In a 5–4 decision, the U.S. Supreme Court recently held that a state-law rule finding most class arbitration waiver provisions unconscionable stands as an obstacle to the objectives the Congress sought to meet in enacting the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (FAA), and is therefore preempted by the Federal Arbitration Act (FAA). AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (Apr. 27, 2011). The decision is a decided victory for businesses who sell products and services to consumers, as it provides a means by which businesses may avoid altogether defending consumer claims on a class-wide basis.
Background
The plaintiffs, Vincent and Liza Concepcion, entered into a contract with AT&T Mobility LLC for cellular phone service. The service purchased by the Concepcions was advertised as including free phones, but AT&T charged the Concepcions sales tax based on the phones' retail value. In March 2006, the Concepcions filed suit against AT&T in the United States District Court for the Southern District of California, and the action was later consolidated with a putative class action alleging that AT&T had engaged in false advertising and fraud.