In its recent decision in AT&T Mobility LLC v. Concepcion,1 the U.S. Supreme Court held that the Federal Arbitration Act (FAA) preempts state law unconscionability defenses to arbitration clauses that contractually waive the right to class determination of claims in litigation and arbitration. As numerous commentators have already recognized, the impact of this opinion is likely to reach well beyond its original consumer context. In particular, AT&T Mobility has the potential to drastically alter the conduct of class actions and arbitrations in the securities industry.
Until recently, FINRA rules, which prevented member firms from compelling class litigants to arbitrate their disputes, complicated the use of class arbitration waivers in agreements between securities firms and their employees, customers and counter-parties. However, the broad language of AT&T Mobility, in conjunction with recent rulings interpreting the relevant FINRA rules, may severely undercut those rules, allowing securities firms to make far greater use of class arbitration waivers.
‘AT&T Mobility’ Ruling
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