ADR Case Updates
U.S. Supreme Court Approves Class Arbitration Waivers, 06/04/2011
A MORE DETAILED SUMMARY OF THE LEAD CASE FOLLOWS:
In AT&T Mobility LLC v. Concepcion,___ U.S. ___, 131 S. Ct. 1740 (April 27, 2011), Vincent and Liza Concepcion entered into an agreement for the sale and servicing of cellular telephones with AT&T. The agreement provided for arbitration of all disputes, and required that claims be brought in the parties' individual capacity, not as class members. The Concepcions brought an action in federal court for fraud and false advertising that was later consolidated with a class action. AT&T moved to compel arbitration. The district court denied the motion on the basis that the arbitration provision was unconscionable under California law because it disallowed class-wide proceedings as set out by the California Supreme Court in Discover Bank v. Superior Court. The Ninth Circuit affirmed.
Reversed and remanded. Section 2 of the Federal Arbitration Act (9 U.S.C. § 2) makes agreement to arbitrate valid, irrevocable, and enforceable save upon such grounds as exist in law or equity for the revocation of any contract. When state law prohibits outright the arbitration of a particular claim, the FAA displaces the conflicting rule. Here, class action waivers in consumer arbitration agreements are not a ground under Section 2 of the FAA for revocation of the underlying contract. Rather, they constitute a prohibition on collective-action waivers. Thus, the Discover Bank rule prohibited outright arbitration of class actions and, therefore, was preempted by the FAA. Therefore, AT&T's motion to compel arbitration should have been granted.
IN ADDITION, THE FOLLOWING CASES HOLD:
Kelly Sutherlin McLeod Architecture, Inc., v. Schneickert (April 18, 2011, Second Dist., Div. Four), 194 Cal. App. 4th 519, (Arbitrator is authorized to compel defendant to retract defamatory statements based on scope of parties agreement);
Chin v. Advanced Fresh Concepts Franchise Corp. (April 20, 2011, Second Dist., Div. Four), 194 Cal. App. 4th 423, (Court errs in denying defendant's motion to compel arbitration where arbitration provision in franchise agreement was not unconscionable - language in agreement that "any award shall be based upon established law and shall not be made on broad principles of justice and equity" was not intended to bar cognizable equitable claims and defense);
Glaser, Weil, Fink, Jacobs, & Shapiro, LLP v. Goff (April 15, 2011, Second Dist., Div. One), 194 Cal. App. 4th 423, (in client fee dispute, court errs in entering judgment in favor of law firm pursuant to arbitration award where firm initially declined offer to submit dispute to binding arbitration);
Shahinian v. Cedars-Sinai Medical Center (April 27, 2011, Second Dist., Div. Eight), 194 Cal. App. 4th 987, (in dispute between hospital and physician, arbitrator is not required to order hospital to conduct peer review hearing where dispute did not involve doctor's competence);
Jones v. Jacobson (May 5, 2011, Fourth Dist., Div. One), 195 Cal. App. 4th 1, (Non-party to agreement containing arbitration clause relating to complex securities transactions cannot compel arbitration in underlying lawsuit where no nexus exists between agreement and lawsuit);
Benjamin, Weill & Mazer v. Kors (May 5, 2011, First Dist., Div. Two), 195 Cal. App. 4th 40, (California Arbitration Act requires arbitrator in attorney fee dispute to disclose nature of legal practice and representation of law firm at time of arbitration); and
Diaz v. Bukey (May 10, 2011, Second Dist., Div. Six), ___ Cal. App. 4th ___, 2011 WL 1759798, (Probate court properly denies Trustee's petition to compel arbitration absent beneficiaries' agreement to submit to arbitration arising from dispute over trust).
The California opinions are posted at: http://www.courts.ca.gov/opinions.htm;
the Ninth Circuit opinions at: http://www.ca9.uscourts.gov/opinions/; and
the U.S. Supreme Court case at: http://www.supremecourtus.gov/opinions/07slipopinion.html.
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