My post a month ago on AT&T Mobility LLC v. Concepcion, a case that my Mayer Brown LLP colleagues are working on, drew some interest. I therefore thought I’d also note that four amicus briefs have been filed supporting the cert petition, from CTIA–The Wireless Association (filed by former Solicitor General Paul Clement, known to many of our readers as one of the lawyers arguing the recent Second Amendment incorporation case), the Chamber of Commerce, the Pacific Legal Foundation, and DRI (a civil litigation defense attorney organization). I read the briefs and thought they were very good (though I’m naturally not an unbiased observer here).
The case, as you may recall, deals with this situation: A consumer signs an agreement which includes an arbitration provision, and which forecloses class action arbitration. The agreement doesn’t make arbitration prohibitively expensive. A state’s law precludes contractual waivers of the right to bring a class action claim; many states don’t do this, but some states do. Does the Federal Arbitration Act preempt the state law on this, and make the no-class-action arbitration provision effective?
Dilan Esper says:
You’re on the wrong side of this one, so I can’t wish you good luck. But it is a very interesting issue, and I appreciate the updates on the case.
March 5, 2010, 1:41 pmAllan says:
I find it amusing that companies think that mandatory arbitration is a consumer benefit and somehow think consumers have a choice in the matter.
Why not have two contracts, one with and one without arbitration provisions? The second, presumably, would be more expensive. Then consumers would have a real choice.
March 5, 2010, 2:00 pmSteve says:
It’s interesting that in a case where denial of class certification would permit an immediate appeal under the “death knell” doctrine, anyone could argue that it would be no big deal to require the plaintiff to proceed before a forum that does not allow class actions.
March 5, 2010, 2:00 pmAF says:
“The agreement doesn’t make arbitration prohibitively expensive.”
That’s impossible for most consumer contracts. Assume that 100,000 consumers are each damaged $50 by the breach of a consumer contract. Obviously, arbitration will cost more than $50 for each of the consumers, if their real economic costs are taken into account. Therefore, arbitration will be prohibitively expensive to them if they are rational actors.
March 5, 2010, 2:04 pmSlow says:
There may be nothing I dislike more than mandatory arbitration in consumer contracts. While many will disagree, I think most of these are substantially contracts of adhesion at this point. The reason being that a consumer is unlikely to find certain products they want or need without these provisions.
The fact that these particular provisions have been included at the behest of these corporations insurers makes it even more unseemly. At some point we could loose the constitutional right to a jury trial, because no insurance company will insure those companies that don’t contract it out.
I love how uppity this forum gets about certain parts of the bill of rights, but the subtle erosion of another by congress and private contract is just okay. I personally think a fair and impartial juridical remedy to civil problems is a cornerstone of our democracy. I have been on both sides of arbitration. It works great to settle ordinary business disputes, it is absolutely terrible for settling consumer product claims.
You think electing judges is bad…the whole arbitration system is a giant scam – if you want to stay on as a arbiter and continued to get paid you have to make the right people happy (who you have to please depends on which arbitration forum you are with). That is just the way it is, there is no sugar coating it or hypothetical…it is just a pure fraud.
Arbitration just works better if the opposing forces are of near equal power.
http://online.wsj.com/article/SB125548128115183913.html
March 5, 2010, 3:22 pmAri says:
I just wrote my note on class action waivers and mandatory arbitration so I’m getting a kick out this.
March 5, 2010, 5:41 pmPatrick says:
This is tough. Do you want to be a pro-business conservative, or a federalist conservative?
March 5, 2010, 6:24 pmGuy says:
Why not have the question settled by the arbitrator? Wouldn’t be far out of the precedents on the issue.
I know this will never happen, but the FAA really needs to be amended to exempt ordinary employment and consumer contracts. Arbitration agreements between two equally-footed parties are one thing. But agreements where a person has to waive their right to judicial enforcement of their rights just to get a job are abominable.
March 5, 2010, 6:38 pmNunzio says:
I think a very fair policy split here would be for Congress to prohibit arbitration in consumer contracts and employment cases but to permit waiver of jury clauses.
So consumers and employees get access to court and companies and employers, and their insurers, get some reassurance that damages will not get out of hand.
March 5, 2010, 6:42 pmBenjamin Davis says:
Does the FAA preempt? Answer is yes. Let’s move on. The problem is the FAA. Now the court might pull something out of its collective you-know-what someday, but not this court. The problem that is more deeper is that the process is not meaningfuly neutral dispute resolution. The problem is that it is really a limitation of liability structure contractually being put in place through 1) eliminating the class action and 2) the hurdles to consumer cases being brought by their nature eliminating some consumers on a cost benefit basis from seeking relief. You can dress it up anyway you want but that is the oink point.
The Arbitration Institutions that are willing to take these case of course must have in mind the background issue of National Arbitration Forum. The step in point by the state will be consumers complaining to state attorney generals and they stepping in to correct this stuff under their powers. But look at this, complaint about the company, arbitration, complaint to State Attorney General, and then step in. See how the consumer is drawn out? Most of us will just let it go which is the acquiescence point being sought in this game.
Of course, those who want arbitration will try to step in under the FAA and we will get state and federal battles on this stuff at some point. And, in the background, are the consumers who are seeking meaningful dispute resolution process – not ersatz process in ersatz arbitration – not true arbitration.
And does product quality improve in this setting or not? I doubt it. Its about reducing risk and leaving the competitive space on the business side to consumers and not on the consumer satisfaction lawyer redressing rents side.
Best,
March 6, 2010, 10:11 amBen
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March 7, 2010, 2:53 amDavid Schwartz says:
Sure, because that’s obviously the fault of the person trying to give the person the job they so badly need.
X needs a job very badly. Y is offering X a job so long as he agrees to arbitration. A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, V, and W aren’t offering X any job at all. But naturally, X’s predicament is Y’s fault — the person who is offering him a job. And the best solution is to make it harder for Y to offer X a job by prohibiting Y from offering X (the guy who desperately needs a job, remember) on the terms Y would prefer — even if X himself would prefer those same terms.
March 7, 2010, 10:18 amDilan Esper says:
X needs a job very badly. Y is offering X a job so long as he agrees to arbitration. A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q, R, S, T, U, V, and W aren’t offering X any job at all. But naturally, X’s predicament is Y’s fault — the person who is offering him a job.
It’s worth noting that if pre-employment arbitration agreements were prohibited or severely restricted, firms would still have to hire employees and would do so.
March 8, 2010, 12:36 amDavid Schwartz says:
Certainly they would. But it defies logic to understand how you can help someone by forcing something on him that he could insist on if he wanted. You want to help the guy? Pass a law requiring any employer to pay him a $10,000 cash hiring bonus. I mean, employers will still hire, right?
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