AT & T Mobility v. Concepcion - Foundations of Law and Dispute Resolution

Question 1

Facts

Answer 1

• Concepcion’s had $30 claim against AT&T based on false advertising b/c phones were not really free. AT&T’s consumer contract required consumers to arbitrate complaints individually, and use no class actions.
• , in California, a leading state law case (Discover Bank) ruled such class action waiver clauses in certain consumer contracts unenforceable as “unconscionable” contracts of adhesion (no bargaining power; small dollar claims won’t really be pursued; enables party to escape liability for many low dollar frauds) and the Fed. Arb. Act contains a “savings clause” that prevents arb clause enforcement “upon such grounds as exist at law or in equity for the revocation of any contract.”

Question 2

Issue

Answer 2

Does FAA preempt the CA ruling? Must the clause be enforced?

Question 3

Holding

Answer 3

Yes, Yes. Agreements requiring Individual arbitration must be enforced. Strong federal policy in favor of arbitration. Allowing class actions undermines the fundamental efficiency advantages of arbitration and delays dispute resolution.

Federal law preempts state law

Question 4

Business Takeaway

Answer 4

Growing number of businesses have arbitration clauses to prevent litigation. Courts favor arbitration and will more often side with arbitration unless there is some kind of torte

Class action favors the plaintiffs
Are costly to the employer
Are more efficient for courts to process v.
individual lawsuits