AT&T Mobility LLC v. Concepcion

Two years ago, the Supreme Court held “that a party may not be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Stolt-Nielsen v. AnimalFeeds International Corp., 130 S. Ct. 1758, 1775 (2010) (emphasis in original). But the Court expressly declined at the time “to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration.” Today, the Supreme Court granted review in Oxford Health Plans LLC v. Sutter, No. 12-135, to resolve a circuit split over what counts—consistent with the FAA—as an agreement to authorize class arbitration. This issue is important to businesses that seek to enforce arbitration agreements in the context of putative class actions when those agreements do not expressly address class arbitration.
Continue Reading Supreme Court Grants Review in Class Arbitration Case, Oxford Health Plans LLC v. Sutter

A California appellate court weighed in last week with another effort to circumvent the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion. In Franco v. Arakelian Enterprises, Inc. (pdf), a panel of the Court of Appeal in Los Angeles affirmed an order refusing to enforce an employee’s agreement to arbitrate disputes with his employer, holding that Concepcion does not abrogate the California Supreme Court’s decision in Gentry v. Superior Court.

Gentry held that a court could refuse to enforce a provision requiring individual arbitration of a claim involving “unwaivable statutory rights”—which include all wage-and-hour claims—if the court determines that (1) the complaint alleged a systematic denial of overtime pay (as any class action complaint would), (2) a class action is “likely to be a significantly more effective practical means of vindicating the rights of the affected employees” than individual arbitration would be, and (3) disallowing a class action “will likely lead to a less comprehensive enforcement of overtime laws” for the allegedly affected employees (i.e., absent class members). That is, under Gentry, a court could refuse to enforce an agreement to arbitrate individually whenever it believes that the absent class members in a putative wage-and-hour class action would collectively be more likely to recover than they would be if each employee had to comply with her agreement and arbitrate any complaint she might have.

The panel concluded that Gentry was not preempted by Concepcion, which the panel took to apply only to categorical prohibitions on class actions. In reaching that conclusion, the panel relied heavily on plaintiff-friendly law review articles, and reasoned that the Supreme Court’s opinion earlier this year in Marmet summarily reversing an explicitly categorical exception to arbitration supported limiting the reach of Concepcion to similar categorical prohibitions.

The panel concluded that Gentry was not such a categorical prohibition. But it is difficult to see how Gentry—which purported to clarify the California Supreme Court’s earlier Discover Bank decision—imposes a less categorical rule than Discover Bank, which applied to consumer class actions alleging systematically deceptive conduct producing damages in amounts too small to make individual actions likely (and which was overruled by Concepcion). Gentry says, in essence, that individual arbitration cannot be compelled whenever the court concludes on balance that the class device will make it more likely that plaintiffs’ lawyers will bring more claims on behalf of a greater number of employees. It is hard to imagine any wage-and-hour class action in which the plaintiffs’ lawyers would not allege “systematic” violations of the wage-and-hour laws, or would not contend that class actions are “significantly more effective” than individual arbitration.

Continue Reading California Court Of Appeal Strikes Down Arbitration Agreement In Wage-And-Hour Class Action Despite Concepcion

The Supreme Court has just granted certiorari in American Express Co. v. Italian Colors Restaurant, No. 12-133.   Earlier today, my colleague Andy Pincus previewed the issue presented to the Court, which is (in a nutshell) whether plaintiffs may avoid their agreements to arbitrate on an individual rather than class-wide basis by contending that they cannot “effectively vindicate” their federal claims without the use of the class device.

Since AT&T Mobility LLC v. Concepcion, the majority of courts have enforced arbitration agreements that waive class actions.   But a distinct minority of courts, relying on the Second Circuit’s decision
Continue Reading Supreme Court Grants Certiorari in American Express Arbitration Case

When the Supreme Court convenes for its private conference today, the Justices will consider whether to grant certiorari in a case presenting one of the most significant questions regarding the meaning of the Court’s ruling in AT&T Mobility v. Concepcion that remains unresolved in the lower courts.

Following the Concepcion decision, opponents of arbitration tried to convince lower courts to limit Concepcion’s holding that arbitration clauses could not be invalidated on the ground that they required individual arbitration and prohibited class proceedings. The overwhelming majority of those arguments were rejected by district courts and courts of appeals, as explained in this article.

But a two-judge panel of the Second Circuit earlier this year endorsed the bizarre assertion that Concepcion applies differently depending on whether the claim to be arbitrated arises under state or federal law. In In re American Express Merchants’ Litigation, the panel held that agreements to arbitrate disputes on an individual basis need not be enforced when a plaintiff provides evidence that the costs of vindicating a federal claim make it “economically irrational” to pursue such a claim without the class-action procedure. Amazingly, the court found that the affidavit of the plaintiffs’ own economic expert provided sufficient “evidence” to invalidate the arbitration clauses. In other words, arbitration clauses that could be enforced with respect to a state claim might be unenforceable if the same plaintiff brought a virtually identical claim under federal law.

As noted in an earlier blog post, American Express filed a petition for a writ of certiorari seeking review of the Second Circuit’s ruling (American Express Co. v. Italian Colors Restaurant, No. 12-133) and Mayer Brown authored an amicus brief supporting the petition on behalf of the Chamber of Commerce, Business Roundtable, American Bankers Association, and National Association of Manufacturers.

Continue Reading Supreme Court Poised To Decide Whether To Grant Certiorari In Major Arbitration Case (In re American Express)

As we previously reported, the Ninth Circuit granted rehearing en banc in Kilgore v. KeyBank, NA, to determine whether the Federal Arbitration Act preempts a California public-policy rule that declares claims for so-called “public injunctive relief” off-limits to arbitration. On October 26, 2012, my colleagues and I, working with the National Chamber Litigation Center, filed an amicus brief on behalf of the Chamber of Commerce of the United States supporting KeyBank.

As we discuss in the brief, California’s rule conflicts with the FAA for three principal reasons:

  • First, the FAA flatly forbids States from “prohibiting arbitration of

Continue Reading Chamber of Commerce Files Amicus Brief In Critical Ninth Circuit Case Explaining Why Plaintiffs Should Not Be Permitted To Use “Public Injunction” Claims As An End-Run Around Their Arbitration Agreements

In an effort to avoid the enforcement of arbitration agreements after AT&T Mobility v. Concepcion, the plaintiffs’ bar has sought to invoke provisions of California’s Unfair Competition Law and Consumers Legal Remedies Act that allow for consumers to pursue claims for injunctive relief on behalf of the “general public.” They point to two pre-Concepcion decisions of the California Supreme Court—Broughton v. Cigna Healthplans, 988 P.2d 67 (Cal. 1999) and Cruz v. PacifiCare Health Sys., Inc., 66 P.3d 1157 (Cal. 2003)—in which that court had declared such claims non-arbitrable.

Earlier this year, a panel of
Continue Reading Ninth Circuit Grants Rehearing En Banc In Kilgore v. KeyBank To Determine Whether California May Exempt Claims For “Public” Injunctions From Arbitration

For years, the California Supreme Court was one of the strongest forces against arbitration in the country. A disproportionate number of the U.S. Supreme Court’s decisions addressing preemption under the Federal Arbitration Act have reversed decisions of the California state courts or of federal courts applying California law. A recent pro-arbitration decision (Pinnacle Museum Tower Ass’n v. Pinnacle Market Development (US), LLC, 54 Cal.4th 223, 145 Cal.Rptr.3d 514 (2012)) suggests that the tide may be turning.

We will soon find out. The court this week granted review in another major arbitration case, Iskanian v. CLS Transportation of Los Angeles, No. S204032. The new grant gives the court the opportunity to weigh in on several issues in the wake of AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Concepcion held that the Federal Arbitration Act (FAA) preempted a California-law doctrine refusing enforcement to arbitration clauses that required individual arbitration and precluded class-wide dispute resolution.

Three issues in Iskanian are most prominent.

Continue Reading California Supreme Court Grants Review In Iskanian v. CLS Transportation; Will Address Enforceability of Employee Arbitration Agreements After Concepcion

Since Concepcion, the plaintiffs’ bar has been searching for ways to avoid agreements to arbitrate on an individual basis. Because their efforts have largely failed so far, the new frontrunner is the argument that class procedures are necessary to permit “vindication of federal statutory rights.” Most courts to consider the argument have rejected it, but it has gained some real traction in the Second Circuit, which refused to enforce American Express’s arbitration agreement in the context of federal antitrust claims by a group of merchants. After the Second Circuit denied en banc review by a sharply divided vote, American
Continue Reading Can Plaintiffs Dodge Concepcion By Arguing That They Need Class Actions To Vindicate Federal Statutory Claims?

In Schnuerle v. Insight Communications (pdf), the Kentucky Supreme Court joins a number of other courts in rejecting a key argument that the plaintiffs’ bar has been making in the wake of AT&T Mobility LLC v. Concepcion (pdf)—that arbitration agreements with class waivers should not be enforced whenever the plaintiff is able to persuade a court that it would not be feasible to vindicate his or her statutory claims on an individual basis because of the alleged cost of proving those claims.

Ever since Concepcion, in which the U.S. Supreme Court held that the Federal Arbitration Act bars states from refusing to enforce arbitration agreements that forbid class proceedings, plaintiffs have been searching for a rule-swallowing exception to that decision. They appear to have settled on the so-called “vindication of statutory rights” theory: Based on out-of-context dicta in a number of Supreme Court decisions involving the arbitrability of federal claims, plaintiffs argue that the Supreme Court has a long-standing rule that courts need not enforce arbitration agreements when they are persuaded that the plaintiff would be unable to vindicate his or her claims under the arbitration clause at issue and that Concepcion left that rule undisturbed.

The courts are divided as to the viability of the vindication-of-statutory-rights theory when the plaintiff has raised federal claims. So far, my colleagues and I have won this fight in the Ninth Circuit in Coneff v. AT&T Corp. (pdf), 673 F.3d 1155 (9th Cir. 2012). The Second Circuit came to a different conclusion in In re American Express Merchants Litigation, 667 F.3d 204 (2d Cir. 2012) (pdf). (We’ve previously reported (pdf) on the Second Circuit’s decision and its denial of a petition for rehearing en banc.) But virtually all courts have rejected the notion that the vindication-of-statutory-rights theory has any validity when the plaintiff raises only state-law claims.  The Kentucky Supreme Court joined the club in Schnuerle.  See more below the fold.

Continue Reading Schnuerle v. Insight Communications: Kentucky Supreme Court Rejects “Vindication of Statutory Rights” Challenge To Agreements To Arbitrate On An Individual Basis

Since the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, the Eleventh Circuit has consistently enforced agreements to arbitrate with class waivers. Earlier this week, it did so again in a case involving Sprint’s arbitration agreement in its service contracts. See Pendergast v. Sprint Nextel Corp. (pdf), No. 09-10612 (11th Cir. Aug. 20, 2012).

Businesses should pay close attention to Pendergast for two reasons. First, the decision closes a door that—at least according to some plaintiffs—had been left wide open in the Eleventh Circuit. Specifically, the Eleventh Circuit issued the first post-Concepcion federal appellate decision in Cruz v. Cingular Wireless LLC (pdf), 648 F.3d 1205 (11th Cir. 2011) (pdf), which involved the same AT&T Mobility provision upheld in Concepcion. Plaintiffs thus argued that Cruz did not apply to arbitration clauses that lacked the pro-consumer incentives of AT&T’s arbitration provision. See Concepcion, 131 S. Ct. at 1753 & n.3. Because the Sprint provision at issue in Pendergast does not contain similar features, Pendergast makes clear that Concepcion and Cruz extend to a broad array of arbitration agreements with class waivers.

Second, Pendergast rejects the attack on arbitration agreements that is currently in vogue among the plaintiffs’ bar: that without the class action device, a plaintiff will not be able to “effectively vindicate” his or her statutory rights. At the eleventh hour—or, to be more precise, just a few weeks before the Eleventh Circuit issued its opinion— the plaintiff filed a motion (pdf) attempting to invoke In re American Express Merchants Litigation (pdf), 667 F.3d 204 (2d Cir. 2012) (“Amex III”). In Amex III, the Second Circuit refused to enforce the arbitration provision in the agreements between the plaintiff and American Express after concluding that the plaintiffs could not vindicate their federal antitrust claims on an individual basis in arbitration. (Please see our more detailed reports on the Amex III decision (pdf) and the Second Circuit’s denial of rehearing en banc (pdf).) By enforcing Sprint’s arbitration clause, the Eleventh Circuit’s decision tacitly rejects the plaintiff’s attempt to invoke this “vindication of statutory rights theory” in the context of Florida’s consumer-protection statute.

Continue Reading Pendergast v. Sprint: Eleventh Circuit Holds That Federal Arbitration Act Preempts State-Law Attacks On Class-Action Waiver In Sprint’s Arbitration Agreement