• On November 9, 2010, the US Supreme Court heard oral argument in AT&T Mobility v. Concepcion, a case that pits the Federal Arbitration Act’s (FAA’s) statutory preference for enforcing arbitration agreements against state laws that strike down contractual arbitration clauses when they are deemed unconscionable. In Concepcion, a California federal district court found that AT&T Mobility’s arbitration clause in its customer agreement – which allows customers to challenge the carrier only in individualized arbitration proceedings, and thus never in class action litigation in court or arbitration – was unconscionable under California law, and thus unenforceable. The Ninth Circuit Court of Appeals agreed. Without the right to bring suit as a class action, the courts found, it is unlikely that any plaintiff would undertake the cost and effort to challenge the carrier’s practice – here, AT&T’s charging sales tax on a purportedly “free” phone. At oral argument, questions from several Justices seemed to undercut AT&T’s position that federal law can displace state unconscionability law. Justice Scalia asked, “Are we going to tell the State of California what it has to consider unconscionable?” Justice Kagan echoed the view that the FAA was not meant to create a uniform state law on unconscionability: “It may be good unconscionability doctrine, and it may be bad unconscionability doctrine, but it’s the state’s.” Chief Justice Roberts, however, asked whether California’s unconscionability law became more strict in the area of arbitration agreements than in other aspects of its unconscionability law, such that its unconscionability jurisprudence as to arbitration clauses may not warrant deference under the FAA’s savings clause for state law. This case is being widely followed, because several other carriers have similar arbitration clauses, and thus the Supreme Court’s decision is likely to have a significant impact on the ability of carriers to avoid class actions in the future. No. 09-893.
  • On November 5, 2010, the US District Court for the District of Kansas narrowed the scope of a putative class action against AT&T Corp. for “cramming,” or adding improper charges to the customers’ telephone bills without their permission. The plaintiffs allege that AT&T Billing Solutions, a wholesale service, allowed other media, information, and communications service providers to place charges on AT&T’s customer bills that were improper. AT&T typically keeps a portion of such charges. The court granted AT&T’s motion to dismiss the business customers’ claims under Kansas consumer protection law, but denied the motion as to the business customers’ other state law claims. The individual consumer’s claims – and those of the class he represents – also will proceed in the case. AT&T argued that plaintiffs’ cramming allegations were barred by the “voluntary payment” doctrine, such that once these plaintiffs paid their phone bills, they could never sue to recover amounts paid to AT&T. At this stage of the case, the court disagrees: “Whether a payment is voluntary depends on the facts of the particular case. Because resolution of contested facts is essential to the resolution of defendants’ affirmative defense of voluntary payment, the court cannot grant the motion to dismiss on this basis.” Midland Pizza LLC v. Sw. Bell Tel. Co., No. 10-2219.