April 2011

Supreme Court Decision Limits Class Action Suits

1 min

In a decision handed down on Wednesday, April 27th, the United States Supreme Court put the brakes on a growing judicial trend to deny enforcement of consumer contract arbitration provisions in class action cases. Over the past several years, California and a number of other state and federal courts held that consumer contracts containing arbitration provisions were unconscionable unless they allowed for class arbitration. In AT&T Mobility LLC v. Concepcion, 563 U.S. ___ (2011), the Supreme Court ruled on Wednesday, April 27th, that the Federal Arbitration Act (FAA) (9 U.S.C. §2) preempts any state law that conditions enforceability of consumer arbitration agreements on the availability of class-wide arbitration procedures.
While Wednesday's Supreme Court decision preempts any hard-and-fast rule against the enforceability of consumer contract arbitration provisions, the FAA's savings clause remains the law. Unconscionability will continue to be an available defense to the enforceability of individual arbitration provisions in consumer sales contracts. The AT&T Mobility decision breathes new life into motions to compel arbitration in consumer class actions but, in defense of those motions, plaintiff lawyers can be expected to compare and contrast against the consumer-friendly aspects of the dispute resolution provisions emphasized by the Supreme Court's decision.

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