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New York Times Editorial: The Supreme Court Arbitration War
Monday, 29 November 2010

The Arbitration War
Unexpected wireless charges are a chronic affliction of life on the grid. The industry triggers more complaints from consumers than any other. AT&T Mobility, by consumer rankings, is the worst. Its performance in a case the Supreme Court heard recently has done nothing to improve that reputation...The Ninth Circuit said this “artifice” has “the practical effect of rendering” AT&T “immune from individual claims.” AT&T’s arbitration clause is unconscionable. The Supreme Court should say so.

New York Times Editorial
The Arbitration War

Unexpected wireless charges are a chronic affliction of life on the grid. The industry triggers more complaints from consumers than any other. AT&T Mobility, by consumer rankings, is the worst. Its performance in a case the Supreme Court heard recently has done nothing to improve that reputation.

This is the latest in the arbitration war — a battle over whether the United States will increasingly have a privatized system of justice that bars people from enforcing rights in court and, if so, what will be considered fair in that system. It would be grossly unfair for the court to let the corporation get away with what it wants to in AT&T Mobility v. Concepcion — a case that involves a small amount of money and a huge principle.

When Vincent and Liza Concepcion signed up for AT&T cellphone service, they received two new phones in exchange for making a two-year agreement. To their consternation, AT&T charged them $30.22 in sales tax for the phones. The Concepcions sued the company for fraud in Federal District Court and their case and another were consolidated as a class action.

Because of an arbitration clause in its customer agreement, AT&T insisted that the Concepcions had to submit their claim to individual arbitration. The federal district judge said no. The judge ruled that the agreement is “unconscionable” under California law — imposed by the company harshly, coerced and not consented to. The United States Court of Appeals for the Ninth Circuit forcefully upheld the decision.

The issue before the Supreme Court is the Federal Arbitration Act, which recognizes some kinds of arbitration agreements as enforceable obligations — and whether that pre-empts the California law. The court must decide if the state law applies only to arbitration agreements, and not contracts generally, or if it hinders Congressional desire to treat arbitration agreements and other contracts similarly and promote speedy resolution of claims.

California says that its law does neither and the appellate court agrees. AT&T contends that California law isn’t what the state says it is. AT&T is asking the Supreme Court to intrude on California’s sovereignty and second-guess interpretation of state law by state courts.

During the recent argument in the Supreme Court, Justice Elena Kagan asked AT&T’s lawyer, “Now, who are we to say that the state is wrong about that?” Justice Antonin Scalia asked a similar question: “Are we going to tell the State of California what it has to consider unconscionable?” When the lawyer answered yes, Justice Stephen Breyer said rhetorically: “Why, why, why?”

The lawyer’s best shot at victory was to portray California law as extreme. Unfortunately for him, courts applying law of at least 19 other states have reached the same conclusion as California, including five federal appeals courts. Under California law, an agreement isn’t enforceable if it requires a customer to submit to individual arbitration that can’t be effective. It can’t be effective, as in this case, if the payoff is so paltry that it takes away incentive to challenge fraud or deception. AT&T’s arbitration agreement supposedly assures customers “a minimum recovery of $7,500, plus double attorneys’ fees, if the arbitrator awards them more than” an offer from AT&T. Translated: AT&T can pay the claim’s value — here, $30.22 — before an arbitrator is picked.

The Ninth Circuit said this “artifice” has “the practical effect of rendering” AT&T “immune from individual claims.” AT&T’s arbitration clause is unconscionable. The Supreme Court should say so.

http://www.nytimes.com/2010/11/27/opinion/27sat1.html?_r=1&nl=todaysheadlines&emc=a211

 
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