Ninth Circuit Affirms Strength of AT&T Mobility LLC v. Concepcion Opinion
Michael F. Bahler | Bloomberg Law
The U.S. Court of Appeals for the Ninth Circuit rejected plaintiffs’ attempt to circumvent the U.S. Supreme Court’s decision in AT&T Mobility LLC v.Concepcion, 131 S. Ct. 1740 (2011), when it held that the binding arbitration agreement in AT&T Corp.’s wireless contracts was not substantively unconscionable.
In July 2006, AT&T wireless subscribers commenced a putative nationwide class action in Washington federal court, alleging that they were harmed as a result of the 2004 merger between AT&T and Cingular Wireless LLC. According to the complaint, the AT&T network was intentionally downgraded following the merger to induce AT&T subscribers to “upgrade” to Cingular plans. As a result of this alleged scheme, plaintiffs claimed they were forced to pay an $18 transfer fee, the expense of a new phone, and $18 for a SIM chip. AT&T customers who did not switch over either had to fulfill their wireless contracts with inferior service or pay a $175 early termination fee.
AT&T moved to compel arbitration pursuant to its standard service agreement, which contained a mandatory arbitration provision and a class action waiver. Applying Washington law, the district court denied the motion, finding that the class action waiver was substantively unconscionable. See Coneff v. AT&T Corp., 620 F. Supp. 2d 1248 (W.D. Wash. 2009). It explained that the individual damages in the case were small, ranging from $4.99 to $175, and the claims would go unprosecuted if the class action waiver were enforced. The district court did not rule on plaintiffs’ procedural unconscionablity argument in light of its substantive unconscionability finding.
On appeal, the Ninth Circuit observed that the district court issued its ruling prior to Concepcion, in which the Supreme Court ruled that the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1–16, preempted a California law that nullified as unconscionable most class action waivers in consumer contracts. It noted that under Concepcion, the worthwhile policy concern behind the class action device—that plaintiffs with small-money claims should have an opportunity to vindicate their rights—gave way to the FAA. It also emphasized that AT&T’s arbitration agreement, identical to the one in Concepcion, had a pro-consumer fee-shifting provision and other features that favored consumers.
Plaintiffs sought to distinguish the instant case from Concepcion by arguing that unlike the California law at issue in that case, the Washington law at issue here would honor the “blow up” provision in the AT&T service contract and invalidate the entire arbitration agreement. The Court, however, was not persuaded. “Pointedly,” it wrote, “by invalidating arbitration agreements for lacking class-action provisions, a court would be doing precisely what the FAA and Concepcion prohibit—leveraging ‘the uniqueness of an agreement to arbitrate’ to achieve a result that the state legislature cannot.” (Internal quotation omitted.)
The Ninth Circuit thus reversed the district court’s substantive unconscionability ruling and remanded the case for a determination on procedural unconscionablity, a doctrine, which it stated, retained continued “vitality” following Concepcion.
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