Arbitration Agreements and Class Action Waivers After AT&T. Mobility v. Concepcion

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1 ASSOCIATION OF CORPORATE COUNSEL San Diego Chapter Arbitration Agreements and Class Action Waivers After AT&T PRESENTED BY Marie Burke Kenny Aaron T. Winn DATE June 16, 2011 Mobility v. Concepcion 2011 Luce, Forward, Hamilton & Scripps LLP

2 The Phenomenon of The Class Action In May 2011, there were 234 class actions filed in California.

3 The Discover Bank Rule Because class actions are inextricably linked to the vindication of substantive rights, class action waivers are (generally) unconscionable.

4 AT&T Mobility v. Concepcion The FAA preempts the Discover Bank rule: Because it stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress, California s Discovery Bank rule is preempted by the FAA.

5 AT&T Mobility v. Concepcion Arbitration agreements may only be declared unenforceable upon such grounds as exist at law or in equity for the revocation of any contract. (FAA, 2.) In other words, Courts must place arbitration agreements on equal footing with other contracts.

6 AT&T Mobility v. Concepcion In response to criticism that class proceedings are necessary to vindicate small-dollar claims: States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.

7 What Does It Mean? Class Action Waivers Are Enforceable (at least in Federal Court and at least in a commercial setting). Are Other State Arbitration Rules Now Suspect? Are injunctive relief claims arbitrable? (Arellano v. T-Mobile) Is a court s ability to deny/stay arbitration under CCP preempted? (Cha v. Granville Homes, Inc.) Do the Armendariz factors survive AT&T? (Macintosh v. Powered, Inc. (Cal. App. 1 District)

8 Court Decisions That Apply AT&T Zarandi v. Alliance Data Sys. Corp. (C.D. Cal. 2011): the argument that the arbitration agreement is unconscionable under state law due to its class action waiver... is no longer viable. Arellano v. T-Mobile USA, Inc. (N.D. Cal. 2011): FAA preempts California s rule exempting injunctive relief claims from arbitration.

9 More Court Decisions That Apply AT&T Bellows v. Midland Credit Mgmt (S.D. Cal. 2011): AT&T makes it clear that an agreement to arbitrate is not substantively unconscionable because it includes a class action waiver. Day v. Persels & Associates (M.D. Fla. 2011): enforcing class action waiver and granting motion to compel arbitration based on AT&T.

10 And One More Bernal v. Burnett (D. Colo. 2011): arbitration agreement that would have been unconscionable under Colorado s unconscionability test before AT&T, is no longer unconscionable.

11 Court Decisions That Question AT&T D Antuono v. Service Road Corp. (Dist. Conn. 2011): certifies three questions to the Second Circuit: are class action waivers unenforceable, despite AT&T, if the class action waiver precludes plaintiff from enforcing statutory rights? may courts inquire into general public policy concerns in determining whether a particular arbitration agreement is enforceable? is a class action waiver provision enforceable if the party seeking to enforce the agreement waives other questionable provisions of the agreement?

12 More Courts That Question AT&T Macintosh v. Powered, Inc. (Cal. App. 1 District): In an unpublished decision, drops a footnote that says AT&T does not affect Armendariz. Sheen et al. v. Lorre et al. (LA Sup. Ct - SC11974): Court questions whether Justice Thomas concurrence in AT&T is controlling.

13 Potential Challenges to AT&T AT&T does not apply in state courts. AT&T only applies to waivers that are similar to the waiver in AT&T or are plaintiff friendly. AT&T does not apply to employment cases. The decision didn t overrule Armendariz. A prohibition against class actions addressing wages and working conditions violates the NLRA. Wage and hour class actions can proceed based upon the vindication of statutory rights doctrine. When arbitration is prohibitively expensive, the class action waiver could be invalid.

14 Drafting Enforceable Agreements And Waivers Do not include a California choice-of-law provision or reference to the California Arbitration Act Specify that the agreement must be enforced in accordance with the FAA, as if the court were sitting as a federal district court judge Include a severability provision Don t abandon Armendariz s rules; include some consumer/employee-friendly terms Specifically identify representative actions including PAGA

15 How To Implement? Employees Current Prospective/Applicants Consumers Existing service contracts New service contracts Other forms of agreements

16 Arbitration: Does It Make Sense For You? Potential protection from class actions Typically speedier resolution Privacy of proceeding Exclusionary rules of evidence usually not applied Less exposure to punitive damages or run away verdicts Ability to select arbitrator with subject matter expertise No right to appeal even if the arbitrator makes a mistake of fact or law Summary judgment is unlikely Arbitration costs can be high With few exceptions, non-signatories cannot be compelled to arbitration The possibility of split the baby awards

17 Other Considerations Impact on existing or anticipated litigation Potential legislation

18 Presenters Marie Burke Kenny represents employers in federal and state court litigation involving wage and hour, wrongful termination, discrimination, harassment, retaliation and unfair competition claims. Ms. Kenny also represents employers in mediation, arbitration and state and federal agency proceedings. She has extensive experience counseling employers regarding all aspects of the employment relationship and works with employers to develop strategies to prevent employment claims and create effective defenses to litigation. Ms. Kenny counsels employers regarding performance management, termination, contracts, workplace investigations, medical issues, leaves of absence and employment policies and practices. She is also an adjunct professor of employment law for San Diego State University's Human Resources Certification Program. Marie Burke Kenny Partner Aaron Winn has successfully prosecuted and defended a wide variety of class actions in both state and federal court. In addition to handling class action litigation, Mr. Winn regularly handles appeals, writs, intellectual property litigation, unfair competition cases, employment litigation, and complex business disputes. Aaron T. Winn Partner awinn@luce.com

19 ASSOCIATION OF CORPORATE COUNSEL San Diego Chapter Thank you for your participation ORANGE COUNTY SAN DIEGO SAN FRANCISCO LOS ANGELES CARMEL VALLEY / DEL MAR RANCHO SANTA FE Luce Forward 600 W Broadway Ste 2600 San Diego,CA Marie Burke Kenny mkenny@luce.com Aaron T. Winn awinn@luce.com 2011 Luce, Forward, Hamilton & Scripps LLP