Preempted by Federal Arbitration Act</li></ul>Broadly applied preemption analysis under § 2 of the FAA<br />State laws that prohibit arbitration of a particular dispute outright<br />State laws applied in a fashion that disfavors arbitration<br />Cases finding unenforceable as against public policy arbitration agreements that fail to provide for judicially monitored discovery<br />Cases finding unenforceable against public policy arbitration agreements as exculpatory provisions <br />State public policy concerns are irrelevant, because “States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for other reasons.”<br /><ul><li>Upheld use of a class waiver
“Switch to class arbitration makes process slower, more costly and more likely to generate procedural morass.”
Class arbitration requires procedural formality.
Class arbitration increases risk to defendants – no review forces “in terrorem” settlement.
Arbitration is poorly suited to high stakes class litigation.
○The United States Supreme Court will be deciding whether Concepcion applies in state court in Schnuerle v. Insight Communications Co., _____ S.W.3d ____, 2010 WL 5129850, in which the Kentucky Supreme Court (pre-Concepcion) struck down under Kentucky law a no class action arbitration clause. The plaintiffs in that case are arguing that Concepcion does not apply in state court and that given the razor thin majority in Concepcion, had that been a state court action, not a federal action, Justice Thomas would have sided with the dissenters. The brief demonstrates that in every opinion since 1995, Justice Clarence Thomas has consistently held that the FAA does not apply in state court actions.</li></ul>California’s Arbitration Jurisprudence<br /><ul><li>Past decade of California Supreme Court decisions reflecting judicial hostility toward arbitration, generally, and toward class action waivers specifically.
Vindication of unwaivable statutory rights (Gentry)
Federal courts favored arbitration, enforcing class action waivers in larger cases and holding preempted California’s CLRA anti-waiver provision</li></ul>California’s Response to AT&T Mobility<br /><ul><li>Mixed bag
Federal district courts applying or expanding AT&T Mobility:
To preempt public policy against arbitration of injunctive relief claims brought under the CLRA and UCL
Arellano v. T-Mobile USA, Inc., 2011 WL 184712 (N.D., Cal., May 16, 2011)
Zarandi v. Alliance Data Systems Corp., 2011 WL 1827228 (C.D. Cal, May 9, 2011)
In re Apple and AT&T iPad Unlimited Data Plan Litigation, 2011 WL 2886407 (N.D. Cal., July 19, 2011)
To suggest (without holding) that Gentry Rule is also preempted by the FAA.
Morse v. ServiceMaster Global Holdings, Inc., 2011 WL 3203919 (N.D. Cal., July 27, 2011)
Nakano v. ServiceMaster Global Holdings, Inc., 2011 WL 3206592 (N.D. Cal., July 27, 2011)
To preempt California’s CLRA anti-waiver provision.
Boyer v. AT&T Mobility Services, Inc., 2011 WL 3047666 (S.D. Cal., July 25, 2011)—holding that despite contrary California appellate authority, the federal court is bound by federal resolution of issues governed by federal law.
Federal district courts limiting AT&T Mobility:
Carving out PAGA claims (Private Attorney General Act, enacted to obtain enforcement of Labor Code violations) from AT&T Mobility’s reach.
Applying Gentry Rule without holding whether Gentry Rule is preempted.
Plows v. Rockwell Collins, Inc., 2011 WL 3501872 (C.D. Cal, August 9, 2011)
California Courts of Appeal limiting AT&T Mobility:
Applying Gentry Rule to require additional evidence in the record for the court to determine whether the Gentry Rule has been met, without holding whether Gentry Rule is preempted.
Brown v. Ralphs Grocery, Co., 197 Cal.App.4th 489 (Cal.App.2d, July 12, 2011)—Petition to Review pending
Declining to extend AT&T Mobility to preempt all California law regarding unconscionability, yet enforcing arbitration agreement
Mission Viejo Emergency Medical Associates v. Beta Healthcare Group, 197 Cal.App.4th 1146 (Cal.App.4 Dist, June 29, 2011)</li></ul>Response by other Jurisdictions<br /><ul><li>Preemption does not apply to class action waivers invalidated due to confusion and vagueness in their terms or application.
Williams v. Securitas Sec. Services USA, Inc., 2011 WL 27113741 (E.D. Pa., July 13, 2011)
NAACP of Camden County East v. Foulke Management Corp., 2011 WL 3273896 (N.J. Super. A.D., August 2, 2011)
Preemption applies to any unconscionability defense against a class action waiver.
Day v. Persels & Associates, 2011 WL 1770300, M.D. Fla., May 9, 2011
AT&T Mobility applies to preempt New Jersey case authority holding that class action waivers are unconscionable.
Wolf v. Nissan Motor Acceptance Corp., 2011 WL 2490939, D.N.J., June 22, 2011</li></ul>○AT&T Mobility does not preclude consideration of all unconscionability defenses; it only narrows permissible factors to consider In Re Checking Account Overdraft Litigation, ____ F.3d _______, _____ W.L. ____ (S.D. Fla., Miami Div. 2011) (finding arbitration agreements to be unconscionable under state law)<br />○Sonic Automotive v. Price, _____ F.3d _____________, _________ W.L. __________, (W.D. Car., Charlotte Div. 2011) (creative use of federal jurisdiction to vacate an arbitrator’s certification of an Etch class<br />○Adhesion contracts not per se unconscionable. Individual claims substantial enough to be pursued under state deceptive practices act because of fee shifting provision. Bernal v. Burnett, 2011 U.S. Dist. LEXIS 59829 (D. Colo. 2011)<br />Short-Lived Victory?<br /><ul><li>Arbitration Fairness Act of 2011
Dealer exemption from FAA</li></ul>Arbitration – Generally<br /><ul><li>ProsConsDeterrenceLess expensive than lawsuitsFaster and more efficientClass waiverLess formal – less adversarialCan be done pro seLimited appeal rightsSplit baby (Rule 43 – fair and equitable)Arbitrator expenseNo rules of evidence in play</li></ul>Arbitration – Drafting Considerations<br /><ul><li>Stand-alone?