In April 2011, the U.S. Supreme Court decided AT&T Mobility v. Concepcion, 131 S.Ct. 1740, holding that the Federal Arbitration Act pre-empts California’s Discover Bank rule that class action waivers in arbitration agreements are unconscionable and therefore unenforceable. Concepcion arose out of a class action brought against AT&T, alleging that AT&T advertised discounted cellphones while charging sales tax on the full price. AT&T demanded that the claims be submitted to individual arbitration because the service agreement mandated arbitration and prohibited class arbitration. In deciding in favor of AT&T, the court explained that “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” With this holding, the Supreme Court overturned more than 20 state laws prohibiting class action waivers in arbitration agreements.
Despite the Supreme Court’s seemingly clear directive that the FAA pre-empts state laws deeming class action waivers unconscionable, the scope of this pre-emption in California has been unclear in the nearly two years since Concepcion was decided. While many California federal courts have applied Concepcion broadly, only one U.S. Court of Appeals for the Ninth Circuit case examining Concepcion is currently good law. In last year’s Coneff v. AT&T, 673 F.3d 1155, the Ninth Circuit considered a challenge to the district court’s ruling that a class action waiver contained in AT&T’s service agreement was substantively unconscionable under Washington law. Plaintiffs had entered into service agreements with AT&T that required individualized arbitration of all disputes and claims and prohibited both class actions and class arbitrations. In upholding the class action waiver in Coneff, the Ninth Circuit expressly rejected the notion that an implied exception must be read into the Concepcion opinion to permit state laws to “invalidate class action waivers when such waivers preclude effective vindication of statutory rights.” The court reversed and remanded the case to the district court.
