• Judicial Scrutiny of Arbitration Clauses Under Concepcion
  • February 10, 2012 | Authors: Michael P. Bracken; Thomas E. Gilbertsen
  • Law Firm: Venable LLP - Washington Office
  • Two recent federal appellate decisions demonstrate the limits of last year’s Supreme Court decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). In Concepcion, plaintiffs alleged a class of California customers to challenge the wireless carrier’s practice of charging sales tax on phones promoted as “free” under various service agreements. When AT&T asserted the arbitration and class waiver provisions in its subscriber agreements, the Southern District of California ruled that the arbitration provision was unconscionable because it contained a class action waiver, and was therefore unenforceable under the rule announced by the California Supreme Court in Discover Bank v. Superior Court, 36 Cal.4th 148, 113 P.3d 1100 (Cal. 2005). The Ninth Circuit affirmed on those same grounds. The Discover Bank Rule claimed support in § 2 of the Federal Arbitration Act, (9 U.S.C. §2) (FAA) providing certain exceptions to enforcement of arbitration agreements, including “such grounds as exist at law or in equity for the revocation of any contract.” Since the FAA’s savings clause allows arbitration agreements to be defeated by state law contract defenses, the Discover Bank Rule was considered by some to be an appropriate application of traditional unconscionability defenses against class action waivers in arbitration agreements. Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 687 (1966).