Supreme Court Enforces Class Action Preclusion Arbitration Provision in Consumer Contracts

In AT&T Mobility LLC v. Concepcion, a class action brought by cellular telephone customers against AT&T wireless, the United States Supreme Court affirmed that the arbitration dispute resolution remedy with a class action waiver set forth in the parties' contract was enforceable. Under the arbitration provision, plaintiffs could not arbitrate their claims on a class wide basis. Disagreeing with the lower courts who found that such an agreement would be unconscionable under state law, the Supreme Court reversed. Instead, the Court found that the Federal Arbitration Act, which reflects a liberal federal policy in favor of arbitration, trumped state law to the contrary. The Court found that the arbitration provision was enforceable and would bar class wide relief.

False advertising claims against marketers on an individualized basis typically involve disputes over only a few dollars. However, on a potential class basis can result in significant exposure. Given the holding in Concepcion, marketers should consider the availability of alternative dispute resolution procedures with class action waivers in their contractual agreements with customers. Marketers, however, should not expect that a blanket mandatory arbitration requirement will automatically result in enforcement of the arbitration provision. Rather, marketers should detail consumer-friendly dispute resolution opportunities for a customer to resolve a claim cheaply and expeditiously on an individualized basis and to make sure that an arbitration component is fair and reasonable.

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