Wednesday, April 27, 2011, 3:00 PM

AT&T v. Concepcion: Has the worm turned?

Posted by: Chris Jones
AT&T v. Concepcion (which has nothing to do with the map of the Paraguaian province to the left) is a case that came down today from the U.S. Supreme Court. It has considerable significance in the world of consumer class action litigation and, by extension, also in the world of consumer finance. Access to the briefs and other materials considered by the high court can be found on the SCOTUS blog, here.

At its core, Concepcion holds that the Federal Arbitration Act preempts a California law that rendered unenforceable any arbitration clause that contained a class action waiver. In other words, prior to Concepcion, California courts more or less treated availability of class litigation as more of a right than a matter of procedure, and arbitration clauses that contained class action waivers were seen as a denial of the right to litigate (whether in court or before an arbitrator) as a class. Today, the Supreme Court ruled otherwise. What makes Concepcion such a meaningful case is that jurisprudence surrounding enforcement of arbitration clauses has been evolving at the state level around the country over the past decade, and many states, including BB&R's own North Carolina, have controlling cases with rules that are similar in many respects to California's pre-Concepcion rule. All of those states are now faced with determining how Concepcion applies to their rules related to contract unconscionability.

The Wall Street Journal blog seems to be of the opinion that Concepcion will serve as a high water mark of sorts for consumer class action litigation because, it implies, everyone will run quickly to rewrite their contracts to include both arbitration clauses and class action waivers. The idea is that companies are more than happy to expose themselves to individual arbitration claims for $30.75, but a putative class of 2,000,000, each with a claim for $30.75 is an entirely different animal altogether. Consider this, if you were a consumer would you be more likely to initiate an arbitration over $30.75 or eat it. Conversely, if you were a consumer that received an "opt out" notice regarding a class action settlement related to the $30.75 claim that you had against ABC Bank, would you be more or less likely to opt in when all you had to do was sign your name and await a check in some amount? Regardless...says the Supreme Court.....if you execute a contract and it contains an arbitration clause and a class action waiver, you will not avoid enforcement of the arbitration clause due to the mere existence of the class action waiver, even if your claim is only for, say, $30.75.

Now, our friends at the WSJ make good points, and Concepcion is certainly a hurdle that the class action bar will have to clear, but consumer class actions aren't dead...not by a long shot. The people who bring and litigate those claims are among the most creative in the legal world. They will find the weaknesses in Concepcion, and they will exploit those weaknesses. Turns out, hundreds of millions of dollars can serve as quite an incentive.

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