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In April 2011 the U.S. Supreme Court held in AT&T v. Concepcion that California’s Discover Bank rule did not invalidate a class action waiver within an arbitration provision in the context of a consumer transaction. The Discover Bank rule provided generally that a class action waiver found in a consumer contract of adhesion, under which a dispute would inevitably involve a small amount of damages, was unconscionable under California law and therefore unenforceable because it exempted the party with superior bargaining power from responsibility for fraud or willful injury. In finding that the rule could not trump the Federal Arbitration Act (FAA), the high court found that “States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons. Moreover, the claim here was most unlikely to go unresolved.”

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