The biggest news on the class action front is that the Supreme Court heard oral argument yesterday in AT&T Mobility v. Concepcion. That case presents the issue of whether class action waivers in consumer contracts are enforceable even when state contract law bars such waivers. The company is challenging a Ninth Circuit ruling in AT&T Mobility v. Concepcion., 584 F.3d 849 (9th Cir. 2009), which struck down its class action waiver in a consumer arbitration agreement as unconscionable under California law. The Ninth Circuit held that the Federal Arbitration Act (“FAA”) does not preempt California law on this issue. California law invalidated the class action waiver on the basis of unconscionability where the agreement is a contract of adhesion drafted by the party with superior bargaining power, individual disputes predictably involve small amounts of damages, and the party with superior bargaining power has prohibited class claims to avoid facing a large number of small claims.
Though the case involves consumer fraud issues in cell phone contracts involving claims of less than $10, the stakes are high and the Supreme Court’s eventual ruling also may impact employers. At issue is whether the Federal Arbitration Act preempts states from conditioning the enforcement of an arbitration agreement on the availability of particular procedures — in this instance, class-wide arbitration — when those procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims. Multiple amicus groups for employees have submitted briefs arguing that a ruling in favor of AT&T Mobility ultimately will harm employees and insulate employers from class claims if they bind workers to arbitration agreements which do not allow for class-wide litigation. The oral argument on November 8 mentioned this potential impact; Justice Kagan’s questioning referred to the supposed evils of class arbitration and how no business would want it (due to limited review of an arbitration ruling,, etc.), and Justice Scalia made the interesting point that the real issue to him is whether corporate defendants are being coerced into abandoning regular arbitration. In essence, this boils down to a policy choice: because no rational business would agree to explicit class arbitration, if the Supreme Court rules for the consumer side, arbitration may be dead if the only way to have an enforceable arbitration agreement is to allow for class-wide dispute resolution.
The National Workrights Institute, an advocacy group for employee rights, filed an amicus brief in support of Plaintiffs; it argued that class actions like the one filed by the Concepcions are an essential procedure for the vindication of the rights of claimants of modest means with modest claims. The group argued that without the option of participating in class action litigation, employees with comparatively small claims against employers would be at a disadvantage in pursuing claims for discrimination or wage and hour violations.
On the other hand, the Equal Employment Advisory Council, an association of employers, submitted an amicus brief contending that permitting class arbitration where the parties have agreed not to do so would defeat one of the most mutually advantageous purposes of arbitration – lower cost resolution of disputes. The EEAC argued that the Ninth Circuit’s ruling, in effect, establishes an across-the-board ban on class arbitration waivers, and also undermines most, if not all, of the practical benefits that inure to employers and employees alike by agreeing to arbitrate workplace disputes.”
Stay tuned – this future ruling will be important to all employers with workplace arbitration agreements.