No Class: The Supreme Court's Arbitration Ruling

The decision in AT&T Mobility v. Concepcion is as big a pro-business, pro-corporate ruling as we've ever seen from the Roberts' Court


On Wednesday morning, the United States Supreme Court gave the world a preview of its coming Walmart class action ruling -- and right now things don't look good at all for the legions of female employees and former employees who claim the giant retailer discriminated against them based upon their gender. In AT&T Mobility v. Concepcion, the Court's five conservative justices banded together to hand Big Business yet another huge legal victory, this time in the context of compelled arbitration clauses, which sets back for decades the rights of individual consumers.

Here is how the Supreme Court described the facts and history of the AT&T Mobility case:

The cellular telephone contract between respondents (Concepcions) and petitioner (AT&T) provided for arbitration of all disputes, but did not permit classwide arbitration. After the Concepcions were charged sales tax on the retail value of phones provided free under their service contract, they sued AT&T in a California Federal District Court.Their suit was consolidated with a class action alleging, inter alia, that AT&T had engaged in false advertising and fraud by charging sales tax on "free" phones. The District Court denied AT&T's motion to compel arbitration under the Concepcions' contract. Relying on the California Supreme Court's Discover Bank decision, it found the arbitration provision unconscionable because it disallowed classwide proceedings. The Ninth Circuit agreed that the provision was unconscionable under California law and held that the Federal Arbitration Act (FAA), which makes arbitration agreements "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract," did not preempt its ruling.

I'll leave it to others to parse the details of Justice Antonin Scalia's majority opinion, which overturned the 9th Circuit, voided the intended impact of California's consumer law and case precedent, and declared that the Federal Arbitration Act allows corporations to force individuals to adhere to individual dispute arbitration no matter how unjust the results. Suffice it to say that the Court's decision completely defies the very federalism principles which are so often articulated by the very conservative members who agreed Wednesday to strike down a state's effort to level the consumer playing field for millions of its residents. This is as big a pro-business, pro-corporate ruling as we've ever seen from the Roberts' Court -- and it will take explicit Congressional action to overturn it. Paging Lilly Ledbetter!

The money quote of the day comes not from the majority, which contorted itself to lend a helping hand to AT&T, but rather from Justice Stephen Breyer, one of the four dissenting justices. Highlighting the absurdity of the result reached by the AT&T majority, Breyer wrote:

In general agreements that forbid the consolidation of claims can lead small dollar claimants to abandon their claims rather than to litigate. I suspect that it is true even here, for as the Court of Appeals recognized, AT&T can avoid the $7,500 payout (the payout that supposedly makes the Concepcions' arbitration worthwhile) simply by paying the claim's face value, such that "the maximum gain to a customer for the hassle of arbitrating a $30.22 dispute is still just $30.22." What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim? In California's perfectly rational view, non class arbitration over such sums will also sometimes have the effect of depriving claimants of their claims (say, for example, where claiming the $30.22 were to involve filling out many forms that require technical legal knowledge or waiting at great length while a callis placed on hold). Discover Bank sets forth circumstances in which the California courts believe that the terms of consumer contracts can be manipulated to insulate an agreement's author from liability for its own frauds by "deliberately cheat[ing] large numbers of consumers out of individually small sums of money." Why is this kind of decision--weighing the pros and cons of all class proceedings alike--not California's to make?

Now, there is no federal arbitration issue pending in the Walmart case. There is no contract clause over which the parties are arguing. There is no relevant state law to apply. Instead, the matter in Wal-Mart v. Dukes focuses upon the Federal Rules of Civil Procedure governing class-action status. But, still, it's not hard to see the similarities between the two disputes. In the Walmart case, the company is asking the justices to dramatically limit the ability of potential plaintiffs to band together to pursue common claims based upon allegedly illegal conduct. In the AT&T case, the company was asking the justices to dramatically limit the ability of its customers to band together to pursue common claims based upon allegedly illegal conduct.

The factual details and legal authority may differ. The precedent and legal standards obviously won't be the same. But at their essence the two cases are quite similar. The AT&T Mobility ruling makes clear that there are at least five justices on the current Court who are hostile to the notion of "class action" in all of its relevant forms. And, if anything, it will probably be easier for those justices to legally justify shooting down the Walmart plaintiffs than it was for them to shoot down the consumers who were seeking to hold AT&T Mobility responsible.

Let me put it this way: This AT&T Mobility decision marks another shoe dropped on the heads of individuals who have sought fair redress against corporate interests this Term. But the next shoe from the Court's conservatives, due by the end of June in Wal-Mart v. Dukesisn't going to fall from the sky. Instead it's going to kick all those employment discrimination plaintiffs right in the ass. Just you watch.

Image credit: AP/J. Scott Applewhite