main image

Posts Tagged ‘Feeney v. Dell Inc.’

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 »

Guest Post: The Argument for Judicial Power to Void Mandatory Arbitration Agreements and Class Action Waivers on State Public Policy Grounds

August 17th, 2009 Class Action Arbitration, Class Action Waivers, Commercial and Industry Arbitration and Mediation Group, Massachusetts Supreme Judicial Court 1 Comment »

By Professor Peter Friedman         

In my recent two-part guest post published in Disputing about recent state court decisions striking down mandatory arbitration clauses and class action waivers in consumer, online transactions, I concluded that those courts were “acting in legitimate ways [by requiring contract] disputes to be resolved in ways that provide relief for and deterrence of wrongdoing.”   (Part I here; Part II here)  In particular, I applauded the  New Mexico Supreme Court and the Supreme Judicial Court of the Commonwealth of Massachusetts for making explicit the purely public policy grounds for invalidating mandatory arbitration clauses and class action waivers in consumer transactions.  See  Feeney v. Dell Inc., ___ Mass. ___ (July 2, 2009); Fiser v. Dell Computer Corp., ___ P.3d ___ (N.M. June 27, 2009). The courts concluded that the provisions deprived consumers of any meaningful remedies for the defendants’ alleged breaches of contract and that those provisions were therefore in conflict with strong state policies in favor of consumer protection.

It is worth examining more closely, however, my reasons for believing the courts in these cases were acting in judicially legitimate ways.  It might be suggested, for example, that, if a court could strike these particular provisions down on public policy it had articulated without explicit statutory support, there would be nothing to stop courts from striking down any arbitration provisions on judicially formulated public policy grounds. Continue Reading »

Introducing Guest-Blogger Professor Peter Friedman: “The Argument for Judicial Power to Void Mandatory Arbitration Agreements and Class Action Waivers on State Public Policy Grounds”

August 17th, 2009 Class Action Arbitration, Class Action Waivers, Commercial and Industry Arbitration and Mediation Group, Consolidation of Arbitration Proceedings, Guest Posts, Uncategorized Comments Off on Introducing Guest-Blogger Professor Peter Friedman: “The Argument for Judicial Power to Void Mandatory Arbitration Agreements and Class Action Waivers on State Public Policy Grounds”

Today we present a guest post by Professor Peter Friedman concerning the argument for judicial power to void class action waivers and arbitration agreements based on state public policy grounds. 

I met Peter through the LinkedIn Commercial and Industry Arbitration Group (learn about the group here).   He’s a Visiting Assistant Professor at the University of Detroit Mercy Law School, where he teaches Contracts and Core Concepts.  He also teaches U.S. Contract Law at the University of Windsor and the Universiteit van Amsterdam.  He is currently on leave from the Case Western University School of Law, where he has been on the faculty since January 1996.  He’s a very smart, creative guy who is devoted to the law, critical analysis of important legal issues, and, even more importantly, legal education.    

Prior to entering the academic world, Peter spent eleven years immersed in the practice of commercial litigation in New York City, most recently as a partner in the New York City office of Akin Gump Strauss Hauer & Feld LLP.  He graduated with his J.D. from the University of Michigan Law School in 1984 and his A.B. in Ancient Greek and Latin from Brown University in 1981.

Since August 2008, Peter has written a blog, Ruling Imagination: Law and Creativity, that explores the ways law affects creative endeavors and the ways creativity informs the practice of law.  Prior to Ruling Imagination, he authored What is Fair Use?, a blog he wrote in connection with an assignment in one of his legal writing classes in which his students drafted cross-motions for summary judgment for a copyright infringement lawsuit.  Just this month Peter has also begun a blog, 1L Contracts, in which he intends to explore issues connected with the law of contracts as they arise through the coming academic year in his Contracts class at Detroit Mercy. Continue Reading »

Feeney v. Dell Inc.: A Critical Analysis

July 17th, 2009 Arbitrability, Class Action Arbitration, Class Action Waivers, Massachusetts Supreme Judicial Court 3 Comments »

Introduction

In part I of a two-part post (here), we summarized the Supreme Judicial Court of Massachusetts’ decision in Feeney v. Dell Inc., ___ Mass. ___, slip op. (July 2, 2009).  The Court there refused to enforce an arbitration agreement in a consumer contract because it contained a class action waiver that the Court found violative of Massachusetts public policy favoring class actions under G.L., c. 93A, and which the Court found not to be severable from the remainder of the arbitration agreement.  The Court also refused to enforce on public policy grounds a choice-of-law clause providing that Texas law — which apparently permits class action waivers — would govern the parties’ agreement.  In this part II we discuss whether the decision comports with the Federal Arbitration Act.

The critical issue in Feeney was whether a state public policy against class action waivers was preempted by the Federal Arbitration Act, the preeminent purpose of which is to enforce according to their terms arbitration agreements falling within its scope.  With all due respect to the SJC, we think Feeney was a tough case and that the preemption issue was a close call.  The Court obviously worked hard to justify the outcome and drilled down on the preemption issue, but at the end of the day its arguments simply proved too much.  Continue Reading »

Feeney v. Dell Inc.: The Massachusetts Supreme Judicial Court Says Class Action Waiver in Arbitration Agreement Governed by the Federal Arbitration Act Violates Massachusetts Public Policy

July 16th, 2009 Arbitrability, Class Action Arbitration, Class Action Waivers, Massachusetts Supreme Judicial Court 3 Comments »

Introduction

The validity of class action waivers in arbitration agreements is a controversial subject at the moment.  There is an obvious tension between the pro-enforcement policies of the Federal Arbitration Act and competing state and federal policies favoring class action arbitration or litigation as a vehicle for vindicating consumer rights.  The United States Supreme Court may provide some hint of where it stands on this issue when it decides the Stolt-Nielsen case (blogged here and here), which raises the related issue whether imposing class action arbitration is consistent with the Federal Arbitration Act when the parties’ contract is silent on that score.  And the Supreme Court may directly address the issue of whether class action waivers comport with federal policy if it decides to grant certiorari in the American Express Merchants’ Litigation (blogged here).  Today we examine a case in which the question was whether a state policy in favor of consumer class actions could trump the enforcement of an arbitration agreement containing a class-action waiver. 

On July 2, 2009, in Feeney v. Dell Inc., ___ Mass. ___, slip op. (July 2, 2009), the Massachusetts Supreme Judicial Court (the “SJC”) ruled that a class action waiver contained in a consumer arbitration agreement violated a fundamental Massachusetts public policy favoring class actions, even though the parties had agreed that Texas law, which allows class action waivers, would govern their agreement.  This violation of Massachusetts public policy, said the Court, rendered the arbitration agreement unenforceable because the class action waiver was unenforceable and could not be severed from the remainder of the arbitration agreement.  But, in an interesting turn of events, the Court dismissed the consumers’ claims with leave to replead, because they failed to state a claim under Mass. G.L., c. 93A, the applicable consumer protection law. 

The case is somewhat different from other decisions voiding class action waivers because the agreement was voided on state public policy grounds, rather than on state unconscionability grounds, and because the court refused to enforce not only the class action waiver but also a choice-of-law clause indicating the parties’ desire that Texas, not Massachusetts, law would govern the class action waiver issue.  The case gives rise to serious questions concerning federal preemption of Massachusetts state policy. 

In this part I of a two-part post, we summarize the Feeny case.  In part II, which will follow tomorrow or the next day, we shall provide our critical analysis.  Because the publicly available copy of the case does not feature official pagination, we have eliminated jump cites, but provide after quotes pertinent information about internal citations, quotations and the like.    Continue Reading »