Source: https://www.scotusblog.com/2011/09/att-mobility-and-the-end-of-consumer-class-action-through-commerce-clause-jurisprudence-not-so-fast/
Timestamp: 2019-04-25 23:50:21+00:00

Document:
The following contribution to our arbitration symposium is written by Terry F. Moritz, a senior partner at Goldberg Kohn Ltd. in Chicago, Illinois. Mr. Moritz founded and chaired the firm’s litigation practice for over twenty-five years. He is also an adjunct professor at Loyola University Chicago, School of Law, focusing on alternative dispute resolution. For further background, see “The Future of Consumer Arbitration in Light of Stolt-Nielsen, Terry F. Moritz & Brandon J. Fitch, 23 Loy. Consumer L. Rev., Vol. 23:3 (2011), pp. 265-293.
Arbitration matters have garnered a significant portion of the Supreme Court’s attention over the past several years. During the October 2009 Term, the United States Supreme Court decided a total of ninety-two cases on the merits (statistics available here), four of which addressed arbitration-related questions. During the 2010 Term, the United States Supreme Court decided another significant Federal Arbitration Act (“FAA”) case, AT&T Mobility LLC v. Concepcion (2011), and as the Court enters the 2011 Term it is scheduled to hear at least two more FAA cases, CompuCredit Corp. v. Greenwood and Stok & Associates, PA v. Citibank, NA.
Two of these decisions, Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) and AT&T Mobility, taken together were initially thought to have significantly affected the ability of plaintiffs to mount class action claims in an arbitration setting. Stolt-Nielsen held that where it was determined that an arbitration agreement was “silent” with respect to the ability of a party to bring a class action in arbitration, one could not be inferred. The AT&T Mobility decision struck down barriers to waivers of class action based on state law grounds and was particularly controversial in that it arose in a consumer law context. Indeed, the day following the release of the AT&T Mobility decision, Senators Al Franken and Richard Blumenthal announced plans to alter the impact of the decision on consumer claims by reintroducing the Arbitration Fairness Act in the 112th Congress. However, the Senators' concerns may be premature, for some lower courts are reading AT&T Mobility very narrowly.
In AT&T Mobility, the Supreme Court was to decide whether a California judicially crafted rule that serves to invalidate an arbitration class-action waiver as unconscionable is in conflict with the FAA and therefore ineffective. AT&T Mobility deals with what are uniquely American phenomena — the use of pre-dispute arbitration agreements in consumer contracts and class action processes in arbitrations. The Ninth Circuit, relying on a decision by the California Supreme Court in Discover Bank v. Superior Court (2008) struck down, as unconscionable, a waiver of the right to bring a class action in a consumer contract that otherwise required arbitration. Discover Bank established a fairly rigid rule that class arbitration waivers were unconscionable and could not be enforced (thus permitting class actions even where the parties had agreed to only individual arbitrations). Simply put, the issue as it came to the Supreme Court was whether a rule that struck down a consumer arbitration agreement’s waiver of a right to commence a class arbitration contradicted the federal policy of promoting arbitration.
In its five-to-four opinion written by Justice Scalia, the United States Supreme Court concluded that because it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” California's Discover Bank rule is preempted by the Federal Arbitration Act. The judgment of the Ninth Circuit was reversed and the case was remanded for further proceedings.
Is the unconscionability test of a class action waiver on the precedential ash pile?
Lower court decisions applying the holding of Stolt-Nielsen and AT&T Mobility do not suggest any singular pattern. Certainly some courts have followed the decisions fairly rigidly — see, e.g.: D’Antuono v. Service Road Corp. (D. Conn. 2011) (arbitration class claims dismissed); Boyer v. AT & T Mobility Services, LLC (S.D. Cal. 2011) (arbitration class action dismissed); Daugherty v. Encana Oil & Gas (USA), Inc. (D. Colo. 2011), (AT&T Mobility followed and arbitration class claims dismissed); DelRio v. Creditanswers LLC (S.D. Cal. 2011) (AT&T Mobility followed); Murphy v. Directv, Inc. (C.D. Cal. 2011) (AT&T Mobility followed); Wallace v. Ganley Auto Group (AT&T Mobility followed).
Based on this analysis, the Court concluded that the AT&T Mobility case did not clearly reach rights secured under Title VII, and the Court refused to grant a motion for reconsideration based upon the decision.
In Re Checking Account Overdraft Litigation the United States District Court for the Southern District of Florida took another approach. The plaintiffs in that case held checking accounts at four banks, and all of the accounts were governed by deposit agreements, which contain arbitration clauses requiring the arbitration of any claims related to the accounts at the election of either the accountholders or the banks. Prior to the decision in AT&T Mobility, the lower court had denied motions to compel arbitration, and the matter went to the Eleventh Circuit. While pending on appeal, the Eleventh Circuit decided Cruz v. Cingular Wireless,. In Cruz, for the first time since AT&T Mobility, the Eleventh Circuit passed on the validity of a class action waiver in a consumer contract’s arbitration agreement. The Cruz plaintiffs were customers of A&&T Mobility, LLC. They filed a class action lawsuit under the Florida Deceptive and Unfair Trade Practices Act, challenging AT&T’s practice of charging them a two-dollar monthly fee for an optional “Roadside Assistance Plan” that they never ordered. Notably, before initiating cellular phone service, the Cruz plaintiffs signed the very same arbitration agreement, containing the same class action waiver, upheld by the Supreme Court in AT&T Mobility. In light of Cruz, the matter was remanded to the trial court.
"Waiver occurs when a party seeking arbitration substantially participates in litigation to a point inconsistent with an intent to arbitrate and this participation results in prejudice to the opposing party. Prejudice has been found in situations where the party seeking arbitration allows the opposing party to undergo the types of litigation expenses that arbitration was designed to alleviate.
Class action waivers in arbitration agreements will continue to be tested under state unconscionability standards, and it is unlikely that state and lower federal courts will totally disregarding the broad holding of AT&T Mobility. However, many lower courts will evaluate arbitration agreements very carefully, and missteps in the creation of arbitration agreements or in their implementation may well create situations in which the lower courts will find the AT&T Mobility holding either not controlling, inapposite or waived.

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