Since last Wednesday the legal blogosphere has been busily abuzz about AT&T Mobility v. Concepcion, ___ U.S. ___ (Apr. 27, 2011).
Cornell Law School Professor Michael C. Dorf deconstructs the opinion at his blog, Dorf on Law:
[T]he case is arresting because the Court's ruling runs away from principles that conservatives purport to value in other contexts.
In the AT&T case, ... the majority opinion exhibits tension with another jurisprudential principle favored by Justice Scalia and other conservatives. In cases under the Equal Protection Clause and the Free Exercise Clause, Justice Scalia and his fellow travelers have repeatedly argued against disparate impact tests. To discriminate, they say, is to use a criterion that on its face draws an impermissible distinction or, in rare circumstances, to use a formally neutral criterion that was adopted for the purpose of discriminating and has a disparate impact.
Yet in the AT&T case, the majority is willing to find that California's no-class-waiver rule does not apply to "any contract" because, even though it does apply to any contract, it impedes what Justice Scalia deems to be the purpose of the FAA. It is possible to make this argument for the hypothetical no-jury-waiver and no-discovery-waiver rules, because then the state rule, while formally applying to any contract, would really apply only to arbitration contracts. But the existence of arbitration class actions means that it's very hard to say that the California law's (supposed) disparate effect on arbitration must be evidence that the California no-class-waiver rule was adopted for the purpose of singling out arbitration. Consequently, it appears that the Court's conservatives are betraying their general hostility to disparate impact for its own sake.
Attorney Matt Bailey of the Bailey Class Action Bilateral Arbitration Daily considers whether Justice Scalia's "majority" opinion is actually a 4-justice plurality opinion with less robust precedential effect (a question that probably crossed the minds of many who read the opinion):
[I]t is not entirely clear whether there exists any common overlap between the analysis of the majority and Justice Thomas. Specifically, the majority reasoned that the “saving clause [in § 2] permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability’” [Slip Opinion, at 5], but concluded that preemption must be found when doing so “stand[s] as an obstacle to the accomplishment of the FAA’s objectives.” See Slip Opinion, at 9. Justice Thomas’ concurrence unequivocally rejected the majority’s “purposes-and-objectives preemption”, however, finding instead that the Discover Bank rule was in direct conflict with § 2.
In fact, the Consumer Financial Protection Act of 2010 (which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010) goes much further, authorizing the Bureau to promulgage regulations prohibiting arbitration clauses in certain types of consumer contracts:
SEC. 1028. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.
(a) STUDY AND REPORT.—The Bureau shall conduct a study of, and shall provide a report to Congress concerning, the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services.
(b) FURTHER AUTHORITY.—The Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers. The findings in such rule shall be consistent with the study conducted under subsection (a).
(c) LIMITATION.—The authority described in subsection (b) may not be construed to prohibit or restrict a consumer from entering into a voluntary arbitration agreement with a covered person after a dispute has arisen.
(d) EFFECTIVE DATE.—Notwithstanding any other provision of law, any regulation prescribed by the Bureau under subsection (b) shall apply, consistent with the terms of the regulation, to any agreement between a consumer and a covered person entered into after the end of the 180-day period beginning on the effective date of the regulation, as established by the Bureau.
12 U.S.C. § 5518 (emphasis added).
Elizabeth Warren, the head of the Bureau, has called arbitration "Darth Vader's Death Star--the Empire always wins." So there is a very real possibility that certain classes of consumer contracts may end up unaffected by Concepcion. We'll have to wait and see.
At the Huffington Post, David Arkush of Public Citizen laments the end of the American legal system as we know it:
If recent crises have taught us anything, it's that disaster follows quickly when companies have too little oversight. AT&T is pushing the outer limits of deregulation, seeking a world in which companies can use one-sided contracts to grant themselves immunity from accountability for a vast range of wrongdoing. Concepcion represents a giant leap toward a dystopian legal system that the Supreme Court should have rejected out of hand -- lawlessness for major corporations and corporate-made law for the rest of us.
Some might call this hyperbole, others pragmatism.
At ADR Profs Blog, Professor Paul F. Kirgis of St. John's University School of Law offers this advice for attorneys with business clients:
Coupled with Stolt-Nielsen, which held that an arbitrator may not interpret silence in an arbitration agreement as allowing for class arbitration, Concepcion means companies no longer have to subject themselves to class actions by consumers (or employees, suppliers, or anyone else with whom they contract). As long as it is sufficiently favorable on cost to the consumer, any arbitration agreement that does not expressly allow for class treatment (and of course, none of them do expressly allow for class treatment) now has the effect of prohibiting class relief. I would submit that any attorney who does not now advise her business clients to put arbitration agreements in all consumer contracts risks a finding of legal malpractice.
Two other law professors, Sarah Cole of the Ohio State Univeristy Moritz College of Law, and Jean Sternlight of the University of Nevada at Las Vegas School of Law, have posts on the decision at ADR Profs Blog.