Following the Supreme Court’s recent decision in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (U.S. 2011), courts across the country have been bulldozing aside class action waivers as well as other remaining obstacles to consumer arbitration.
For the past few years, courts throughout the U.S. have repeatedly struck down class action waivers under state unconscionability law.
On remand from the U.S. Supreme Court, and in a pre-Concepcion case, the Second Circuit didn’t budge from its original decision: A class action waiver is unenforceable when it would effectively shut down an action seeking to vindicate statutory rights.
The future of class action waivers remains unclear.
Congress might not have banned mandatory consumer arbitration altogether in the Dodd- Frank Act, but it dynamited a bunch of obstacles.
We recently reported on the U.S. Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., No. 08-1198 (U.S. Apr. 27, 2010), in which the Court held that the Federal Arbitration Act does not allow class arbitrations absent an agreement between the parties in their arbitration clauses.
Consumer arbitration has been an important tool for controlling class action exposure, at least until the states began to fiddle and find waivers of class action clauses unconscionable.
In a proposed class action alleging that Dell designed, manufactured, and sold defective notebook computers, the Ninth Circuit struck down a class action waiver clause pursuant to which Dell had obtained an order from the district court compelling arbitration.
In an action alleging that Chase improperly increased the interest rate charged on credit card balances, the Eighth Circuit reversed a finding that a class action waiver in a cardholder agreement was unconscionable.
In a class action claiming that AT&T’s offer of a "free" phone to anyone who signed up for its service was fraudulent to the extent AT&T charged the new subscriber sales tax on the retail value of each "free" phone, the Ninth Circuit affirmed the denial of the telephone company’s motion to compel arbitration on the ground that the arbitration clause contains an unconscionable class action waiver.