U.S. Supreme Court Issues Long-Awaited Ruling Upholding Class Arbitration Waivers

On April 27, 2011, the U.S. Supreme Court held in AT&T Mobility, LLC v. Concepcion that the Federal Arbitration Act (FAA) preempts the California Supreme Court's 2005 decision in Discover Bank v. Superior Court, which had held that arbitration agreements banning class arbitration could be found to be unenforceable as unconscionable contracts under California law. The court found that the Discover Bank decision is preempted by the FAA because the ruling "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress."

Concepcion Decision Background

In Concepcion, the plaintiffs sued AT&T for charging $30.22 in sales tax for a "free" cell phone. Their cell phone contract with AT&T provided for arbitration of "all disputes," and required that claims be brought only in the parties' "individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding." AT&T moved to compel