The U.S. Supreme Court’s 5-4 decision in AT&T v. Concepcion is a disturbing example of judicial activism that makes it easier for corporations to enforce mandatory arbitration clauses banning class actions, cheat consumers and workers out of millions and keep almost all of the money. But, contrary to what many corporate defense counsel claim and I feared (see Arthur H. Bryant, “Class Actions Wipe Out,” NLJ, Nov. 25, 2010), Concepcion does not kill — or let corporations kill — class actions. The decision has lots of limitations.
First, the Court held that the Federal Arbitration Act of 1925 (FAA) pre-empts California’s Discover Bank rule — which declared all class action bans in adhesion contracts unconscionable in cases charging companies with cheating “large numbers of consumers out of individually small amounts of money” — because, in the Court’s view, the rule could force defendants into class arbitration without their consent even though the consumers’ claim was “most unlikely to go unresolved” in individual arbitration. The Court pointed to the facially attractive aspects of AT&T’s mandatory arbitration clause, which the district court (in the absence of evidence) opined would “prompt full…or even excess payment to the customer without the need to arbitrate or litigate” and make consumers “better off…than they would [be] in a class action.” Few states, however, have categorical rules like the Discover Bank rule, and few companies have arbitration clauses like AT&T’s (although more will be adopting them soon).
