Legal News

ATT Mobility LLC v. Concepcion

Case Number 09-893
Supreme Court of the United States

On April 27, 2011, the US Supreme Court, in a 5-4 decision, delivered its opinion in the closely watched AT&T v. Concepcion case.  This case originated in the United States District Court for the Southern District of California and was appealed to the United States Circuit Court of Appeals for the 9th Circuit. Factually, Concepcion, on behalf of himself and a class of similar AT&T subscribers, sought recovery of the sales tax he paid in connection with the purchase of a phone that was advertised by AT&T as “Free”.   In response, AT&T asked the District Court to enforce the contractual mandatory arbitration clause, which both the District Court and the Circuit Court of Appeals determined was unenforceable under California law on the basis that AT&T cell phone subscribers were unfairly prohibited from prosecuting their claims in arbitration as a class action.  After hearing oral argument in November 2010, the Supreme Court reversed the 9th Circuit and found that the relevant California law was inconsistent with the purpose and objectives of the Federal Arbitration Act, and therefore must give way to the Act.  As such, the Supreme Court has effectively gutted consumers’ procedural right to pursue thousands of low dollar claims in the form of a class action where the consumer has contracted to resolve those claims in arbitration.  Unfortunately, this decision is another big win for corporations and a huge loss for consumers as it encourages large consumer service based corporations like AT&T to incorporate mandatory arbitration clauses with class action waiver language in their consumer transaction contracts.  These companies know that with these now enforceable waivers, very few consumers will pursue small money damages on their own in arbitration and they also know that absent class action treatment, lawyers will not pursue these claims on a contingent fee basis.  Although not entirely practical, it is decisions like these which force consumers to read the fine print to determine exactly what they are agreeing to and if these waivers and similar waivers are present, consumers must be willing to walk away from the provider.

Posted April 28, 2011