January 12, 2018 Practice Points

Ninth Circuit Holds that Arbitration Is Not State Action

By S.I. Strong

There has been a significant amount of scholarly debate in the United States about whether and to what extent arbitration constitutes state action and how best to describe the connection between arbitration and the Constitution.  See, e.g., Sarah Rudolph Cole, Arbitration and State Action,2005 B.Y.U. L. Rev. 1; S.I. Strong, Constitutional Conundrums in Arbitration, 15 Cardozo J. Conflict Resol. 41 (2013).  Therefore, it may be of interest to know that the US Court of Appeals for the Ninth Circuit recently has held that arbitration is not state action.  Roberts, et al. v. AT&T Mobility, LLC, Case No. 16-16915(December 11, 2017)

The decision came in the context of a class action suit that alleged AT&T had falsely advertised its services as including "unlimited" phone services when that was not in fact the case.  AT&T moved to compel arbitration and the plaintiffs argued in response that they had a First Amendment (constitutional) right under the Petitions Clause to bring their claims in court. In its ruling, the Ninth Circuit "rejected plaintiffs' assertion that there is a state action whenever a party asserts a direct constitutional challenge to a permissive law under Denver Area Educational Telecommunications Consortium, Inc. v. FCC, 518 U.S. 727 (1996)."  The panel held that Denver Area "did not broadly rule that the government is the relevant state actor whenever there is a direct constitutional challenge to a 'permissive' statute, and it did not support finding state action in this case."

 As a result, "[t]he panel rejected plaintiffs' argument that they could show state action because the Federal Arbitration Act, including judicial interpretations of the statute, encourages arbitration such that AT&T's actions were attributable to the state." The panel held that the Act "merely gives AT&T the private choice to arbitrate, and does not encourage arbitration such that AT&T's conduct is attributable to the state."

S.I. Strong is the Manley O. Hudson professor at the University of Missouri, School of Law in Columbia, Missouri.

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