Reports of The Class Action’s Death Have Been Greatly Exaggerated

A few months ago, the Supreme Court granted certiorari in AT&T Mobility v. Concepcion, No. 09-893, which sent chills down the spines of consumer advocates who know the tremendous advantage that a class action waiver gives to a large corporation.  They had applauded the willingness of certain state courts to strike down these waivers in the arbitration clauses found in more and more of the “contracts” that average folks must swallow if they want to have cell phone service or establish a brokerage account or take a job with a large corporate employer, etc., etc.  Some state courts, including the California Supreme Court, have refused to accept that any consumer, unless powerless to avoid it, would ever give up the only practical legal recourse–a class action–available to obtain compensation for and/or stop illegal conduct by a corporation directed at that person and at hundreds or thousands or millions of others through the same, repeated systematic acts that injure each in an amount or in a manner that could never justify the expense of an individual lawsuit or arbitration. This kind of unreasonable condition imposed by the party with all of the bargaining power in a contract “negotiation” may be stricken under the doctrine of contract law known as “unconscionability.”

Immediately after certiorari was granted by the Supreme Court, the dire  predictions rolled in: the Supreme Court was going to kill class actions by preventing state courts from reviewing the terms that corporations impose on their customers, clients and employees under the guise of an arbitration agreement. These predictions were not without basis–it has been widely noted that the current Supreme Court is the most big-business friendly panel in recent memory.

However, at oral argument in Concepcion on November 9, 2010, the Justices did not seem inclined to further their assault on the rights of plaintiffs.  Instead, they addressed their most  difficult questions to counsel for the petitioner, AT&T Mobility.  AT&T had asked the court to declare that the California Supreme Court’s decision in Discover Bank v. Superior Court–a decision that held that arbitration clauses and class action waivers may be unconscionable in certain circumstances–is preempted by the Federal Arbitration Act.

With the caveat that predicting the outcome by analyzing the justices’ questions and comments at the argument has a low success rate, here is a sampling:

Justice Scalia hinted that the Supreme Court may not step into the merits of a contractual dispute under state law, and asked “Are we going to tell the State of California what it has to consider unconscionable?”

Referencing the Federal Arbitration Act’s preemption of laws that single out arbitration agreements, Justice Ginsberg stated to counsel for AT&T: “You don’t have anything that says—the California court hasn’t said: We are applying a special definition of unconscionability to arbitration agreements.”

Justice Kagan indicated that the decision as to whether an arbitration clause is unconscionable should be left up to the states, asking counsel for AT&T:  “Who are we to say the state is wrong about that?”

And, in a potentially telling indicator familiar to those with appellate court experience, the justices seemed a bit more deferential to counsel for the plaintiffs, who defended the Discover Bank decision.  This could indicate that the justices favored the plaintiffs’ position.

Now, we won’t have a decision on this case until sometime next year, and we don’t have any idea what the Justices were actually thinking, so what we are saying is entirely speculation.  But we’re not alone in our view that the questioning by the justices in this case did not show the type of hostility that would be expected if the Court was truly considering killing the class action. It seems that the New York Times, the Wall Street Journal, and Slate, among many others, share our view.

See our prior post on ATT v. Concepcion.