One of my favorite scenes from the movie My Cousin Vinny (1992) is Vincent Laguardia Gambini’s (a/k/a “Vinny’s”) opening statement in the criminal trial of his cousin and cousin’s friend, both of whom were arrested and mistakenly charged for murder and robbery while driving through Alabama. Vinny (played by Joe Pesci) — a native New Yorker who is as out of place in a rural Alabama courtroom as I suppose anyone could be — dozes off during the prosecution’s opening statement only to be jarred awake by his cousin — who is facing the death penalty — so that he can deliver an opening statement. He saunters over to the jury, and says, gesturing at the prosecutor, “Everything that guy just said is bull$#!+. Thank you.” Then he returns to the defense table. (Watch the scene here, which begins approximately three minutes and 33 seconds into the clip.) Continue Reading »
Archive for the ‘Class Action Arbitration’ Category
AT&T Mobility, LLC v. Concepcion: What Would Cousin Vinny Have to Say About The Ninth Circuit’s Interpretation of the Equal Footing Principle?
December 10th, 2010 Arbitration Agreements, Arbitration Practice and Procedure, California State Courts, Class Action Arbitration, Class Action Waivers, Practice and Procedure, United States Court of Appeals for the Ninth Circuit, United States Supreme Court Comments Off on AT&T Mobility, LLC v. Concepcion: What Would Cousin Vinny Have to Say About The Ninth Circuit’s Interpretation of the Equal Footing Principle?Some Initial Thoughts on the SCOTUS AT&T Mobility, LLC v. Concepcion Oral Argument
November 16th, 2010 Arbitration Agreements, Arbitration Practice and Procedure, California State Courts, Class Action Arbitration, Class Action Waivers, Practice and Procedure, United States Court of Appeals for the Ninth Circuit, United States Supreme Court Comments Off on Some Initial Thoughts on the SCOTUS AT&T Mobility, LLC v. Concepcion Oral ArgumentAs many readers know, on Tuesday, November 9, 2010 the United States Supreme Court heard oral argument in AT&T Mobility, LLC v. Concepcion, No. 09-893 (blogged here, here, here and here). You can find the transcript of the argument, here, and the audio, here.
After reviewing the oral argument transcript a number of times, and listening to the audio, we still believe it more likely than not that AT&T Mobility will prevail. We’ll develop that thought further in upcoming installments of our Disputing guest post, “AT&T Mobility LLC v. Concepcion: Can Discover Bank Withstand Stolt-Nielsen Scrutiny?” (Part I, here).
There have been a number of differing opinions post argument on how the Court will likely rule. Some believe the argument foreshadows victory for the Concepcions. Others are not so certain, and still others believe that AT&T Mobility may emerge the victor. Like all such opinions, they are are really nothing more than educated guesswork, and should be taken with a grain of salt.
We don’t suggest our take on things is anything more, but we share it for what it is worth. We think the oral argument was basically a toss-up, and that it mainly confirmed what we already knew or surmised: That this is a very difficult case, and that the eight Justices who asked questions appear to be split along ideological lines. We expected no less in light of the 5-3 and 5-4 split decisions in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. ___, 130 S. Ct. 1758 (2010); and Rent-A-Center West v. Jackson, 561 U.S. ___, 130 S. Ct. 2772 (2010).
The key point on which the argument shed no meaningful light is what Associate Justice Clarence Thomas makes of this case. Justice Thomas joined the Stolt-Nielsen and Rent-A-Center majority opinions, but those cases, unlike this one, did not concern the preemptive scope of the Federal Arbitration Act.
Preemption is controversial, and its importance extends far beyond the AT&T Mobility case. Particularly controversial — and very supportive of AT&T Mobility’s position — is the doctrine of “implied preemption,” also known as “conflict” or “obstacle” preemption. In Federal Arbitration Act cases this doctrine tells us that state laws or policies that undermine “the goals and policies of the FAA” are preempted by the Act. Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Univ., 489 U.S. 468, 477-78 (1990).
But Justice Thomas believes that the implied preemption doctrine is unconstitutional. See Wyeth v. Levine, 555 U.S. ___, 129 S. Ct. 1187, 1205 (2009) (Thomas, J. concurring) (“implied pre-emption doctrines that wander far from the statutory text are inconsistent with the Constitution. . . .”). He also believes that Congress intended the Federal Arbitration Act to be a procedural statute that applies only in federal court. See, e.g., Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) (Thomas, J., dissenting); Buckeye Check Cashing, Inc. v. Cardegna, 546 US 440 (2006) (Thomas, J., dissenting) (“[I]n state-court proceedings, the FAA cannot be the basis for displacing a state law that prohibits enforcement of an arbitration clause contained in a contract that is unenforceable under state law.”).
He thus believes that state courts can apply state arbitration law as they see fit, irrespective of whether the result would be different had the case been brought in federal court. While AT&T Mobility — like Stolt-Nielsen and Rent-A-Center — was brought in federal court, and everybody concedes that the Federal Arbitration Act applies, Justice Thomas remains a strong proponent of federalism.
Justice Thomas’ deference to state law is problematic for AT&T Mobility. Perhaps AT&T Mobility’s best argument is that the Federal Arbitration Act impliedly preempts the Discover Bank rule for the reasons set forth in Stolt-Nielsen. Apparently concluding that the Justices in the Stolt-Nielsen majority — including Justice Thomas — are the ones most likely to support AT&T Mobility’s position, AT&T Mobility deliberately downplayed the implied preemption issue, although it made clear that it believes the Federal Arbitration Act both expressly and impliedly preempts the Discover Bank rule.
That was a wise strategy given Justice Thomas’ rejection of implied preemption. Its wisdom was borne out by what transpired at the argument: of the eight Justices that asked questions, the four more liberal ones (Associate Justices Ruth Bader Ginsburg, Stephen G. Breyer, Sonia M. Sotomayor and Elena Kagan) appear to be leaning in favor of finding that the Federal Arbitration Act does not preempt the Discover Bank rule, while the four more conservative ones (Chief Justice John G. Roberts, and Associate Justices Antonin G. Scalia, Anthony M. Kennedy, and Samuel J. Alito, Jr.) appear to be leaning in favor of finding that the Federal Arbitration Act preempts Discover Bank.
That means Justice Thomas is likely to hold the deciding vote, but where he’ll ultimately cast it, nobody knows (at least outside the Supreme Court). We believe there are equally plausible reasons why he might vote for or against preemption.
We’ll explore all of this and more in our Disputing guest post. In the meantime, keep an eye out for our next Forum article on AT&T Mobility, which will focus on the highlights of the oral argument and tie them into the express and implied preemption issues that this critically important case presents.
U.S. Law Week Quotes Philip J. Loree Jr. Comments on SCOTUS AT&T Mobility LLC v. Concepcion Class Waiver Case
October 23rd, 2010 Arbitration Agreements, Arbitration Practice and Procedure, Class Action Arbitration, Class Action Waivers, United States Court of Appeals for the Ninth Circuit, United States Supreme Court Comments Off on U.S. Law Week Quotes Philip J. Loree Jr. Comments on SCOTUS AT&T Mobility LLC v. Concepcion Class Waiver CaseOn October 14, 2010 I was interviewed by Tom P. Taylor, a reporter for The United States Law Week, about the AT&T Mobility LLC v. Concepcion case (blogged here, here, here and here), which will be argued before the United States Supreme Court on November 9, 2010. On October 19, 2010 Tom’s excellent article on AT&T Mobility was published in 79 U.S.L.W., No. 14 (October 19, 2010) (BNA), and he extensively quoted my comments in it.
U.S. Law Week is a subscription only publication, but I received permission from the Bureau of National Affairs (“BNA”) to post a copy of the article on my LinkedIn profile. So, if you are a member of Linkedin, you can access a copy of the article here (it does not appear in my “public” LinkedIn profile).
We would like to thank Tom for conducting a very professional interview and following up with a well-written, comprehensive and informative article about this critically important case.
We are following AT&T Mobility closely, and will be commenting further on it in the near future. I am also working on a guest-post about the case for another ADR-oriented blog. Stay tuned for details….
AT&T Mobility LLC v. Concepcion: What is the Scope of Federal Preemption in Class Waiver Cases?
September 30th, 2010 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Class Action Arbitration, Class Action Waivers, Practice and Procedure, Unconscionability, United States Court of Appeals for the Ninth Circuit, United States Court of Appeals for the Second Circuit, United States Supreme Court Comments Off on AT&T Mobility LLC v. Concepcion: What is the Scope of Federal Preemption in Class Waiver Cases?Part II
Introduction
Part I of this two-part post (here) briefly discussed the background of AT&T Mobility LLC v. Concepcion, No. 09-893, a case pending before the United States Supreme Court that will be argued on November 9, 2010. We now delve into the details of the preemption questions before the Court and take a guess at the outcome.
Federal Arbitration Act Preemption
The Federal Arbitration Act does not preempt all state law applicable to arbitration agreements, but it expressly preempts state law that conflicts with Section 2, and impliedly preempts all state law that “stands as an obstacle to the accomplishment and execution of the full purposes of Congress” embodied in the Federal Arbitration Act. See Shroyer v. New Cingular Wireless Serv., Inc., 498 F.3d 976, 988 (9th Cir. 2007) (citations and quotation omitted).
Does Section 2 of the Federal Arbitration Act Expressly Preempt the Discover Bank Rule?
Section 2 of the Federal Arbitration Act declares that arbitration agreements within its scope “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Section 2 establishes substantive federal law that expressly preempts all conflicting state law, except for state law that permits “the revocation of any contract” or governs the formation, interpretation, or construction of contracts generally.
The exception to federal preemption is exceedingly narrow, for it saves from preemption only state laws that apply equally across the board to all contracts. The United States Supreme Court summarized it well when it said:
States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause ‘upon such grounds as exist at law or in equity for the revocation of any contract. What States may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal footing, directly contrary to the Act’s language and Congress’s intent.
Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 281 (1995) (citations and quotations omitted; emphasis in original). Continue Reading »
AT&T Mobility LLC v. Concepcion: What is the Scope of Federal Preemption in Class Waiver Cases?
September 30th, 2010 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Class Action Arbitration, Class Action Waivers, Practice and Procedure, United States Court of Appeals for the Ninth Circuit, United States Supreme Court Comments Off on AT&T Mobility LLC v. Concepcion: What is the Scope of Federal Preemption in Class Waiver Cases?Part I
Introduction
In our recent feature “What to Make of the Second Circuit Voiding a Class Action Waiver Under California’s Discover Bank Rule,” we briefly discussed AT&T Mobility LLC v. Concepcion, No. 09-893, a case which asks the United States Supreme Court to determine whether the Federal Arbitration Act preempts California’s Discover Bank rule. The Discover Bank rule deems unconscionable class action and class arbitration waivers in adhesive contracts in circumstances where a consumer alleges that a party with superior bargaining power has committed widespread but small-dollar fraud. Petitioner AT&T Mobility LLC (“AT&T Mobility”) has filed its brief (here); various organizations, including the Chamber of Commerce of the United States of America, have filed an impressive stack of amicus curiae briefs supporting AT&T Mobility (here); Vincent and Liza Concepcion (the “Concepcions”) have filed their brief, which was posted online earlier today (here); and AT&T will presumably submit a reply brief. The Court has scheduled argument for November 9, 2010.
AT&T Mobility is an extremely important case because it will decide whether the Federal Arbitration Act preempts certain state law unconscionability and public-policy-based rules that are principally directed at class arbitration and class action waivers. This issue has spawned a number of conflicting decisions in the state and federal courts, including Feeney v. Dell, Inc. 454 Mass. 192 (2009), a case we blogged back in 2009 (posts here and here).
This two-part feature takes a closer look at AT&T Mobility, considers the principal issues before the Court, and ventures a guess on what the outcome will be. This Part I discusses the background of the case, and Part II (here) outlines Federal Arbitration Act preemption rules, analyzes and explains why we believe the Federal Arbitration Act expressly and impliedly preempts the Discover Bank rule, and provides our best guess as to what the Supreme Court will conclude. Continue Reading »
United States Law Week Quotes Philip J. Loree Jr. Comments on Fensterstock
August 4th, 2010 Arbitration Practice and Procedure, Class Action Arbitration, Class Action Waivers, United States Court of Appeals for the Second Circuit, United States Supreme Court Comments Off on United States Law Week Quotes Philip J. Loree Jr. Comments on FensterstockLast week I was interviewed by Tom P. Taylor, a reporter for The United States Law Week, about the Fensterstock v. Education Finance Partners, No. 09-1562-cv, slip op. (2d Cir. July 12, 2010), class-action waiver case (blogged here). Yesterday, Tom’s excellent article on Fensterstock was published in 79 U.S.L.W. 1111 (Aug. 3, 2010) (BNA), and he quoted some of my comments in it.
U.S. Law Week is a subscription only publication, but I received permission from the Bureau of National Affairs (“BNA”) to post a copy of the article on my LinkedIn profile. So, if you are a member of Linkedin, you can access a copy of the article here (it does not appear in my “public” LinkedIn profile).
We would like to take this opportunity to thank Tom P. Taylor for conducting a very professional interview and following up with a very professional article. We would also like to thank Bernard J. Pazanowski, who co-authored the article with Tom.
What to Make of the Second Circuit Voiding a Class Action Waiver Under California’s Discover Bank Rule?
July 23rd, 2010 Arbitration Practice and Procedure, California State Courts, Class Action Arbitration, Class Action Waivers, Practice and Procedure, United States Court of Appeals for the Ninth Circuit, United States Court of Appeals for the Second Circuit, United States Supreme Court Comments Off on What to Make of the Second Circuit Voiding a Class Action Waiver Under California’s Discover Bank Rule?After deciding Stolt-Nielsen, S.A. v. AnimalFeeds, Inc. and Rent-A-Center West v. Jackson, the United States Supreme Court left federal arbitration law at a crossroads. In both cases the Court adhered quite faithfully to its prior Federal Arbitration Act jurisprudence, under which it enforces arbitration agreements according to their terms, without regard to other considerations. In Rent-A-Center the Court implicitly reaffirmed that these pro-enforcement rules apply equally to contracts of adhesion.
We will find out whether the Court intends to continue down the same path when it decides AT&T Mobility v. Concepcion next term, a case that raises the question whether California’s Discover Bank unconscionability rule is pre-empted by the Federal Arbitration Act. That rule deems unconscionable under California law class-action or class-arbitration waivers where: (a) “the waiver is found in a consumer contract of adhesion in a setting in which the disputes between the contracting parties predictably involve small amounts of damages”; and (b) “it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money. . . .” Discover Bank v. Superior Court, 36 Cal. 4th 148, 162-63 (2005) (citing Cal. Civ. Code § 1668).
The Discover Bank rule is grounded in a California-law principle – embodied in Cal. Civ. Code § 1668 – that “contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud. . . are against the policy of the law.” See Cal. Civ. Code § 1668. If a company is allegedly engaging in fraudulent acts designed to cheat numerous consumers out of small amounts of money, a class action or class arbitration waiver may, if enforced, effectively act as an exculpatory provision that insulates the company from the consequences of its small scale, but widespread fraud, because the individual, allegedly defrauded consumers have little incentive to pursue separate actions or arbitrations to recoup trivial amounts of damages. See Discover Bank, 36 Cal. 4th at 162-63. Any contract that had that effect – whether it is a class action waiver in an arbitration clause, an exculpatory agreement or a contract that simply forbids class actions — would be unconscionable under the rule.
In Fensterstock v. Education Finance Partners, No. 09-1562-cv, slip op. (2d Cir. July 12, 2010), the United States Court of Appeals for the Second Circuit suggested one path that the United States Supreme Court might take on Discover Bank preemption. In an interesting opinion, Senior Circuit Judge Amalya Lyle Kearse, joined by Circuit Judges José A. Cabranes and Chester J. Straub, held that the Discover Bank rule was not preempted by the Federal Arbitration Act. According to the Second Circuit, California’s Discover Bank rule “’places arbitration agreements on the exact same footing as contracts that bar class action litigation outside the context of arbitration,’” and for that reason the rule is not preempted by the Act. Slip op. at 16-17 (quoting Shroyer v. New Cingular Wireless Serv., Inc., 498 F.3d 976, 990 (9th Cir. 2007) (emphasis in original)).
On first blush the Second Circuit’s decision seems reasonable. But there are some important issues lurking beneath the surface that the Supreme Court will need to address when it decides AT&T Mobility. Continue Reading »
