Just this Wednesday, the Supreme Court issued its opinion in AT&T Mobility LLC v. Concepcion, greatly impacting the ability of plaintiffs to pursue class proceedings. In a 5-4 decision, the Court overruled the California Supreme Court’s holding in Discover Bank v. Superior Court that class-arbitration waivers in consumer contracts were unconscionable and unenforceable.
For the majority, Justice Scalia wrote:
Because it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” Hines v. Davidowitz, 312 U. S. 52, 67 (1941), California’s Discover Bank rule is preempted by the [Federal Arbitration Act].
Justice Thomas concurred, but argued that contract defenses allowed for under § 2 of the FAA should be limited to defenses related to the formation of the arbitration agreement, such as fraud, duress, or mutual mistake. Arbitration agreements should not be invalidated on the basis of defenses that do not relate to the formation of the agreement, such as public policy.
In his dissent, Justices Breyer disagreed with Justice Scalia’s assertion that Discover Bank defeated the purposes of the FAA.
[I]nsofar as we seek to implement Congress’ intent, we should think more than twice before invalidating a state law that does just what § 2 requires, namely, puts agreements to arbitrate and agreements to litigate “upon the same footing.”