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Case of the Day: AT&T Mobility LLC v. Conception

The Case of the Day, AT&T  Mobility LLC v. Conception (S.Ct. 2011), is a significant domestic arbitration case that is outside the official Letters Blogatory scope of coverage, but I’m going to cover it anyway, because I really don’t understand the rationale of the case.

The Conceptions were AT&T Mobility customers. Their contract with AT&T had an arbitration clause. Although AT&T’s advertisement had claimed that customers like the Conceptions would receive “free phones,” the Conceptions were unhappy to learn that they were being charged sales tax on the value of the phone they received. They sued AT&T for false advertising and fraud in the Southern District of California, and their case was later consolidated with a class action making those claims. AT&T moved to compel arbitration. The District Court denied the motion on the grounds that under California law, the arbitration agreement was unconscionable because it did not permit arbitration on a class basis. The Ninth Circuit affirmed, noting that the analysis of an arbitration agreement that forbade class arbitration was the same as the analysis of a contract that bars class actions outside of the arbitration context.

Section 2 of the FAA makes arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” The Court (Justice Scalia wrote the majority opinion, which was joined by the Chief Justice and Justices Kennedy, Thomas, and Alito) didn’t focus on the plain meaning of this provision—indeed, Justice Breyer, in dissent, argued that the Court had conceded that California’s law on unconscionability came within the plain meaning of the savings clause—but instead, asserted that the purpose of the FAA was “to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings.” According to the Court, class arbitration “sacrifices the principal advantage of arbitration—its informality—and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.”

This analysis seems really to be on the wrong track. It seems to suggest that parties cannot make an enforceable contract to arbitrate on a class basis even if they affirmatively want class arbitration. But that seems perverse and inconsistent with the notion of arbitration as a method for the parties to make their own law and resolve their own disputes as they choose.