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© 2011 Luce, Forward, Hamilton & Scripps LLP
ASSOCIATION OF CORPORATE COUNSEL
PRESENTED BY
Marie Burke KennyAaron T. Winn
DATE
June 16, 2011
San Diego Chapter
Arbitration Agreementsand Class Action
Waivers After AT&TMobility v. Concepcion
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Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
The Phenomenon of The Class Action
In May 2011, there were 234 class actions filed inCalifornia.
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Because class actions are inextricably linked to thevindication of substantive rights, class action waiversare (generally) unconscionable.
The Discover Bank Rule
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
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AT&T Mobility v. Concepcion
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
The FAA preempts the Discover Bank rule: “Because itstands as an obstacle to the accomplishment andexecution of the full purposes and objectives ofCongress, California’s Discovery Bank rule ispreempted by the FAA.”
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AT&T Mobility v. Concepcion
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Arbitration agreements may only be declaredunenforceable “upon such grounds as exist at law or inequity for the revocation of any contract.” (FAA, § 2.)In other words, “Courts must place arbitrationagreements on equal footing with other contracts.”
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AT&T Mobility v. Concepcion
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
In response to criticism that class proceedings arenecessary to vindicate small-dollar claims: “Statescannot require a procedure that is inconsistent with theFAA, even if it is desirable for unrelated reasons.”
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What Does It Mean?
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Class Action Waivers Are Enforceable (at least inFederal Court and at least in a commercial setting).
Are Other State Arbitration Rules Now Suspect?
› Are injunctive relief claims arbitrable? (Arellano v. T-Mobile)
› Is a court’s ability to deny/stay arbitration under CCP 1281.2preempted? (Cha v. Granville Homes, Inc.)
› Do the Armendariz factors survive AT&T? (Macintosh v. Powered,Inc. (Cal. App. 1 District)
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Court Decisions That Apply AT&T
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Zarandi v. Alliance Data Sys. Corp. (C.D. Cal. 2011):the argument that “the arbitration agreement isunconscionable under state law due to its class actionwaiver . . . is no longer viable.”
Arellano v. T-Mobile USA, Inc. (N.D. Cal. 2011): FAApreempts California’s rule exempting injunctiverelief claims from arbitration.
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Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Bellows v. Midland Credit Mgmt (S.D. Cal. 2011):AT&T makes it clear that “an agreement to arbitrate isnot substantively unconscionable because it includes aclass action waiver.”
Day v. Persels & Associates (M.D. Fla. 2011):enforcing class action waiver and granting motion tocompel arbitration based on AT&T.
More Court Decisions That Apply AT&T
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And One More…
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Bernal v. Burnett (D. Colo. 2011): arbitrationagreement that would have been unconscionableunder Colorado’s unconscionability test before AT&T, isno longer unconscionable.
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Court Decisions That Question AT&T
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
D’Antuono v. Service Road Corp. (Dist. Conn. 2011):certifies three questions to the Second Circuit:
› are class action waivers unenforceable, despite AT&T, if the classaction waiver precludes plaintiff from enforcing statutory rights?
› may courts inquire into general public policy concerns in determiningwhether a particular arbitration agreement is enforceable?
› is a class action waiver provision enforceable if the party seeking toenforce the agreement waives other questionable provisions of theagreement?
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More Courts That Question AT&T
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Macintosh v. Powered, Inc. (Cal. App. 1 District): In anunpublished decision, drops a footnote that says AT&Tdoes not affect Armendariz.
Sheen et al. v. Lorre et al. (LA Sup. Ct - SC11974):Court questions whether Justice Thomas’ concurrencein AT&T is controlling.
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Potential Challenges to AT&T
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
AT&T does not apply in state courts.
AT&T only applies to waivers that are similar to the waiver in AT&T or areplaintiff friendly.
AT&T does not apply to employment cases.
› The decision didn’t overrule Armendariz.
› A prohibition against class actions addressing wages and working conditionsviolates the NLRA.
› Wage and hour class actions can proceed based upon the “vindication ofstatutory rights” doctrine.
When arbitration is prohibitively expensive, the class action waiver couldbe invalid.
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Drafting Enforceable Agreements And Waivers
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Do not include a California choice-of-law provision or reference tothe California Arbitration Act
Specify that the agreement must be enforced in accordance withthe FAA, as if the court were sitting as a federal district court judge
Include a severability provision
Don’t abandon Armendariz’s rules; includesome consumer/employee-friendly terms
Specifically identify representative actions including PAGA
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How To Implement?
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Employees
› Current
› Prospective/Applicants
Consumers
› Existing service contracts
› New service contracts
› Other forms of agreements
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Arbitration: Does It Make Sense For You?
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Potential protection from class actions
Typically speedier resolution
Privacy of proceeding
Exclusionary rules of evidence usuallynot applied
Less exposure to punitive damages orrun away verdicts
Ability to select arbitrator with subjectmatter expertise
No right to appeal even if thearbitrator makes a mistake of fact orlaw
Summary judgment is unlikely
Arbitration costs can be high
With few exceptions, non-signatoriescannot be compelled to arbitration
The possibility of “split the baby”awards
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Other Considerations
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Impact on existing or anticipated litigation
Potential legislation
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Presenters
Arbitration Agreements and Class Action WaiversAfter AT&T Mobility v. Concepcion
Marie Burke Kenny represents employers in federal and state court litigation involving wage andhour, wrongful termination, discrimination, harassment, retaliation and unfair competition claims.Ms. Kenny also represents employers in mediation, arbitration and state and federal agencyproceedings. She has extensive experience counseling employers regarding all aspects of theemployment relationship and works with employers to develop strategies to prevent employmentclaims and create effective defenses to litigation. Ms. Kenny counsels employers regardingperformance management, termination, contracts, workplace investigations, medical issues,leaves of absence and employment policies and practices. She is also an adjunct professor ofemployment law for San Diego State University's Human Resources Certification Program.
Marie Burke Kenny | Partner| [email protected]
Aaron Winn has successfully prosecuted and defended a wide variety of class actions in bothstate and federal court. In addition to handling class action litigation, Mr. Winn regularlyhandles appeals, writs, intellectual property litigation, unfair competition cases, employmentlitigation, and complex business disputes.
Aaron T. Winn | Partner | [email protected]
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Thank you foryour participation Luce Forward
600 W Broadway Ste 2600San Diego,CA 92101
619.236.1414
Marie Burke Kenny | [email protected] T. Winn | [email protected]
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© 2011 Luce, Forward, Hamilton & Scripps LLP
ASSOCIATION OF CORPORATE COUNSELSan Diego Chapter
