GUEST-POST PART I | States’ Rights, Big Business and the Nature of Arbitration: AT&T Mobility LLC v. Concepcion

By S.I. Strong

AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), always promised to be an interesting case. Not only did the dispute concern class arbitration, one of the most controversial procedural devices to develop in recent years, it did so in a way that set corporate interests squarely against states’ rights. Given that several Supreme Court Justices who are perceived as supporting big business also appear to favor federalist causes, AT&T Mobility appeared likely to require some intricate jurisprudential machinations if those members of the Court were to remain true to their previously espoused legal principles.

In the end, little or no attempt to balance the competing interests was apparently made. Instead, five justices signed onto a majority opinion written by Justice Scalia that gave full effect to large corporations’ desire to limit or even eliminate the possibility of class suits, and it was left to the four dissenting justices, led by Justice Breyer, to give voice to the interests of states in matters touching on arbitration. Indeed, the closing phrases of Justice Breyer’s dissenting opinion could have been penned by any number of the members of the majority in different circumstances. See id. at 1762 (Breyer, J., dissenting) (stating “federalism is as much a question of deeds as words. . . . Here, recognition of that federalist ideal . . . should lead us to uphold California’s law, not strike it down. We do not honor federalist principles in their breach”). (Although Justice Thomas also wrote a concurrence, that opinion falls largely by the legal wayside, since he explicitly joined the majority opinion.)

The somewhat predictable 5-4 split may lead some observers to claim that AT&T reflects yet another example of purposive judicial interpretation and the increasing politicization of the Supreme Court. However, other interpretations are also possible. For example, some readers may see the opinion as one in a continuing line of decisions reflecting the federalization of arbitration law. See Philip J. Loree, Jr., Stolt-Nielsen Delivers A New FAA Rule – And Then Federalizes the Law of Contracts, 28 Alt. High Cost Lit. 121 (June 2010).

Alternatively, the decision can be read as reflecting (and unfortunately perpetuating) several misconceptions about arbitration in both the class and the bilateral context. This is perhaps the most interesting of the various interpretations, since it explains a number of recent Supreme Court opinions that not only suggest a lack of understanding of the nature, use and benefits of arbitration but that result in a somewhat tortured reading of the Federal Arbitration Act (FAA) that does little to clarify the issues for future litigants. See S.I. Strong, Opening More Doors Than It Closes: Stolt-Nielsen SA v. AnimalFeeds International Corp., 2010 Lloyd’s Mar. & Comm. L.Q. 565; S.I. Strong, Non-signatories’ Right to Appeal the Denial of a Stay of Litigation: Arthur Andersen LLP v. Carlisle, 28 J. Int’l Arb. 81 (2011).

This last option will be the one explored in this discussion. However, before parsing through specific issues, it is necessary to provide some background information on the case itself, although the question presented to the Supreme Court was in many ways relatively straightforward. A dispute had arisen in the context of a consumer arbitration, and the consumers wanted to go forward as a class despite the existence of a waiver of class proceedings in the arbitration agreement. AT&T, the corporate respondent, took the view that the waiver meant that only bilateral arbitration was appropriate. However, the California federal district courts had struck the waiver, based on California precedent regarding the unconscionability of any waiver of class proceedings that:

is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.

AT&T, 131 S.Ct. at 1746 (quoting Discover Bank v. Superior Court, 113 P.3d 1108 (Cal. 2005)). After losing its case in the Ninth Circuit, AT&T asked the U.S. Supreme Court to review the California law.

AT&T took the view that the waiver could not be unconscionable because it provided numerous benefits to the consumer and made bilateral arbitration an economically viable alternative to class suits. The waiver in question:

provide[d] that customers may initiate dispute proceedings by completing a one-page Notice of Dispute form available on AT&T’s Web site. AT&T may then offer to settle the claim; if it does not, or if the dispute is not resolved within 30 days, the customer may invoke arbitration by filing a separate Demand for Arbitration, also available on AT&T’s Web site. In the event the parties proceed to arbitration, the agreement specifie[d] that AT&T must pay all costs for nonfrivolous claims; that arbitration must take place in the county in which the customer is billed; that, for claims of $10,000 or less, the customer may choose whether the arbitration proceeds in person, by telephone, or based only on submissions; that either party may bring a claim in small claims court in lieu of arbitration; and that the arbitrator may award any form of individual relief, including injunctions and presumably punitive damages. The agreement, moreover, denie[d] AT&T any ability to seek reimbursement of its attorney’s fees, and, in the event that a customer receives an arbitration award greater than AT&T’s last written settlement offer, require[d]s AT&T to pay a $7,500 minimum recovery and twice the amount of the claimant’s attorney’s fees.

AT&T Mobility,131 S.Ct. at 1744. The waiver also contained language stating that “the arbitrator may not consolidate more than one person’s claims, and may not otherwise preside over any form of a representative or class proceeding” and that claims must be brought in the parties’ “individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.” Id.

[This is the first installment in a three-part series on the Guest-Post: States’ Rights, Big Business and the Nature of Arbitration: AT&T Mobility LLC v. Concepcion. Read part Two here and Part Three here.]

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S.I. Strong is currently Associate Professor of Law at the University of Missouri and Senior Fellow at the award-winning Center for the Study of Dispute Resolution, having previously taught law at the University of Cambridge and the University of Oxford in the United Kingdom. Prior to joining the faculty at Missouri, Dr Strong was Counsel specializing in international dispute resolution at Baker & McKenzie LLP and a dual-qualified practitioner (U.S.-England) in the New York and London offices of Weil, Gotshal & Manges LLP. Dr Strong has acted in arbitral proceedings under a wide range of institutional rules and is listed as a neutral on various national and international rosters. Dr Strong is the author of numerous works on international arbitration, including the award-winning article, The Sounds of Silence: Are U.S. Arbitrators Creating Internationally Enforceable Awards When Ordering Class Arbitration in Cases of Contractual Silence or Ambiguity? 30 Michigan Journal of International Law 1017 (2009), as well as the books Research and Practice in International Commercial Arbitration: Sources and Strategies (2009) and Class Arbitration and Collective Arbitration: Mass Claims in the National and International Sphere (forthcoming), both from Oxford University Press. Dr Strong, who is qualified as a lawyer at the New York and Illinois bars and as a solicitor of the Supreme Court of England and Wales, holds a Ph.D. in law from the University of Cambridge, a D.Phil. from the University of Oxford, a J.D. from Duke University, an M.P.W. from the University of Southern California and a B.A. from the University of California.