Since the U.S. Supreme Court decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), discussion has heightened regarding the use of class, representative and collective action waivers in conjunction with binding arbitration agreements (“class arbitration waivers”). In many ways, Concepcion is a green light for using such class arbitration waivers to protect against class and collective actions, but there is a significant possibility that Concepcion will not preclude all such actions. Several lower courts have invalidated class arbitration waivers relying on the view that the waiver at issue interfered with the plaintiff’s vindication of a claim or of a particular right.

These cases have involved a variety of federal and state claims, foreshadowing potential limitations on the reach of Concepcion in certain substantive areas of the law. These limitations should be taken into account in assessing the enforceability of class arbitration waivers before drafting arbitration provisions, and during the course of litigation.

The Supreme Court and circuit courts have established that an agreement to arbitrate statutory claims may be unenforceable if the terms of the agreement prevent the plaintiff from effectively vindicating his statutory rights. See e.g., Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000); Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 636-37 (1985). Supreme Court jurisprudence prior to Concepcion recognized that this principle could be applied to ensure a plaintiff’s ability to enforce a substantive statutory right, Mitsubishi, 473 U.S. at 636-37, or potentially to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, Green Tree, 531 U.S. at 90-91. Lower courts have begun to prescribe how this long-standing principle will be applied to class arbitration waivers post-Concepcion.

Substantive areas of the law which may not be reached by Concepcion include Title VII pattern and practice discrimination claims, Clayton Act antitrust claims and Fair Labor Standards Act (FLSA) claims. Courts have read the statutory schemes controlling these claims as requiring that class or collective procedures are available or as prohibiting such claims from being brought as individual claims. See, e.g.,:

  • Raniere v. Citigroup Inc., No. 11-CIV-2448, 2011 WL 5881926, *14-17 (S.D.N.Y. Nov 22, 2011)
    • collective actions must be available under the FLSA
  • AT&T Mobility LLC v. Fisher, No. Civ. A. DKC 11-2245, 2011 WL 5169349, *5-6 (D.Md. Oct 28, 2011)
    • class arbitration waiver cannot preclude all means of enforcing representative Clayton Act antitrust claims
  • Chen-Oster v. Goldman, Sachs & Co, No. 10 Civ. 6950, 2011 WL 2671813, *1, 3-4 (S.D.N.Y. July 7, 2011)
    • class arbitration waiver would require plaintiff to forfeit right to be free from Title VII pattern and practice discrimination because such claims cannot be brought as individual claims

It is questionable whether class arbitration waivers will be subject to invalidation because of the size of individual claims or costs associated with arbitrating an individual claim. Concepcion seems to reject such an argument, stating, “[T]he dissent claims that class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system. But States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” 131 S.Ct. at 1753 (citation omitted).

Yet, one court has invalidated a class arbitration waiver on the ground that there was no incentive for a plaintiff to pursue an individual state claim due to the small value of the claims. See Feeney v. Dell, Civil Action No. MICV 2003-01158, (slip opinion) (Mass. Sup.Ct. Sept. 30, 2011).

Others have recognized that Concepcion forecloses this argument. See e.g., Hendricks v. AT&T Mobility, LLC, __ F.Supp.2d __, 2011 WL 5104421, *4-5, n.2 (N.D.Cal. Oct 26, 2011). Further, despite relying on Green Tree to invalidate a class arbitration waiver in a federal antitrust action, the 2nd Circuit has taken it upon itself to consider rehearing its decision in light of Concepcion. See id., at n.2 (discussing the 2nd Circuit’s Aug. 1, 2011 order in In re American Express Merchants’ Litigation, No. 06–1871–CV).

Concepcion seems clear that a state’s preference for the availability of a class procedure over individual arbitration is not sufficient to warrant obstruction of the FAA’s objectives. There is room for the possibility that Concepcion will be deemed to limit a federal vindication of rights argument based upon the value of claims at issue or costs associated with individual arbitration.