Source: https://cbaclelegalconnection.com/2011/10/07/
Timestamp: 2019-04-18 14:58:33+00:00

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The Colorado State Judicial Branch has issued a revised form for inmates to request to file in court without payment of filing and service fees. State Judicial also released a new finding and order form for such a request. Practitioners should begin using the new forms immediately.
The Colorado State Judicial Branch has issued an updated list of Colorado Family Court Facilitators for each judicial district in the state. Practitioners should begin using the new list immediately.
On Friday, October 7, 2011, Governor John Hickenlooper announced his appointment of Gerald Keefe to serve as a county court judge in the Fifteenth Judicial District, which serves Cheyenne, Kiowa, Prowers, and Baca counties. His appointment is effective November 1.
Keefe is an educator who has worked as superintendent of schools for the Kit Carson R-1 School District since 1994. He also serves as a member of the Colorado Association of School Executives and was the Chair of the Colorado Rural Schools Caucus from 2004-2010.
Keefe earned both his bachelor’s degree and his master’s degree from the University of Northern Colorado. Keefe is not an attorney. He has lived in Cheyenne Wells for 54 years.
Editor’s Note: This segment of the article highlights the AT&T Mobility LLC v. Concepción decision. The authors of this article, Dirk W. de Roos and Russell O. Stewart, along with Jay S. Horowitz, presented a CLE program on this subject and addressed the case as one of the most immediate attacks on class action litigation as it now exists. Are class action lawsuits obsolete? This seminar analyzed the decision and what may be its historic (and potentially almost inconceivable) impact on class action litigation. The program is available as a CLE homestudy in two formats: video on-demand and mp3 download.
In Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., the U.S. Supreme Court held that no party is obligated to submit to class arbitration under the Federal Arbitration Act (FAA) when an arbitration agreement is silent about the parties’ intent to allow for class arbitration. In the later case of AT&T Mobility LLC v. Concepción, the Court held that the FAA preempted California law mandating class actions as a viable arbitration remedy. This article discusses both opinions and their impact on arbitration in the United States.
On April 27, 2011, the U.S. Supreme Court, in a case closely followed by class action attorneys, held that the FAA preempts California’s Discover Bank rule, which had held that consumer collective arbitration waivers were unconscionable and unenforceable. Justice Scalia, writing for a majority in AT&T Mobility v. Concepción,55 explained that the California rule mandating the availability of class-wide arbitrations interfered with the FAA’s fundamental purpose of ensuring the enforcement of agreements to arbitrate in an efficient, streamlined procedure. AT&T Mobility fills in the blanks left by Stolt-Nielson and clarifies the Court’s views on class actions and arbitration.
Balancing the waiver of class-action rights, the AT&T contract contains terms that are unusually favorable to consumers. For example, if there were an arbitration: (1) AT&T was required to pay all costs for non-frivolous claims; (2) the arbitration must take place in the county where the Concepcións were billed; (3) either party could elect to proceed in small claims court; (4) the Concepcións could choose whether the proceedings would be in person, by telephone, or by submittal; (5) AT&T was precluded from ever seeking attorney fees; and (6) if the Concepcións recovered more than AT&T’s last written settlement offer, AT&T was obligated to pay a $7,500 minimum recovery fee and twice the amount of the Concepcións’ attorney fees.
A dispute arose when the Concepcións were billed $30.22 in sales tax for their “free” telephones. The Concepcións filed a putative class action complaint in the U.S. District Court in Los Angeles, alleging that AT&T had engaged in false advertising by charging sales tax on phones it advertised as free.
The Ninth Circuit affirmed, agreeing that the attempted waiver of class action rights was unconscionable.60 In addition, the Ninth Circuit reasoned that the Discover Bank rule merely “placed arbitration agreements with class action waivers on the exact same footing as contracts that bar class action litigation outside the context of arbitration.”61 Because § 2 of the FAA permits arbitration provisions to be declared unenforceable on “such grounds as exist in law or equity for the revocation of any contact,” the Ninth Circuit concluded that California law did not disfavor arbitrations and was not preempted by the FAA.
Under this section, arbitration provisions and agreements must be placed on equal footing with other contracts, and enforced according to their terms. Furthermore, the final phrase of the section permits agreements to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an arbitration agreement is at issue.
The Court noted that the California Supreme Court in Discover Bank held that agreements were unconscionable and unenforceable if: (1) the waiver is found in a consumer contract of adhesion; (2) the setting is likely one of a small amount of damages; and (3) there is an allegation that the party with superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small amounts of money. The Court observed that California courts had frequently applied the Discover Bank rule to find class action waiver provisions unconscionable, and that California judges were more likely to hold unconscionable contracts to arbitrate when compared to other contracts.
The Court began its analysis with the observation that the preemption inquiry becomes complex when a doctrine of general applicability, such as unconscionability, “is alleged to have been applied in a fashion that disfavors arbitration.” As examples, Justice Scalia suggested that states might attempt to prohibit all agreements that fail to provide for judicially monitored discovery. Although such a rule would be generally applicable, it would in practice disfavor arbitration. Other examples might be a state law that declares unconscionable any agreements that fail to follow the Federal Rules of Evidence, or a state law that disallows any agreement that does not permit an ultimate disposition by a jury. These examples have historical analogies in judicial treatment of arbitration before the FAA was enacted in 1925.
Justice Scalia concluded that the overarching purpose of the FAA is to ensure the enforcement of arbitration provisions according to their terms so as to facilitate streamlined dispute resolution proceedings. That being so, the Discover Bank rule requiring the availability of class-wide arbitration interferes with the fundamental attributes of arbitration and thus created a scheme inconsistent with the FAA.
The Court held that the Discover Bank rule violates § 2 of the FAA by imposing an arbitration condition to which both parties had not agreed. The California court’s attempt to limit the rule to contracts of adhesion is essentially meaningless, because “the time in which consumer contracts [are] anything other than adhesion [is] long past.”63 Moreover, the purported limitation that the damage be “small” is “toothless and malleable,” and the requirement of an alleged “scheme to cheat” has no limiting effect. The Court concluded that, faced with inevitable class arbitration, companies would have less incentive to continue to resolve potentially duplicative claims on an individual basis.
The Court found additional support for its holding in Stolt-Nielsen.64 As detailed above, in Stolt-Nielsen, the Court held that an arbitration panel exceeded its power under § 10 of the FAA by imposing class procedures based on policy judgment rather than the arbitration agreement itself or some background principle of contract law. The agreement at issue there could not be interpreted to allow such changes because the “changes brought about by the shift from bilateral arbitration to class-action arbitration are fundamental.”65 Class actions involve absent parties and require different procedures, which makes confidentiality more difficult. Class arbitration, to the extent it is manufactured by Discover Bank rather than consensual, thus is inconsistent with and stands as an obstacle to accomplishment of the purposes of Congress enacting in the FAA.
The Concepción decision concludes by noting that with the favorable dispute resolution procedures in AT&T’s contract, the Concepcións’ individual claim was likely to be resolved, and the Concepcións would be better off pursing their individual arbitration claims instead of participating in a class action.
Concepción makes clear that class action waivers in arbitration clauses are not unconscionable and should be enforced in all fifty states. Concepción is a pro-arbitration decision, and is likely to result in more arbitrations of consumer contracts and greater use of class action waivers such as those used by AT&T. Absent some legislative changes to the FAA’s breadth of preemption, Concepción also may substantially curtail class actions in contractual disputes.
55. Concepción, supra note 2.
56. Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005).
58. Concepción, supra note 2 at 2 n.2.
59. Laster v. T-Mobile, USA, Inc., 2008 WL 5216255 (S.D.Cal., Aug. 11, 2008).
60. Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir. 2009).
62. 9 U.S.C. § 2.
63. Concepción, supra note 2 at 12.
64. Stolt-Nielsen, supra note 1.
65. Concepción, supra note 2 at 13.
66. Phillips Petroleum v. Shutts, 472 U.S. 797, 811-12 (1985).
67. Concepción, supra note 2 at 16-17.
On Thursday, October 6, 2011, the Tenth Circuit Court of Appeals issued no published opinions and six unpublished opinions.
Standard Bank, PLC v. Runge, Inc.

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