Oral argument: Nov. 9, 2010
Appealed from: United States Court of Appeals for the Ninth Circuit (Oct. 27, 2009)
CLASS ACTION, FEDERAL ARBITRATION ACT, PREEMPTION, CONSUMER CLAIMS
Vincent and Liza Concepcion ("the Concepcions") signed a two-year service contract with AT&T Mobility for wireless phone service and received free cell phones from AT&T as a part of their contract. AT&T charged the Concepcions a sales tax on their phones, and the Concepcions subsequently sued AT&T alleging that the company had fraudulently advertised the phones as free. The District Court for the Southern District of California consolidated the Concepcions' claim with a class action suit pending in the District Court on the same issue. The service contract that the Concepcions signed contained a clause requiring that they arbitrate disputes with AT&T directly, thus prohibiting the Concepcions from participating in class action suits. After AT&T moved to compel arbitration, the District Court denied AT&T's motion, and AT&T appealed to the Ninth Circuit Court of Appeals arguing that the Federal Arbitration Act ("FAA") expressly and impliedly preempted state law requiring the enforcement of the arbitration clause. The Ninth Circuit ruled against AT&T on the grounds that the arbitration provision represented an unconscionable exculpatory clause and could not be enforced. The United States Supreme Court will now determine whether the FAA preempts state law requiring the enforcement of the arbitration clause. This decision may affect consumers' ability to participate in class action suits and the extent to which they may arbitrate small claims.