Last spring, the U.S. Supreme Court decided AT&T Mobility v. Concepcion, a case involving a challenge to a California law prohibiting class arbitration waivers in consumer contracts when disputes arise over small damage amounts. By a vote of 5 to 4, the Court held that the Federal Arbitration Act (FAA) pre-empts California's state law, under which such waives were treated as unconscionable contracts of adhesion.
The case involved cell phone contracts that provided for arbitration of all types of disputes, but also required that arbitration be pursued in an individual capacity, not in a class action. In other words, the Court ruled that AT&T customers were required to arbitrate disputes, rather than sue in a class action, despite California's law allowing just that.
Challenging Corporate Conduct
The Supreme Court's Concepcion decision does not mean, however, that consumers no longer have rights to challenge corporate conduct through class actions. Try as they might, corporations cannot ban all consumer class actions with mandatory arbitration clauses.
AT&T, for example, would dearly like to have such a ban in place now, as it seeks to complete its proposed merger with T-Mobile. AT&T faces numerous arbitration claims relating to that merger.
Legal commentators have reaffirmed customers' rights to challenge corporate conduct. Regarding the legality of a merger between AT&T and T-Mobile, Richard Brunell of the American Antitrust Institute believes that customers still have the right to challenge anti-competitive conduct. The Concepcion decision does not necessarily change that, no matter how much AT&T wishes it did.
Class Actions After Concepcion
It's true that, after Concepcion, states have no straightforward way to prohibit consumer contracts in which companies seek to insulate themselves from liability by insisting on various waivers. Even if a consumer is required to arbitrate, the outcome of the arbitration can have ramifications for other similarly-situated consumers.
Put another way, even if arbitration is required in consumer cases, that does not mean that the company can completely limit the substance of what is to be arbitrated.
To be sure, these are not easy concepts to grasp immediately. But a California employment law attorney can advise you on what can still be done to protect your rights as a consumer.
