Consumer Class Action Waivers Post-Concepcion

May 16, 2012

Consumer class actions threaten businesses with significant liability for damages, attorneys’ fees and injunctions, arising out of disputes that would otherwise involve very small amounts of money on a per-plaintiff basis.

Seeking to prevent class actions that arise from consumer contract disputes, many companies have inserted into their contracts arbitration provisions that not only require arbitration, but also prohibit consumers from bringing disputes in the form of a class action.

Last year, the U.S. Supreme Court ruled in AT&T Mobility LLC v. Concepcion,131 S. Ct. 1740 (2011) that the Federal Arbitration Act (FAA) preempted California’s refusal to enforce class action waivers in consumer arbitration agreements.

Since then, plaintiffs have attempted to distinguish Concepcion, arguing that certain state laws that prohibit the enforcement of consumer arbitration agreements are different either substantively or procedurally from the California law preempted in Concepcion.

The United States Court of Appeals for the Ninth Circuit recently issued two opinions that shut the door on these arguments and provide businesses with significant guidance on how broadly they can write and enforce consumer arbitration agreements.