Last week, three noteworthy new opinions were handed down interpreting AT&T Mobility LLC v. Concepcion, 563 U.S. __, 131 S.Ct. 1740 (2011).
Two of the opinions hail from Missouri. In Robinson v. Title Lenders, Inc., ___ S.W.3d ___ (Mo. Mar. 6, 2012), the Missouri Supreme Court held that the FAA, as interpreted in Concepcion, did not preempt general state-law unconscionability principles. The Court reversed the trial court's order compelling arbitration and remanded for further proceedings. In Brewer v. Missouri Title Loans, ___ S.W.3d ___ (Mo. Mar. 6, 2012), the Court reiterated its unconscionability holding and affirmed the lower court's order striking down the arbitration clause (which happened to include a class action ban) as unconscionable under Missouri law.
Our own Court of Appeal reached a similar conclusion several months ago in Sanchez v. Valencia Holding Co., LLC, 201 Cal.App.4th 74 (2011). (A petition for review was filed in January and remains pending in Sanchez. Here is a link to the docket. On February 23, 2012, the Supreme Court gave itself an extension of time, through April 3, to grant or deny the petition.)
In Kilgore v. KeyBank, N.A., ___ F.3d ___ (9th Cir. Mar. 7, 2012), the Ninth Circuit likewise assessed the enforceability of an arbitration clause in light of ordinary rules of unconscionability (namely, those of California as set forth in Armendariz). Slip op. at 2654-56. With great conciseness (at least when compared to the Robinson and Brewer opinions), the Ninth Circuit in Kilgore held that such rules are not preempted:
Concepcion did not overthrow the common law contract defense of unconscionability whenever an arbitration clause is involved. Rather, the Court reaffirmed that the savings clause preserves generally applicable contract defenses such as unconscionability, so long as those doctrines are not “applied in a fashion that disfavors arbitration.” Concepcion, 131 S. Ct. at 1747.
Slip op. at 2654. The court went on to hold that the particular abitration clause before it was not unconscionable. Id. at 2654-56.
The opinion's other major holding is even more noteworthy. The Ninth Circuit held that the FAA, as interpreted in Concepcion, preempts the California Supreme Court's Broughton and Cruz decisions, which held that CLRA and UCL claims seeking public injunctions are not arbitrable as a matter of public policy. Kilgore, slip op. at 2646-54.
In some respects, the issue resembles one addressed by the Court of Appeal in Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489 (2011). Brown held that a representative action brought under the Labor Code Private Attorneys General Act ("PAGA") was inarbitrable, Concepcion notwithstanding. The California Supreme Court denied review in October. A cert. petition is now pending in the U.S. Supreme Court (no. 11-880). The response to the petition is due to be filed today.
In other arbitration-related news, simultaneous supplemental briefs were filed two days ago, on March 13, 2012, in Sonic-Calabasas A, Inc. v. Moreno, S174475. That case involves an employment contract in which arbitration was substituted for a Berman hearing. The U.S. Supreme Court vacated the California Supreme Court's February 2011 opinion and ordered the matter reconsidered in light of Concepcion. See this blog post for more.
And on February 15, 2012, the Kentucky Supreme Court heard oral argument on the post-Concepcion petition for rehearing in Schnuerle v. Insight Communications Co., no. 2008-SC-000789 (to pull up the case, visit the docket search page, click on "case number," then insert year 2008 and case no. 789). In its original opinion, handed down in December 2010, the Kentucky Supreme Court struck down as unconscionable a no-class-action arbitration clause. Schnuerle v. Insight Communications Co., ___ S.W.3d ___, 2010 WL 5129850 (Ky. Dec. 16, 2010). See this blog post for more on Schnuerle.