The AT&T v. Concepcion case involved a suit filed against AT&T for deceptive advertising. They had signed a contract with AT&T for the sale and servicing of cellular phones. The contract provided that in the event of consumer dispute, arbitration was the only option. AT&T compelled for arbitration which was denied by the district court and affirmed by the Ninth Circuit Court of Appeals. AT&T thus appealed to the Supreme Court. The Court’s 5-4 majority ruling held that the Federal Arbitration Act of 1925 (FAA) superseded state laws which prevents the making of contracts that do not allow class action.
BRIEF FOR AT&T MOBILITY v. CONCEPCION
In the AT&T v. Concepcion case, Vincent and Liza Concepcion purchased a cell phone and service plan from AT&T, for which they were told, was a “free” phone. Although the phone was advertised as free under the service contract, the Concepcions were required to pay sales tax based upon the retail value of the phone, a sum of $30.22. The Concepcions alleged AT&T provided false advertising and fraud by charging sales tax and thus, they filed suit against AT&T as a class action lawsuit.
Under the service contract agreement, AT&T contained an arbitration clause that required claims be brought in the parties’ “individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding” (..from the case..). According to the contract, this meant that the Concepcions had to bring their claim as an individual arbitration and not as a member of class. To “bring the action individually acted as a class action waiver,” which was “unconscionable” under the California law as articulated by the California Supreme Court in Discover Bank (source….). California law prohibits contracts that do not allow consumer class action lawsuits, therefore, the district court denied AT&T’s motion and the Ninth Circuit concurred, thus AT&T appealed to the United States Supreme Court.
After the case reached the Supreme Court, the issue became whether the ruling from Discover Bank was preempted by the Federal Arbitration Act of 1925 (FAA). The ruling from Discover Bank found the “class action waiver clause to be unconscionable under California law” (website). In a 5-4 decision, the Court held that the FAA had preeminence over the California law. This ruling basically concluded that AT&T was allowed to force the Concepcions, or anyone who signs their service agreement, to settle their disputes individually rather than by class action. Justice Scalia wrote, “Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration” (…case). Justice Scalia reasoned arbitrators do not have the capabilities to handle the magnitude of class-wide cases and at the same time, businesses would not be willing to participate in these types of proceedings when there is a potential for great losses to the company if they were found guilty of any wrongdoing.