January 19, 2012 Articles

Arbitration and Class Actions: A Bleak Future?

By Jacqueline A. Chamberlain

AT&T v. Concepcion
Under Discover Bank v. Supreme Court, 36 Cal. 4th 148, 113 P.3d 1100 (Cal. 2005), class action waivers in California are unconscionable when they are in a contract of adhesion; they govern disputes over small amounts of money; and they are allegedly part of a scheme to cheat consumers out of individually small amounts of money. In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (Apr. 27, 2011), the plaintiffs were AT&T wireless customers who sued AT&T for deceptive advertising on behalf of a class, claiming that AT&T advertised discounted cell phones but charged sales tax on the full retail price. AT&T argued that class arbitration was outside the scope of the AT&T wireless contracts, which contained arbitration clauses requiring that claims be resolved only through individualized arbitrations, not as a class action. The California Supreme Court, in a decision affirmed by the Ninth Circuit, agreed with the plaintiffs and deemed the class action waivers unenforceable because AT&T could not prohibit class arbitration under the Discover Bank rule.

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