Results tagged “Contract Law”

February 25, 2013


Kabateck.jpgBy Brian S. Kabateck '89, Guest Alumni Blogger

Concepcion v. AT&T, 131 S.Ct. 1750 (2011) is arguably the worst consumer Supreme Court decision in the last 20 years. Interestingly, there hasn't yet been a public outcry. In this horrible decision, the court held that the Federal Arbitration Act trumps all other laws. If you don't know the case and have been living in a bubble for the last two years, the facts are simple: The Concepcions sued AT&T Mobility claiming that their cell-phone company had engaged in deceptive advertising by falsely claiming that their plan included free cell phones. Their suit became a class action. The U.S. District Court for the Central District of California refused to dismiss the suit despite the fact that the contract mandated binding arbitration and prohibited class action lawsuits. The district court ruled that California law prohibits consumer adhesion contracts that waive the customer's right to a jury trial, mandate arbitration and purport to waive the right to participate in a class action lawsuit. The Ninth Circuit Court of Appeals upheld the District Court's decision. The Supreme Court disagreed and held that the Federal Arbitration Act (a law that was written before the Great Depression) mandated that any arbitration agreement was absolutely enforceable, even if it appears in a contract of adhesion.

Before Concepcion, contracts of adhesion couldn't force people into arbitration in California, and class action waivers were generally held unenforceable. There are many cases all across the United States today with varying decisions on the enforceability of mandatory binding arbitration agreements. There is no doubt that mandatory arbitration in consumer contracts of adhesion is bad for most Americans. The only groups that like the idea of mandatory arbitration are big business and the chamber of commerce. Arbitration doesn't discourage consumer litigation; it eliminates it entirely. Who is going to arbitrate a $75 dispute with your phone company provider? And if your phone company is overcharging you $75, where does the consumer go? Or a $500 dispute? Or a $1,000 dispute? While a $75 rip off may not be the worst thing that happens to a consumer, it nevertheless is wrong and should be stopped. And a $75 dispute magnified over tens of thousands of customers means millions of dollars the corporation is stealing from its consumers. The state and federal governments have neither the ability nor the resources to litigate these cases on behalf of consumers. So if class actions are eliminated for this category of cases, and the government won't enforce the laws, it is a license to steal from America.

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September 13, 2011

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Associate Professor of Law, David Horton, wrote a post for SCOTUSblog entitled, "Does the Federal Arbitration Act apply to wills and trusts?" The post was part of an Arbitration Symposium organized by the Supreme Court blog.

Here's an excerpt:

"Over the last two decades, arbitration has transformed the way that consumer and employment disputes are resolved. Recently, arbitration clauses have become increasingly common in a different context: wills and trusts. The roots of this movement are easy to understand. Even with the economic downturn, Americans bequeath hundreds of billions of dollars each year. This massive intergenerational wealth transfer - the largest in history - is expected to make probate litigation more common. Incapacity and undue influence claims are notorious not just for depleting estates, but for exposing a testator or settlor's intimate life in open court. Arbitration's purported benefits - its low cost, speed, and privacy - make it attractive to estate planners and their clients."

Read the full post here.

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January 19, 2011

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By Associate Professor David Horton

This is another installment of Loyola's "11 on '11" series, in which Loyola Law School professors are weighing in on what they expect to be the biggest legal issues in their fields in 2011.

For "contract procedure" enthusiasts, few stories in 2011 will rival the U.S. Supreme Court's decision in AT&T v. Concepcion. The Court will decide whether the Federal Arbitration Act (FAA) preempts state courts from striking down class arbitration waivers under the unconscionability doctrine. It's no exaggeration to say that the fate of the consumer class action hangs in the balance.

The seeds of Concepcion go back to the late 1990s and early 2000s, when companies began to see mandatory arbitration clauses as a panacea for class action liability. During that period, most courts held that the FAA flatly precluded plaintiffs from aggregating claims. As a result, mandatory arbitration clauses not only funneled consumers outside of the court system, but forced them to pursue their lawsuits on an individual basis. But in 2003, a highly fractured plurality of the Court suggested in Green Tree v. Bazzle that the FAA didn't bar class arbitration. Thus, to continue to use arbitration as a bulwark against the class action, companies were forced to insert express class action waivers into their agreements.

In Discover Bank v. Superior Court, a landmark 2005 decision, the California Supreme Court held that these class arbitration waivers could be unconscionable when applied to numerous low-value claims. The state high court explained that, in those circumstances, class arbitration waivers amounted to "get out of jail free cards" for corporate liability. For instance, if a business defrauds a million consumers out of $10, no individual consumer will spend the time and money necessary to sue. That lawsuit will either be brought as a class action or not at all.

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