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By Louis M. Solomon
v. AT&T Mobility LLC,
Case No. C 07-00411 (N.D. Cal. Sept. 2011) [enhanced version available to lexis.com subscribers], involves claims similar to those
that the Supreme Court addressed in its significant decision of earlier this
MobilityLLC (ATTM) v. Conception, 131 S.Ct. 1740 (2011) [enhanced version / unenhanced version available from lexisONE Free Case Law], which we discussed in the
context of our frequent discussion, crucial in the international litigation
context, pitting freedom of contract against public policy principles.
The current District Court case also involved claims of false advertising,
unfair competition, and other state law causes of action arising from
AT&T's "fewest dropped calls" promotion. The contract at issue,
like the one in addressed by the Supreme Court, was a "take-it-or-leave-it form
contract requiring arbitration but that preclude[d] ATTM's customers from
bringing any 'purported class or representative proceeding'".
The issues of note discussed by the
District Court bear on international practice in the following ways:
First, the District Court followed Concepcion
by finding that California law invalidating the no-class-action provision
was preempted by federal law favoring arbitration of disputes. In doing
so, however, the Court stated that Concepcion did not leave room
for a court to perform an "individualized case-by-case analysis of whether
binding a particular plaintiff to bilateral arbitration would preclude that
plaintiff from vindicating his rights". Acknowledging that such an
analysis may still be permitted when the underlying claim is based on federal
law - though not explaining why the out might depend on what law provided the
rule of decision - the Court flatly concluded that "Concepcion forecloses
plaintiffs from objecting to class-action waivers in arbitration agreements on
the basis of the potential cost of proving a claim exceed potential individual
the District Court suggested that Concepcion effectively overruled or
significantly narrowed the Supreme Court's decision in Green Tree Financial
Corp Alabama v. Randolph, 531 U.S. 79 (2000) [enhanced version / unenhanced version ], where in the context of a federal claim the Supreme Court
stated that where "a party seeks to invalidate an arbitration agreement on the
ground that arbitration would be prohibitively expensive, that party bears the
burden of showing the likelihood of incurring such costs". The
District Court noted that the Second Circuit in In re American Express
Merchants' Litigation, No. 06-1871 (2d Cir. Aug. 1, 2011) [enhanced version / unenhanced version ], had sua sponte issued an order staying the case while it
considered the impact of Concepcion on its holding that, in the federal
law context, Green Tree applied to invalidate a class-action waiver in
an arbitration agreement. See our discussion of American Express and of a subsequent Southern District of New York (Magistrate Judge) decision
coming to the same conclusion, again in a case involving underlying federal
Third, in finding that AT&T had
not waived its right to seek arbitration, the District Court ruled that
reliance on the pre-Concepcion rule (which would have rendered the
arbitration clause unenforceable) was appropriate and precluded a finding of
waiver. The state of the law rendered any effort to arbitrate futile.
The District Court did not appear to require AT&T to make any showing that
it in fact relied on its view of the pre-Concepcion law as a predicate
to avoid a finding of waiver.
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