The U.S. Supreme court issued its opinion in AT&T Mobility v. Concepcion yesterday. The Court held that California’s Discover Bank rule is preempted by the Federal Arbitration Act. The Discover Bank rule states that a class action waiver in an arbitration agreement is unconscionable and should not be enforced
- when it is found in a consumer contract of adhesion
- in a setting in which disputes between the contracting parties predictably involve small amounts of damages,
- and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.
As Paul Kirgis notes in this post in the ADR Prof Blog, the Court’s decision will allow companies to use arbitration agreements to avoid being subject to class actions altogether (“it certainly puts the final nail in the coffin of class arbitration”). Though that may be true, the arbitration agreement at issue in AT&T Mobility strikes me as unusually consumer friendly. If the cost of avoiding class actions is providing real relief to consumers who are harmed, that might not be a bad result for consumers.
What do you think?