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Practice Note: AT&T Mobility v. Concepcion

by ~ John Matosky (Email) (Web Site)

In a series of decisions beginning in early 2010, the United States Supreme Court has emphasized the consensual nature of arbitration, not only with respect to whether parties have agreed to arbitrate certain disputes but also with respect to the manner in which they have agreed to conduct their arbitration. In the Court�s latest such decision, AT&T Mobility v. Concepcion, 563 U.S. ___, 131 S. Ct. 1740 (2011), it held that the Federal Arbitration Act (FAA) preempted a California rule that deemed class-action waivers in consumer contracts to be unenforceable. As in its earlier decision in Stolt-Nielsen S.A. v. Animal Feeds Int�l Corp., 559 U.S. ___ (2010), the Court concluded that the FAA requires express consent in order to require a party to participate in collective arbitration proceedings.

Massachusetts practitioners, many of whom are accustomed to invoking the First Circuit�s 1988 decision in New England Energy v. Keystone Shipping, 855 F.2d 1 (1st Cir. 1988), to argue that the FAA does not preempt the consolidation-friendly Section 2A of the Massachusetts Arbitration Act (MAA), are justified in wondering whether, in light of Stolt-Nielsen and Concepcion, consolidation remains available under the Massachusetts state rule in the absence of an express agreement between the parties to use it.

In Keystone, the First Circuit held that the FAA did not preempt Section 2A of the MAA, which allows the court to consolidate arbitrations consistent with the principles set forth in the rules of civil procedure, because the FAA, itself, did not address the issue of consolidation. The court further concluded that consent was unnecessary under Section 2A and, therefore, silence in an arbitration agreement with respect to consolidation was not an obstacle to ordering consolidated proceedings.

In its decision in Stolt-Nielsen, however, the U.S. Supreme Court held that class-action arbitration was unjustified where the agreement was silent on the issue. The parties￁ consent to class arbitration, the court determined, must be express in order to satisfy the federal policy that arbitration agreements are enforced according to their terms.

The Supreme Court reaffirmed the fundamentally consensual nature of arbitration in Concepcion. The case involved claims by a married couple that their cell phone service provider, AT&T, had engaged in false advertising and fraud by charging sales tax on a supposedly free telephone they received as part of their service contract. After the couple�s claims were consolidated with a putative class action involving similar claims, AT&T moved to compel individual arbitration with the couple based upon a class arbitration waiver in the contract. The California rule at issue deemed such waivers to be unconscionable in the consumer context and, thus, unenforceable. The state rule effectively permitted consumers to demand class arbitration regardless of what the contract said, and the district court denied AT&T�s motion on that basis. The Ninth Circuit affirmed. The Supreme Court reversed, concluding that because arbitration is wholly a matter of contract and the FAA requires the parties￁ contracts to be enforced according to their terms, any rule that would permit a party to demand class arbitration despite contractual silence or an express waiver �stands as an obstacle to the accomplishment of the full purposes and objectives of Congress￁ in enacting the FAA.

Although neither Concepcion nor Stolt-Nielsen addresses the precise issue of consolidated arbitration, the decisions arguably demonstrate that any state statute or rule that allows a court or arbitrator (as the case may be) to impose arbitration procedures without a contractual basis, including by allowing an inference of consent from contractual silence, interferes with the objectives of the FAA and, therefore, is preempted. Although it remains to be seen, Section 2A, at least to the extent of the First Circuit�s gloss that allows consolidation despite contractual silence, would appear to fall within the category of preempted rules.We use the very best in technology to make these elegant replica louis vuitton handbags,replica rolex,breitling watches for sale and replica breitling watches.

John E. Matosky may be reached at
￁ 2011 Prince Lobel Tye LLP. All rights reserved.

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