Supreme Court Creates A Pathway To Avoid Class Action Litigation

A new U.S. Supreme Court decision holding that individuals can waive the right to participate in a class action as part of an arbitration agreement has the potential to limit the availability of class action treatment for commercial and consumer disputes.

In AT&T Mobility LLC v. Concepcion, the Court relied on the "liberal federal policy favoring arbitration" to hold that the Federal Arbitration Act preempts California law that prevented enforcement of a contract clause waiving the right to participate in a class action. These clauses required any claims to be brought in an individual capacity rather than as a class action or in a class arbitration. California courts – and courts in several other jurisdictions – had held that such clauses are "unconscionable" and therefore unenforceable.