Class Arbitration Waivers: U.S. Supreme Court Upholds Class Arbitration Waiver

Sullivan & Cromwell LLP - May 2, 2011

The Supreme Court of the United States last week issued a 5-4 decision in AT&T Mobility LLC v. Concepcion, --- S. Ct. ---, 2011 WL 1561956 (U.S. Apr. 27, 2011), holding that arbitration agreements waiving class arbitration are enforceable in accordance with their terms. In reversing the Ninth Circuit Court of Appeals, the majority upheld a clause in a cell-phone subscriber contract requiring consumer claims to be brought in arbitration on an individual basis. The Court held that the Federal Arbitration Act (“FAA”) preempts a rule in California that class arbitration waivers in contracts of adhesion are unconscionable and unenforceable in disputes over small amounts of damages in which fraud is alleged. The Concepcion decision came exactly one year after, and strongly reaffirmed, Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), in which the Court held that arbitration agreements that are silent as to class arbitration should not be construed as permitting class litigation in the absence of evidence that the parties intended to agree to it.