Supreme Court Hears Arguments in AT&T Mobility LLC v. Concepcion

The United States Supreme Court heard oral arguments Tuesday in AT&T Mobility LLC v. Concepcion, 09-893, a class-wide arbitration case from the 9^th Circuit. AT&T concerns the applicability of state law unconscionability defenses to class arbitration exclusion clauses in consumer arbitration agreements.

In the case, Vincent and Liza Concepcion sued AT&T in California over a charge of approximately $30 in connection with purchasing a cellular telephone. Because the amount was so small, the Concepcions also sued on behalf of other cellular phone purchasers despite that the service agreement the couple signed stated:

YOU AND AT&T AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN YOUR OR ITS INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING.

Although AT&T revised its arbitration provisions after the Concepcions filed suit, the case was allowed to proceed in federal court due to questions regarding whether California unconscionability law applied. AT&T maintains that the Federal Arbitration Act pre-empts state contract law.

Oral argument before the Court lasted for approximately one hour. According to the Washington Post,

The justices’ questions suggested a more limited ruling on the facts of the specific case rather than the broad decision on class-action suits that the 26 groups submitting friend-of-the-court briefs had addressed.

The arguments also raised questions about states’ rights. State and federal courts in California agreed with a state law that said businesses’ attempts to ban arbitration class-action suits unfairly tilt the field against consumers. And some justices indicated that the decision should be up to the states.

…[Justice] Roberts and Justice Samuel A. Alito Jr. seemed more sympathetic to AT&T. The company argued that lower courts had wrongly held that the ban on class-action arbitration suits was “unconscionable.”

Alito said the “heart” of AT&T’s argument was that the traditional test of whether a contract is unconscionable “focuses on unfairness to the party who is before the tribunal. So here it would be unfairness to the Concepcions, rather than unfairness to other members of the class who are not before the court.”

A review of the transcript reveals that the recent ruling in Stolt-Nielsen v. AnimalFeeds International, 130 S. Ct. 1758 (2010), weighed heavily on the minds of the Court. During oral argument, Justice Ginsburg asked AT&T’s attorney to focus on Stolt-Nielsen and explain why it was not dispositive in the case at hand.

Justices Alito, Scalia and Roberts, who aligned with Justices Thomas and Kennedy to create the majority in Stolt-Nielsen, seemed likely to rule that the class arbitration exclusion clause in the case cannot be rendered unenforceable by the application of California unconscionability law. Meanwhile, Justices Breyer, Sotomayor and Kagan appeared to favor the application of state unconscionability principles, even in a class-wide arbitration context. It will be interesting to see if the Court in this case splits in a similar fashion to Stolt-Nielsen.

Once available, audio from yesterday’s argument will be uploaded here.

Disputing has discussed the AT&T Mobility case many times in recent months. Blogs about the case can be read here, here and here.

Technorati Tags: law, ADR, arbitration