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AT&T Mobility LLC v. Concepcion - 563 U.S. 333, 131 S. Ct. 1740 (2011)

Rule:

The principal purpose of the Federal Arbitration Act (FAA) is to ensure that private arbitration agreements are enforced according to their terms. This purpose is readily apparent from the FAA's text. 9 U.S.C.S. § 2 makes arbitration agreements valid, irrevocable, and enforceable as written (subject, of course, to the saving clause); 9 U.S.C.S. § 3 requires courts to stay litigation of arbitral claims pending arbitration of those claims in accordance with the terms of the agreement; and 9 U.S.C.S. § 4 requires courts to compel arbitration in accordance with the terms of the agreement upon the motion of either party to the agreement (assuming that the making of the arbitration agreement or the failure to perform the same is not at issue). In light of these provisions, parties may agree to limit the issues subject to arbitration, to arbitrate according to specific rules, and to limit with whom a party will arbitrate its disputes.

Facts:

The cellular telephone contract between respondents (Concepcions) and petitioner (AT&T) provided for arbitration of all disputes but did not permit class-wide arbitration. After the Concepcions were charged sales tax on the retail value of phones, which were provided free under their service contract, they sued AT&T in a California Federal District Court. Their suit was consolidated with a class action alleging that AT&T had engaged in false advertising and fraud by charging sales tax on “free” phones. The District Court denied AT&T's motion to compel arbitration under the Concepcions' contract. Relying on the California Supreme Court's Discover Bank decision, it found the arbitration provision unconscionable because it disallowed class-wide proceedings. On appeal, the United States Court of Appeals for the Ninth Circuit agreed that the provision was unconscionable under California law and held that the Federal Arbitration Act (FAA), 9 U.S.C.S. § 2, which makes arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,” did not pre-empt its ruling.

Issue:

In a putative class action by cell phone purchasers, should the cellular service provider's motion to compel arbitration under the purchase contracts, which precluded class arbitration, be granted?

Answer:

Yes.

Conclusion:

On a writ of certiorari, the Supreme Court  of the United States considered whether the Federal Arbitration Act (FAA) prohibits States from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures. The Court held that the FAA preempted the Discover Bank rule. According to the Court, the saving clause under the FAA did not permit application of the California rule because nothing in the saving clause suggested an intent to preserve state law rules that stood as an obstacle to the accomplishment of the FAA's objectives. The Court explained that the overarching purpose of the FAA was to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings, requiring the availability of class arbitration was inconsistent with the FAA. The Ninth Circuit's judgment was reversed and remanded.

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