Supreme Court Argument Suggests Consumer Class Actions Will Survive

On Tuesday, November 9, 2010, the U.S. Supreme Court heard oral argument in AT&T Mobility v. Concepcion. The case involved an effort by AT&T to prohibit class actions in an arbitration clause of contracts with mobile phone customers. California courts had held that the class action bar was unconscionable and unenforceable.

Before the oral argument, many expected the conservative U.S. Supreme Court to reverse the lower court’s decision and allow such clauses in boilerplate print of consumer contracts, even where they might be unenforceable under state law standards. However, comments of most of the justices during oral arguments, including conservative Justice Antonin Scalia, suggest the court may defer to state court judges’ determinations about what is and is not fundamentally unfair in a consumer contract.

The lawyer for the California couple, who had filed the class action against AT&T Mobility claiming that they were defrauded over a $30 charge, told the court that a decision in favor of AT&T would “gut the state’s substantive consumer protection law.” Although recent Supreme Court decisions have suggested the court would enforce arbitration agreements and disfavor consumer class actions, the justices’ questions at oral argument suggested otherwise. For example, Justice Antonin Scalia, a noted conservative on the court, asked AT&T’s attorney, “Are we going to tell the State of California what it has to consider unconscionable?” Questions by Justice Breyer, Justice Bader Ginsburg and new Supreme Court Justice Elena Kagan were similar in tone. Questions from conservative Justice Samuel A. Alito, Jr., indicated support for AT&T and suggest that the opinion may be divided.

Numerous consumer groups, including the Legal Aid Society of the District of Columbia, AARP, Centers for Responsible Lending and the Consumer Federation of America have expressed support for the Concepcions and the California lower court’s rulings rejecting the arbitration clauses.

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