U.S. Supreme Court

The End of Consumer Class Actions? Supreme Court Upholds AT&T Arbitration Contract

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The U.S. Supreme Court has sided with AT&T in its bid to enforce contract provisions banning class actions and requiring individual arbitration in consumer disputes.

The Federal Arbitration Act pre-empts a California common-law rule that allowed some consumers to avoid contracts in which they waived their class action rights, the court ruled in an opinion (PDF) by Justice Antonin Scalia.

“The dissent claims that class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system,” Scalia wrote in his opinion. “But states cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.”

Tom Goldstein of SCOTUSblog calls the 5-4 decision in AT&T Mobility v. Concepcion “super-significant.” In a preview of the case, Vanderbilt law professor Brian Fitzpatrick had warned that a ruling for AT&T could “end class-action litigation in America as we know it.”

The court ruled against cell phone customers Vincent and Liza Concepcion, who sued AT&T for advertising discounted cell phones but charging sales tax—$30.22—on the full retail price. They had asked the court to uphold California court rulings finding AT&T’s contractual class-action waivers were unconscionable as applied to consumers.

At issue is a section of the Federal Arbitration Act that permits arbitration agreements to be declared unenforceable “upon such grounds as exist at law or in equity for the revocation of any contract.” This clause, Scalia wrote, cannot be construed to allow a common law right that is inconsistent with the provisions of the arbitration law.

“The overarching purpose of the FAA,” Scalia wrote, “is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”

Justice Stephen G. Breyer dissented. He was joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan.

“What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?” Breyer wrote. Why is this kind of decision—weighing the pros and cons of all class proceedings alike—not California’s to make?”

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