The Ninth Circuit recently reversed a lower court order denying AT&T Mobility LLC's motion to compel arbitration in a putative class action lawsuit that alleges AT&T engaged in false advertising regarding the download speeds of 3G phones on the company's networks. The court of appeals found that the district court erred in relying on a case that has since been overturned by AT&T Mobility LLC v. Concepcion and remanded the case for further consideration.
In September 2009, AT&T sought to enforce a provision in its service agreement that requires all claims to be pursued through individual arbitration and prohibits both class action arbitration and class action litigation. In denying AT&T's motion, the lower court relied solely on Laster v. AT&T Mobility LLC, a Ninth Circuit decision holding that arbitration agreements containing class action waiver provisions are unconscionable and unenforceable under California law. In Concepcion, the Supreme Court overruled the Ninth Circuit's decision in Laster and held that the Federal Arbitration Act preempts California law regarding the unconscionability of class arbitration waivers.
On appeal, AT&T sought to reverse the lower court's order without remanding the case. The Plaintiffs, however, argued that the case should be remanded because the lower court did not consider their allegations that AT&T did not provide adequate notice of changes to the arbitration clause and that the arbitration clause is still unconscionable after Concepcion. The Ninth Circuit ultimately reversed and remanded to allow the lower court the opportunity to address Plaintiffs' additional arguments.
TIP: The Supreme Court's decision in Concepcion is broadly written and held that "the FAA prohibits States from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures." However, Concepcion left the door open for states to take steps to address issues of procedural unconscionability—such as notice—in adhesion contracts.