Supreme Court Holds That Agreements With Arbitration Clauses Can Properly Waive Class Action Rights

On Wednesday, April 27, 2011, the Supreme Court issued a 5-4 decision in AT&T Mobility v. Concepcion, ruling that the Federal Arbitration Act ("FAA") protects the rights of companies to require arbitration and to preclude individuals from pursuing such arbitration on a classwide basis, even in consumer contracts. That decision, authored by Justice Scalia, will likely reduce the prevalence of classwide arbitrations, and makes arbitration clauses more attractive to companies seeking to protect themselves against consumer or other types of class actions.

The case arose out of the purchase of cellular telephones and service by Vincent and Liza Concepcion ("Plaintiffs" and "Respondents") in February 2002. At that time, the Plaintiffs entered into a service agreement with AT&T Mobility LLC ("Defendant" and "Petitioner"), which was advertised as including "free" phones, but were charged $30.22 in sales tax based on the phones' retail value. Plaintiffs subsequently filed a