In what would have been bigger class action news yesterday had the Supreme Court not issued its decision in Amgen, the Court also heard oral argument in class arbitration case, American Express Co. v. Italian Colors Restaurant, No. 12-133 (click case title for a link to the transcript). The primary issue presented is whether the “federal substantive law of arbitrability” may be invoked to invalidate an arbitration agreement in a case involving federal law claims. The case will test the limits of the Supreme Court’s holding in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (holding that the Federal Arbitration Act preempts state laws prohibiting class arbitration waivers).
It is clear from the questions posed by the Justices that there are certain members of the Court (namely Justice Scalia, author of Concepcion) who remain steadfast in their belief that arbitration agreements that prohibit class claims are enforceable, period, and that there is another faction of the court that has serious doubts about the use of an arbitration agreement to effectively foreclose a litigant from obtaining any meaningful procedure for vindicating his or her rights. Whether this case follows Concepcion in solidifying the enforceability of class arbitration waivers or carves out an exception will likely depend on a few swing votes in the middle.
Concepcion a Year Later, Are Consumer Class Actions Dead Yet?
On May 1, we received the following comment in response to a post from last May entitled Will AT&T v. Concepcion Really Kill the Consumer Class Action?
It has been almost a year. Could someone tell me, in their opinion, what effect Concepcion has had on consumer class actions over the last 11 months?
Concepcion has not been treated by the lower courts as foreclosing all arguments for declaring an arbitration clause invalid. A case in point is the Second Circuit’s recent decision in In re Amex III., which relied on the federal common law of arbitrability in declaring a class arbitration waiver invalid.
Class action litigation has been on the decline in substantive areas that are not impacted by arbitration clauses, such as in securties class actions.
There are many areas of consumer class action litigation that remain unaffected by arbitration clauses because they either involve claims where there may be no contractual relationship between the plaintiff and the defendant, including statutory penalty class actions such as TCPA class actions class actions and certain data privacy class actions, or they involve areas of the law where arbitration clauses are prohibited, including many insurance class actions. A careful review of the data may show that consumer class action litigation has simply shifted to these areas.
Recognizing that arbitration clauses do not necessarily provide a magic talisman against class action litigation and that implementing an overly consumer-friendly arbitration clause may actually encourage litigation, not all companies have rushed to adopt arbitration clauses into their consumer contracts.
In summary, I would say that while Concepcion‘s ban on state laws invalidating arbitration clauses has become an important consideration in litigating consumer class actions, it has not brought about their end.
I’d love to hear what readers have to say about their own perspectives on this issue. Please feel to comment below.