by M. Todd Ratay
In 2011, the United States Supreme Court decided in AT&T Mobility Inc. v. Concepcion that companies can enforce a contract provision that requires customers to arbitrate their disputes individually. Many feared this decision could effectively end consumer class action lawsuits. This article discusses the analyses the Court’s decision and its likely ramifications for class actions in various contexts.
AT&T v. Concepcion involved the purchase of a cell phone and a service agreement, The Concepcions alleged AT&T had engaged in false advertising and fraud by charging sales tax on what they were told was a “free” phone. Although the phone was advertised as free under their service contract, the Concepcions were still required to pay sales tax based upon the retail value of the phone, a sum of $30.22. The Concepcions filed suit against AT&T and their case was consolidated into a class action.
The service agreement the Concepcions signed for service with AT&T contained an arbitration clause that compelled the Concepcions to bring their claim in an arbitration proceeding, and required they do so individually, and not as a member of a class. AT&T moved to compel arbitration in accordance with the contract’s arbitration clause. The district court denied the motion, finding the clause that required the Concepcions to bring the action individually acted as a class action waiver, and this was unconscionable under California law as spelled out by the California Supreme Court in Discover Bank. The Ninth Circuit agreed, AT&T appealed to the United States Supreme Court.
