Congress? Or will the Court step back and do the right thing? No one will know for sure until the Court decides Concepcion next spring.