Hendricks v. AT&T Mobility LLC

Filing 30

STATUS REPORT Joint by AT&T Mobility LLC. (Nadolenco, John) (Filed on 5/11/2011)

I
2
J

4

Donald M. Falk (CA Bar No. 150256)
dfalk@mayerbrown,com
MAYER BROWN LLP
Two Palo Alto Square, Suite 300
3000 El Camino Real
Palo Alto, CA 94306-2112
Telephone: (650) 33 l-2000
Facsimile: [phone]

5

John Nadolenco (CA Bar No. 181128)
@may erbrown. co m
Cornehl (State Bar No. 232733)
Lisa W.

6

j nado lenco

7

lcornehl

MAYER
8

9

com

WN LLP

350 South Grand Avenue, 25th Floor
Los Angeles, CA 90071-1503
Telephone: [phone]
Facsimile: [phone]

10

l1

Attorneys for Defendant

AT&T Mobility LLC

I2

UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

14

SAN FRANCISCO DIVISION

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t6
17

l8

Case

PATRICK HENDRICKS, on behalf of himself
and all others similarly situated,
Plaintiff,

No. CV 1l-00409-CRB

JOINT STATUS REPORT REGARDING
U.S. SUPREME COURT'S RECENT
DECISION TN AT&T MOBILITY LLC
V. CONCEPCION

19

Honorable Charles R. Breyer

VS,

20

2I

AT&T MOBILITY,LLC,
Defendant.

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23

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25

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JOINT STATUS REPORT
CASE NO. CV l l-00409 (cRB)

1

On March 25,2011, the Court stayed all proceedings in this matter pending the U.S.

2

Supreme Court's disposition of AT&T Mobility LLC v. Concepcion, No. 09-893. See Dkt. No.

J

a

29. On April27 ,2011, the Supreme Court issued its decision in Concepcion (563 U.S,

4

V/L 1 561956). A copy of the decision is attached

5

Mobility LLC ("ATTM") and plaintiff Patrick Hendricks submit this joint status report.

6

parties disagree about the effect of the Court's decision in Concepcion on whether plaintiff

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putative class-action lawsuit may proceed in this Court.

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9

as

The parties further request that the Court vacate the case management

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s

Therefore, the parties request that the Court issue the following schedule:

15

l2

The

Plaintiff intends to amend his complaint. ATTM intends to move to compel arbitration.

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11

I

Exhibit 1, Accordingly, defendant AT&T

Complaint
Defendant ATTM's Motion to Compel Arbitration:
Plaintiff s Opposition to Arbitration Motion:
Defendant's Reply in Support of Arbitration Motion:
Hearing on Motion to Compel Arbitration:

10

-,

201

Plaintiff

s

File Amended

June 7, 2011

July 7,2011
August 7,2077

August29,2}ll
September 16,2011
conference

l6

currently set for May 27,2011 as well as the requirement that the parties file a case management

17

statement on May 20,2011.

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Dated: May I l,20ll

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21

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23

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MAYER BROWN LLP
By:/s/John Nadolenco
John Nadolenco (CA Bar No. l8l128)
@may erbrown. com

j nado I enco

MAYER BROWN LLP

350 South Grand Avenue, 25th Floor
Los Angeles, CA 90071-1503
Telephone: [phone]
Facsimile: [phone]

Attorney for Defendant

25

26

27
28
JOINT STATUS REPORT
CASE NO, CV I l-00409 (CRB)

1

Dated: May 11,2011

BURSOR & FISHER, P.A
By: /s/L. Timothy Fisher

2
a

J

4
5

L. Timothy Fisher (CA Bar No. 191626)
[e-mail]
BURSOR & FISHER, P.A.
2121 North California Blvd, Suite
Walnut Creek, CA 94596
Telephone: [phone]

Facsimile:

l0l0

[phone]

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Attorney for Plaintiff
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8

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2t
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2

JOINT STATUS REPORT
CASE NO. CV l l-00409 (CRB)

trXHIBIT 1
3

WestLaw
Page I

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wL

1561956 (U,S.), l1 Cal. Daily Op. S,ew.4842,2011 Daily Journal D.A.R. 5846

(Cite as:2011 WL 1561956 (U.S.)

25T Alternative Dispute Resolution

H
Only the Westlaw citation is currently available.
Supreme Court of the United States

AT&T MOBILITY LLC, Petitioner,

25TII Arbitration
25TII(A) Nature and Form of Proceeding
25Tkl14 k. Constitutional and Statutory
Provisions and Rules of Court. Most Cited Cases

v.

The provision of the Federal Arbitration Act
(FAA) stating that arbitration agreements in maritime transactions or contracts evidencing transactions involving commerce are valid, irrevocable,

Vincent CONCEPCION et ux.
No, 09-893.
Argued Nov. 9, 2010.
Decided April27,20ll

Background: Customers brought putative class action against telephone company, alleging that company's offer of a free phone to anyone who signed
up for its cellphone service was fraudulent to the
extent that the company charged the customer sales
tax on the retail value of the free phone. The United
States District Court for the Southern District of
Califomia, Dana M. Sabraw, J., 2008 WL 5216255,
denied company's motion to compel arbitration.
Company appealed. The United States Court of Appeals for the Ninth Circuit, Carlos T, Bea, Circuit
Judge, 584 F,3d 849, affirmed. Certiorari was granted.

Holding:The Supreme Court, Justice Scalia, held
that the Federal Arbitration Act preempts California's judicial rule regarding the unconscionability
of class arbitration waivers in consumer contracts,
abrogating Discover Bank v. Superíor Court, 36
Cal.4th 148, 30 Cal.Rptr.3d 76, ll3 P,3d 1100.
Reversed and remanded

Justice Thomas f,rled a concurring opinion

and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract,

reflects both a liberal federal policy favoring arbitration and the fundamental principle that arbitration
is a matter of contract. 9 U.S.C.A, $ 2.
[2] Alternative Dispute Resolution 251 Qæ114
25T Alternative Dispute Resolution

25TII Arbitration

25TII(A) Nature and Form of Proceeding
25'1k114 k. Constitutional and Statutory

Provisions and Rules of Coult. Most Cited Cases

In light ofthe libçral federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract, which are reflected in
the provision of the Federal Arbitration Act (FAA)

stating that arbitration agreements

joined.

@ll4

en-

forceable, save upon such grounds as exist at law or
in equity for the revocation of any contract, courts
must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms. 9 U.S.C,A. $ 2.

251S117

25T Alternative Dispute Resolution

25TII Arbitration
25TII(A) Nature and Form of Proceeding

25Tkll7 k, Preemption, Most Cited

West Headnotes

[1f Alternative Dispute Resolution 25a

maritime

volving commerce are valid, irrevocable, and

[3] Alternative Dispute Resolution
Justice Breyer filed a dissenting opinion, in
which Justices Ginsburg, Sotomayor, and Kagan,

in

transactions or contracts evidencing transactions in-

States 360

Cases

€Þ18.15

O 201 I Thomson Reuters. No Claim to Orig. US Gov. Works'

4

Page 2

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wL

1561956

(u.s.), I I Cal. Daily op. sew.4842,201 I Daily Joumal D.A.R.

5846

(Cite as: 20ll WL 1561956 (U.S.))

Alternative Dispute Resolution ZSf Cæ'l3a(6)

360 States

360I Political Status and Relations

360I(8) Federal Supremacy; Preemption
360k18.15 k. Particular Cases, Preemption or Supersession. Most Cited

Cases

The Federal Arbitration Act (FAA) preempts
Califomia's judiciat rule stating that a class arbitration waiver is unconscionable under Califomia law
if it is found in a consumer contract of adhesion in
a setting in which disputes between the contracting
parties predictably involve small amounts of damages, and if it is alleged that the party with superior
bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, because that rule
stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress in enacting the FAA, which include ensuring
the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings; abrogating Discover Bank v. Superior
Court,36 Cal.4th 148, 30 Cal.Rptr,3d 76, l13 P,3d
1100. 9 U.S.C.A. $ 2; West's Ann.Cal.Civ.Code $$
1668,1670.5(a).

[4] Alternative Dispute

Resolution 25T

æ

134(r)

25T Altemative Dispute Resolution

25TII Arbitration
25TII(B) Agreements to Arbitrate
25Tkl3l Requisites and Validity
25Tkl34 Validity
25"tk13 4(6) k. Unconscionabil ity
Most Cited Cases
Under the saving clause in the provision of the
Federal Arbitration Act (FAA) stating that arbitration agreements in maritime transactions or contracts evidencing transactions involving commerce
are valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the re-

vocation

of any contract,

arbitration

agreements

may be invalidated by generally applicable contract
defenses, such as fraud, duress, or unconscionabil-

ity, but not by defenses that apply only to arbitration or that derive their meaning from the fact that
an agreoment to arbitrate is at issue. 9 U,S.C.A. $ 2.

[5] Contractt 95

Sl

95 Contracts
95I Requisites and Validity
95I(A) Nature and Essentials in General
95kl k. Nature and Grounds of Contractual Obligatiqn. Most Cited Cases

25T Alternative Dispute Resolution

25TII Arbitration
25TII(B) Agreements to Arbitrate

25Tkl3l Requisites and Validity
25Tkl34 Validity
25Tkl34(l) k. In General. Most
Cited Cases

Under California law, a finding that a contract
is unconscionable requires a procedural and a substantive element, the former focusing on oppression

or surprise due to unequal bargaining power, the
'West's
latter on overly harsh or one-sided results.
Ann.Cal.Civ,Code $$ 1668, I 670,5(a).

Alternative Dispute Resolution 251

S13a(3)

25T Alternative Dispute Resolution

25TII Arbitration
25TII(B) Agreements to Arbitrate

25Tkl3l Requisites and Validity
25Tkl34 Validity
25Tkl34(3) k. Validity of Assent.

[6] Alternative Dispute Resolution 25T

æll7

25T Alternative Dispute Resolution

25TII Arbitration
25TII(A) Nature and Form of Proceeding
25Tkll7 k. Preemption. Most Cited Cases
States 360

OPl8.15

Most Cited Cases

@

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Page

3

--- s.ct. ----,2011 wL 1561956 (u.s.), 1l cal, Daily op. serv. 4842,2011 Daily Joumal D.A.R. 5846
(Cite as: 201r WL 1561956 (U.S.))

360 States
360I Political Status and Relations
360I(B) Federal Supremacy; Preemption
360k18.15 k. Particular Cases, Preemption or Supersession. Most Cited Cases

When state law prohibits outright the arbitration of a particular type of claim, the conflicting
state rule is displaced by the Federal Arbitration
Act (FAA). 9 U.S.C.A. $ 2.
[7] Alternative Dispute Resolution 257

(F-llT

25T Alternative Dispute Resolution
25TII Arbitration
25TI(A) Nature and Form of Proceeding
25Tkl17 k. Preemption. Most Cited Cases
States 360 O;p18.15

360 States
360I Political Status and Relations

360I(8) Federal Supremacy; Preemption
360k18.15 k. Particular Cases, Preemption or Supersession. Most Cited Cases

In light of the preemptive.effect of the Federal
Arbitration Act (FAA), a court may not rely on the

of an agreement to arbitrate as a basis
for a state-law holding that enforcement would be
unconscionable, for this would enable the court to

such grounds as exist at law or in equify for the re-

vocation of any contract, preserves generally applicable contract defenses, nothing in it suggests an
intent to preserve state-law rules that stand as an
obstacle to the accomplishment of the FAA's objectives. 9 U.S.C,A. $ 2.
[9] States 36¡

@r8.11

360 States
360I Political Status and Relations

360I(8) Federal Supremacy; Preemption
360k18.1I k, Congressional Intent. Most
Cited Cases

A federal statute's preemption saving clause
cannot in reason be construed as allowing a common law right, the continued existence of which
would be absolutely inconsistent with the provisions of the act; in other words, the act cannot be
held to destroy itself.
[10] Alternative Dispute Resolution 257

@ll4

25T Alternative Dispute Resolution

25TII Arbitration
25TII(A) Nature and Form of Proceeding
25Tkl14 k. Constitutional and Statutory

uniqueness

Provisions and Rules of Court. Most Cited Cases

effect what the state legislature cannot. 9 U.S.C.A.

The .principal purpose of the Federal Arbitration Act (FAA) is to ensure that private arbitration
agreements are enforced according to their terms. 9

$2.
[8f Alternative Dispute Resolution 25a

Çfl4

25T Alternative Dispute Resolution

25TII Arbitration
25TII(A) Nature and Form of Proceeding
25Tkl l4 k. Constitutional and Statutory
Provisions and Rules of Court. Most Cited Cases

u.s.c.A,

[1]

$$ 2-4.

Alternative Dispute Resolution

251Qlll

25T Alternative Dispute Resolution

25TII Arbitration
25TII(A) Nature and Form of Proceeding
' 25Tkl I I k. Nature, Purpose, and Right to
Arbitration in General. Most Cited Cases

While the saving clause, in the provision of the
Federal Arbitration Act (FAA) stating that arbitration agreements in maritime transactions or con-

In bilateral arbitration, parties forgo the procedural rigor and appellate review of the courts in

tracts evidencing transactions involving commerce
are valid, irrevocable, and enforceable, save upon

order to realize the benefits ofprivate dispute resolution: lower costs, greater efficiency and speed, and

@

2011 Thomson Reuters. No Claim to Orig. US Gov. Works

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1561956 (U.S.), I

I Cal. Daily Op. Serv. 4842, 201I Daily Joumal D,A.R.

5846

(Cite as; 2011 WL 1561956 (U.S.))

the ability to choose expert adjudicators to resolve
specialized disputes.

[12f Judgmen¡228'

æ677

228 Judgment
228XlV Conclusiveness of Adjudication
228XIV(B) Persons Concluded
228k677 k. Persons Represented bY
Parties. Most Cited Cases

For a class-action money judgment to bind absentees in litigation, class representatives must at
all times adequately represent absent class members, and absent members must be afforded notice,
an opportunity to be heard, and a right to opt out of
the class.

[13] Alternative Dispute Resolution 25"¡

(æ^ll2

25T Alternative Dispute Resolution

25TII Arbitration
25TII(A) Nature and Form of Proceeding
25Tk112 k, Contractual or Consensual
Basis. Most Cited Cases

Alternative Dispute Resolution 25a

(|--Í4

25T Alternative Dispute Resolution

25TII Arbitration
25TII(A) Nature and Form of Proceeding

25Tkll4 k. Constitutional and Statutory
Provisions and Rules of Court. Most Cited Cases

Arbitration is a matter of contract, and the Federal Arbitration Act (FAA) requires courts to honor
parties' expectations. 9 U.S.C.A, $ I et seq.

.s¡l/oår,

FN*

FN* The syllabus constitutes no part of the
opinion ofthe Court but has been prepared
by the Reporter of Decisions for the convenience ofthe reader. Sae United States v.

Detroit Timber

&

Lumber Co., 200 U.S.

321, 337, 26 S.Cr. 282, 50 L.Ed. 499.

*1 The cellular telephone contract between re-

spondents (Concepcions) and petitioner (AT & T)
provided for arbitration of all disputes, but did not
permit classwide arbitration. After the Concepcions

were charged sales tax on the rètail value ofphones
provided free under their service contract, they sued
AT 8. T in a California Federal District Court.
Their suit was consolidated with a class action alleging, inler alia, that AT & T had engaged in false

advertising and fraud by charging sales tax on
"free" phones. The District Court denied AT & T's
motion to compel a¡bitration under the Concepcions' contract. Relying on the California Supreme
Court's Discover Bank decision, it found the arbitration provision unconscionable because it disallowed classwide proceedings. The Ninth Circuit
agreed that the provision was unconscionable under
California law and held that the Federal Arbitration

Act (FAA), which makes arbitration agreements
"valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract," 9 U.S.C. $ 2, did not
preempt its ruling.

Held: Because it "stands as an obstacle to the
accomplishment and execution of the full purposes
and objectives of Congress," Hines v, Davidoìitz,
312 U,S. 52,67,61 S.Ct. 399, 85 L.Ed. 581, California's Dìscover Bank rule is pre-empted by the

FAA. Pp.

(a) Section 2 reflects a "liberal federal policy
favoring arbitration," Moses H. Cone Memorial

l, 24,
103 S.Ct.927,74 L.Ed.2d 765, and the

Hospital v. Mercury Conslr. Corp., 460 U.S,

"fundamental principle that arbitration is a matter
of contract," Rent-A-Center, West, Inc. v. Jaclçson,
130 S.Cr. 2772,177 L.Ed.2d
561 U.S,
403 (2010). Thus, courts must place arbitration
-¡L¡
agreements on an equal footing with other contracts, Buckeye Check Cashing, Inc. v. Cardegna,
546 U,S. 440, 443, 126 S.Ct. 1204, 163 L,Ed.zd
1038, and enforce them according to their terms,
Volt Information Sciences, Inc. v. Board ofTruslees
of Leland Stanford Junior Univ., 489 U.S. 468, 478,
109 S.Ct. 1248, 103 L.Ed,2d 488, Section 2's sav-

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(Cite as: 20l1WL 1561956 (U.S.))

ing clause permits agreements to be invalidated by
"generally applicable contract defenses," but not by
defenses that appty only to arbitration or derive
their meaning from the fact that an agreement to arbitrate is at issue. Doctor's Associales, Inc. v. Cas-

arotlo, 517 U.S. 681, 687, l16 S.Ct. 1652,

134

L.Ed.zd902.Pp.

(b) In Drscover Bank, the California

Supreme

Court held that class waivers in consumer arbitra-

tion agreements are unconscionable if the agreement is in an adhesion contract, disputes between
the parties are likely to involve small amounts of
damages, and the party with inferior bargaining
power alleges a deliberate scheme to defraud. Pp.

The switch from bilateral to class arbitration sacnfices arbitration's informality and makes the process
slower, more costly, and more likely to generate
procedural morass than final judgment. And class
arbitration greatly increases risks to defendants.
The absence of multilayered review makes it more
likely that errors will go uncorrected. That risk of
error may become unacceptable when damages allegedly owed to thousands of claimants arc aggregated and decided at once. Arbitration is poorly
suited to these higher stakes. In litigation, a defendant may appeal a certification decision and a final
judgment, but 9 U.S.C. $ l0 limits the grounds on
which courts can vacate arbitral awards. Pp.
-

584 F.3d 849, reversed and remanded.

(c) The Concepcions claim that the Discover
Bank rule is a ground that "existfs] at law or in
equity for the revocation of any contract" under
FAA $ 2. When state law prohibits outright the arbitration of a particular type of claim, the FAA displaces the conflicting rule. But the inquiry is more
complex when a generally applicable doctrine is alleged to have been applied in a fashion that disfa-

vors or interferes with aibitration. Although $ 2's
saving clause preserves generally applicable contract defenses, it does not suggest an intent to preserve state-law rules that stand as an obstacle'to the
accomplishment of the FAA's objectived. Cf. Geier'
v, American Honda Molor Co., 529 U.S. 861,872,
120 S,Ct. l9l3,146L.Ed.zd 914. The FAA's overarching purpose is to ensure the enforcement of arbitration agreements according to their terms so as
to facilitate informal, streamlined proceedings,

Parties may agree to limit the issues subject to ar-

bitration, Mitsubishí Motors Corp, v, Soler
Chrysler-Plymoulh, Inc., 473 U.S. 614, 628, 105
S.Ct. 3346, 87 L.Bd.2d 444, to arbitrate according
to specific rules, Voll, supra, at 479, 109 S,Ct,
7248, and to limit with whom they will arbitrate,
Stolt-Nielsen, supra, at

Pp.

-

-.
*2 (d) Class arbitration, to the extent-. is manit
ufactured by Discover Bank rather than consensual,
interferes with fundamental attributes of arbitration.

@

SCALIA, J., delivered the opinion of the Court,

in which ROBERTS, C. J., and KENNEDY,
THOMAS, and ALITO, JJ., joined, THOMAS, J,,
filed a concurring opinion. BREYER, J,, filed a dissenting opinion, in which GINSBURG, SOTOMAYOR, and KAGAN, JJ., joined,
Andrew J, Pincus, Washington, DC, for Petitioner.
Deepak Gupta, for Respondents.

Donald M. Falk, Mayer Brown LLP, Palo Alto, CA,

Neal Berinhout, Atlanta, GA, Kenneth S, Geller,
Andrew J, Pincus, Evan M. Tager, Archis A. Parasharami, Kevin Ranlett, Mayer Brown LLP, Washington, DC, for Petitioner.

For U.S. Supreme Court Briefs, See:2010 WL
3017755 (Pet.Brief)2010 WL 4312794
(Reply.Brief)
Justice SCALIA delivered the opinion of the Court.

*3

Section 2 of .he Federal Arbitration Act
(FAA) makes,agreements to arbitrate "valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation ofany
contract." 9 U.S.C. $ 2. We consider whether the
FAA prohibits States from conditioning the enforceability of certain arbitration agreements on the

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availability of classwide arbitration procedures.

phone, or based only on submissions; that either

party may bring a claim in small claims court in

I
In February 2002, Vincent and Liza

Concepcion entered into an agreement for the sale and ser-

vicins of cellulatlçlephones with AT & T Mobilify
LCC (AT & D.FNI ïhe contract provided for arbitration of all disputes between the parties, but required that claims be brought in the parties'
"individual capacity, and not as a plaintiff or class
member in any purported çlass or repre-s-e-qtative
proceeding." App. to Pet. for c"rt oiu.FN2 t¡,

AT & T to make unilateral
it did to the arbitration provi-

lieu of arbitration; and that the arbitrator may award
any form of individual relief, including injunctions
and presumably punitive damages. The agreement,
moreover, denies AT & T any ability to seek reimbursement of its attorney's fees, and, in the event
that a customer receives an arbitration award greater than AT & T's last written settlement offer, requires AT & T to pay a 37,500 minimum recovery
and t¡¡riçe the amount of the claimant's attomey's

^

tees.

FN3

agreement authorized
amendments, which

sion oh several occasions. The version at issue in
this case reflects revisions made in December 2006,
which the parties agÍee are controlling.

FN3. The guaranteed minimum recovery
was increased in 2009 to

$

10,000. Brief for

Petitioner 7.

contract

was with Cingular Wireless. AT & T acquired Cingular in 2005 and renamed the
company AT & T Mobility in 2007. Laster
v. AT & T Mobility LLC, 584 F.3d 849,
852, n, I (C.4.9 2009).

The Concepcions purchased AT & T service,
which was advertised as including the provision of
free phones; they were'not ch4rged for the phones,
the pbones' retail value. In March 2006, the Con-

FNl. The Conceptions' original

FN2. That provision further states that "the
arbitrator may not consolidate more than
one person's claims, and may not otherwise
preside over any form of a representative
or class proceeding." App. to Pet. for Cert,

but they wère charged 530.22 in sales tax based on
cepcions filed a complaint against AT

& T in the

United States District Court for the Southern Dis-

trict of California. The complaint was later consolidated with a putative class action alleging, among
other things, that AT & T had engaged in false advertising and fraud by charging sales tax on phones

it advertised

as free.

In March 2008, AT & T moved to compel arbitration under the terms of its contract with the

6la.
The revised agreement provides that customers

may initiate dispute proceedings by completing a
one-page No-tice of Dispute form available on AT
& T's Web site, AT & T may then offer to settle the
claim; if it does not, or if the dispute is not resolved
within 30 days, the customer may invoke arbitration by hliig a separate Demand for Arbitrátion,
also available on AT & T's Web site. In the event
the parties proceed to arbitration, the agreement
specifies that AT & T must pay all costs for nonfrivolous claims; that arbitration must take place in
the county in which the customer is billed; that, for
claims of $10,000 or less, the customer may choose
whether the arbitration proceeds in person, by tele-

Concepcions. The Concepcions opposed the motion, contending that the arbitration agreement was
unconscionable and unlawfully exculpatory under
California law because it disallowed classwide procedures. The District Court denied AT & T's motion. It described AT & T's arbitration agreement
favorably, noting, for example, that the informal
dispute-¡esolution process was "quick, easy to use"
and likely to "promp[t] full or ... sven excess payment to the customer without the need to arbitrate
or litigate"; that the $7,500 premium functioned as
"a substantial inducement for the consumer to pursue the claim in arbitration" if a dispute was not resolved informally; and that consumers who were

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members of a class would likely be worse off.
Laster v. T-Mobile USA, Inc., 2008 WL 5216255,
*11-*12 (S.D.Cal., Aug. l1, 2008). Nevertheless,
relying on the California Supreme Court's decision
in Discover Bank v, Superior Court, 36 Cal.4th
148, 30 Cal.Rptr.3d 76, ll3 P.3d 1100 (2005), the
court found that the arbitration provision vr'as unconscionable because AT & T had not shown that
bilateral arbitration adequately substituted for the
deterrent effects of class actions. Laster, 2008 WL
5216255, *14.

*4 The Ninth Circuit affirmed, also hnding the
provision unconscionable under California law as
announced in Discover Bank. Laster v, AT & T Mobílily LLC, 584 F.3d 849, 855 (2009). It also held
that the Discover Bank rule was not preempted by
the FAA because that rule was simply "a refinement of the unconscionability analysis applicable to
contracts generally in California." 584 F.3d, at 857,
In response to AT & T's argument that the Concepcions' interpretation of California law discriminated
against arbitration, the Ninth Circuit rejected the
contention that

"

'class þroceedíngs

will

reduce the

efficiency and expeditiousness of arbitration' " and
noted that " ' Discover' Bank placed arbitration
agreements with class action waivers on the exacl
same

þoting

litigId., at

as contracts that bar class action

dtion outside the context of arbitration.' "
858 (quoting Shroyer v. New Cingular Wireless
Services, Inc., 498

F .3

d

97

6, 990 (C.4,9 2007)).

We granted certiorari, 560 U.S,
3322, t76 L,Bd,2d l2l8 (2010).

130 S.Ct.

-,

II

[][2] The FAA was enacted in 1925 in response to widespread judicial hostility to arbitration
agreements. See Hall Streel Associates, L.L.C. v.
Mattel, Inc., 552 U.S. 576, 581, 128 S.Ct. 1396,
170 L.Ed.2d 254 (2008). Section 2, the "primary
substantive provision of the Act," Moses H. Cone

Memorial Hospilal v. Mercury Constr. Corp., 460
u.s. l, 24, 103 s.ct.927,74 L,Ed,zd 765 (1983),
provides, in relevant part, as follows:

@

20ll

"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or
transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law
or in equity for the revocation ofany contract." 9

u.s.c.

$ 2.

*5 We have described this provision as reflecting both a "liberal federal policy favoring arbitration," Moses H. Cone, supra, at 24, 103 S.Ct.927,
and the "fundamental principle that arbitration is a
matter of contract," Rent-A-Cenler, lV'est, Inc. v.
130 S.Ct. 2772,
Jackson, 561 U.S.
2776, 177 L.Ed.zd 403 (2010). In line with these
-> -;

principles, courts must place arbitration agreements
on an equal footing with other contracts, Buckeye
Check Cashing, Inc. v. Cardegna, 546 U.S. 440,
443, t26 S.Cr. 1204, 163 L.Ed.2d 1038'(2006), and
enforce them according to their terms, Voll Inforrnation Sciences, Inc. v. Board of Trustees of Leland
Stanford Junior Univ., 489 U,S. 468, 478, 109 S.Ct,
1248,103 L,Ed.2d 488 (1989).

[3][a] The hnal phrase of $ 2, however, permits
arbitration agreements to bq declared unenforceable
"upon such grounds as exist at law or in equity for
the revocation of any contract." This saving clause
permits agreements to arbitrate to be invalidated by
"generally applicable contract defenses, such as
fraud, duress, or unconscionability," but not by defensds that apply only to arbitration or that derive
their meaning from the fact that an agreement to arbitrate is at issue. Doclor's Associales, Inc. v. Cas-

arotto, 517 U.S. 681, 687, l16 S.Ct. 1652,

134

L.Ed.2d 902 (1996); see also Perry v. .Thomas, 482

U.S. 483, 492493, n.

9,

107 S.Ct. 2520,

96

L.Ed.zd 426 (1987). The question in this case is
whether $ 2 preempts California's rule classifying
most collective-arbitration waivers in consumer
contracts as unconscionable. We refer to this rule as
the Discover Bank rule.

[5] Under California law, courts may refuse to
enforce any contract found "to have been uncon-

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scionable at the time it was made," or may "limit
the application of any unconscionable clause." Cal.
Civ.Code Ann, $ 1670.5(a) (West 1985). A finding
of unconscionability requires "a 'procedural' and a

'substantive' element,

the former focusing

on

'oppression'or 'surprise' due to unequal bargaining
power, the latter on 'overly harsh' or 'one-sided'

results." Armendariz v. Foundation Health Pyschca're Servs., Inc., 24 Cal.4th 83, l14, 99
Cal.Rptr.2d 745, 6 P.3d 669, 690 (2000); accord,

Discover

Bank,36 Cal.4th, at 159-161,30

Cal.Rptr.3d 76,113 P.3d, at I 108.

In

Dìscover Bank, the California Supreme

Court applied this framework to
waivers in arbitration agreements and

class-action

America Online, Inc. v. Superior Cl., 90
Cal.App.4th l, l7-18, 108 Cal.Rptr.2d 699,
7tt-7t3 (2001).
[6][7] When state law prohibits outright the arbitration of a particular type of claim, the analysis

"[Vy']hen the waiver is found in a consumer contract of adhesion in a setting in which disputes

befween the contracting parties predictably involve small amounts of damages, and when it is
alleged that the party with the superior bargaining
power has carried out a scheme to deliberately
cheat large numbers of consumers out of indi-

vidually smâll sums of money, then ... the waiver
becomes in practice the exemption of the party
'fróm responsibility for [its] own fraud, or willful
injury to the person or property of another.' Under these circumstances, such waivers are unconscionable under California law and should not be

enforced." Id.,
I

A
The Concepcions ârgue that the Discover Bank
rule, given its origins in California's unconscionability doctrine and Califomia's policy against exculpation, is a ground that "exist[s] at law or in equity
for the revocation of any contract" under FAA $ 2.
Moreover, they argue that even if we construe the
Discover BanÈ rule as a prohibition on collective-action waivers rather than simply an application of
unconscionability, the ru[e would still be applicable
to all dispute-resolution contraçts, since California
prohibits waivers of class litigation as well. See

hetd as fol-

lows:

P.3d,

5846

at l1l0

at 162, 30 Cal,Rptr.3d 76, ll'3
(quoting Cal. Civ.Code Ann.

$

668).

*6 California

courts have frequently applied
this rule to find arbitration agreements unçonscion-

able. See, e,9., Cohen v. DirecTV, Inc,,

142
813,
Cal.App.4th 1442, 145l-1453, 48 Cal.Rptr.3d
819-821 (2006); Klussman v. Cross Country Bank,
134 Cal.App.4th 1283, 1297, 36 Cal.Rptr,3d 728,
738-739 (2005); Aral v. EarthLink, Inc., 134

Cal.App.4th 544, 556-557, 36 Cal.Rptr.3d 229,
237-239 (2005).

III

O 20l

l

is straightforward: The conflicting rule is displaced
by the FAA. Preston v. Ferrer,552 U.S. 346,353,
128 S.Ct. 978, 169 L.Ed,2d 917 (2008). But the inquiry becomes more complex when a doctrine normally thought to be generally applicable, such as
duress or, as relevant here, unconscionability, is alleged to have been applied in a fashion that disfavors arbitration. In Perry v. Thomas,482 U.S. 483,
107 S.Ct. 2520, 96 L,Ed.2d 426 (1987), for ex-

ample, we noted that the FAA's preemptive effect
might extend even to grounds traditionally thought
to exist " 'at law or in equity for the revocation of
any contract.' " Id., at 492, n. 9, 107 S,Ct. 2520
(emphasis deleted). We said that a court may not
"rely on the uniqueness ofan agreement to arbitrate
as a basis for a state-law holding that enforcement
would be unconscionable, for this would enable the
court to effect what ,.. the state legislature cannot,"
Id., at493, n. 9, 107 S.Ct.2520,

An obvious illustration of this point would be a
case finding unconscionable or unenforceable as
against public policy consumer arbitration agreements that fail to provide for judicially monitored
discovery. The rationalizations for such a holding
are neither difficult to imagine nor different in kind
from those articulated in Discover Bank. A court

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of honibles, and no genuine worry. "Rules
at destroying arbitration" or "demanding
procedures incompatible with arbitration," they

might reason that no consumer would knowingly
waive his right to full discovery, as this would enable companies to hide their wrongdoing. Or the

parade

court might simply say that such agreements are ex-

concede, "would be preempted by the FAA because
they cannot sensibly be reconciled with Section 2."
Brief for Respondents 32. The "grounds" available
under $ 2's saving clause, they admit, "should not
be construed to include a State's mere preference
for procedures that are incompatible with arbitration and 'would wholly eviscerate arbitration agreements.' " Id., at 33 (quoting Carter v. SSC Odin
Ill.Dec.
Operating Co., LLC,237 lll.zd 30, 50,
?40
(2010)).^ " '
196,927 N.E.2d t207 , 1220

culpatory-re-stricting discovery would be of
greater benefit to the company than the consumer,
since the former is more likely to be sued than to

sue. See Discover Bank, supra,

at 16l, 30

Cal.Rptr.3d 76, ll3 P.3d, at ll09 (arguing that
class waivers are similarly one-sided). And, the
reasoning would continue, because such a rule applies the general principle of unconscionability or
public-policy disapproval of exculpatory agreements, it is applicable to "any" contract and thus
preserved by $ 2'of the FAA. In practice, of course,
the rule would have a disproportionate impact on
arbitration agreements; but it would presumably apply to contracts purporting to restrict discovery in
litigation as well,

*7 Other

.are

easy to imagine. The
might apply to a rule classifying as
same argument
unconscionable arbitration agreements that fail to
abide by the Federal Rules ofEvidence, or that disallow an ultimate disposition by a jury (perhaps
termed "a panel of twelve lay arbitrators" to help
examples

avoid preemption). Such examples are not fanciful,
since the judicial hostility towards arbitration that
prompted the FAA had manifested itself in "a great
variety" of "devices and formulas" declaring arbitration against public policy, Robert Lawrence Co.

v. Devonshire Fabrics, Inc., 271 F.zd 402, 406
(C.A.z 1959), And although these statistics are not
definitive, it is worth noting that California's courts
have been more likely to hold contracts to arbitrate
unconscionable than other contracts. Broome, An
Unconscionable Applicable of the Unconscionability Doctrine: How the California Courts are Circumventing the Federal Arbitration Act, 3 Hastings
Bus. L.J. 39,54,66 (2006); Randall, Judicial Attitudes Toward Arbitration and the Resurgence of
Unconscionability, 52 Buffalo L.Rev. 185, 186-187
(2004).

The Concepcions çuggest that all this is just

a

aimed

FN4. The dissent seeks to fight off even
this eminently reasonable concession. It
says that to its knowledgè "we have not ...
applied the Act to strike down a state statute that treats arbitrations on par with judicial and administrative proceedings," pos!,
at l0 (opinion of BREYER, J.), and that
"we should think more than twice before
invalidating a state law that ... puts agree-

ments to arbitrate and agreements to litigate 'upon the same footing' " post, at 4-5.

[8][9] We largely agree. Although $ 2's saving
clause preserves generally applicable contract defenses, nothing in it suggests an intent to preserve
state-law rules that stand as an obstacle to the accomplishment of the FAA's objectives. Cf. Geier v.
American Honda Motor Co., 529 U.S, 861, 872,
120 S.Ct. 1913, 146 L.Ed.zd 914 (2000); Crosby v.
National Foreign Trade Counc¡L, 530 U.S. 363,
372-373, 120 S.Ct. 2288, t47 L.Bd,.2d 352 (2000),
As we have said, a federal statute's saving clause "
'cannot in reason be construed as [allowing] a common law right, the continued existence of which
would be absolutely inconsistent with the provisions of the act. In other words, the act cannot be
held to destroy itself,' " Arnerican Telephone &
Telegraph Co. v. Central OfJìce Telephone, Inc.,

524 U.S. 2t4, 227-228,

ll8

S.Ct. 1956,

l4l

L.Ed,zd 222 (1998) (quoting Texas & PaciJìc R.
Co. v. Abilene Cotton Oil Co,,204 U,S. 426, 446,

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27 5.Ct.350,

5l L.Ed.

553 (1907)).

*8 We differ with the Concepcions only in the
application of this analysis to the matter before us'
We do not agree that rules requiring judicially monitored discovery or adherence to the Federal Rules
of Evidence are "a lar cry from this case." Brief for
Respondents 32. The overarching purpose of the
FAA, evident in the text of $S 2, 3, and 4, is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined
proceedings. Requiring the availability of classwide

arbitration interferes with fundamental attributes of
arbitration and thus creates a scheme inconsistent
with the FAA.
B

[0]

The "principal purpose" of the FAA is to

"ensur[e] that private arbitration agreements are enforced according to their terms." Volt, 489 U.S., at
478, 109 S.Ct. 1248; see also Stolt-Nielsen S.A. v.
130
AnirnalFeeds Int'l Corp.,559 U.S.
s.ct. 1758, 1763, 176 L.Ed.zd 605 (2010). This
-, -,
purpose is readily apparent from the FAA's text.
Section 2 makes arbitration agreements "valid, irre-

vocable, and enforceable" as written (subject, of
course, to the saving clause); $ 3 requires courts to
,stay litigation of arbitral claims pending arbitration
of those claims "in accordance with the terms of the
agreement"; and $ 4 requires courts to compel ar-

"in accordance with the terms of the
agreement" upon the motion of either party to the
agreement (assuming that the "making of the arbitration agreement or the failure ... to perform the
same" is not at issue). In light of these provisions,
we have held that parties may agree to limit the issues subject to arbitration, Mitsubishí Molors'Corp.
bitration

v. Soler Chrysler-Plymoulh, Inc., 473 U.S. 614,
628, 105 S.Cr. 3346, 87 L.Ed,2d 444 (1985), to arbitrate according to specific rules, Voh, supra, at
479,109 S.Ct. 1248, and to limit withwhom aparty
will arbitrate its disputes, Stolt-Níelsen, supra, at

_,

130 S,cr. at 1773.

The point of affording parties discretion in
designing arbitration processes is to allow for effi-

@

cient, streamlined procedures tailored to the type of
dispute. It can be specified, for example, that the
decisionmaker be a specialist in the relevant field,
or that proceedings be kept confltdential to protect
trade secrets, And the informality of arbitral proceedings is itself desirable, reducing the cost and
increasing the speed of dispute resolution. l4 Penn
129 S.Ct.
Plaza LLC v. Pyetl,556 U.S.
1456, 1460, 173 L.Ed.2d 398 (2009); Mitsubishi
-; -;
Molors Corp., supra, at 628, 105 S.Ct. 3346.

*9 The dissent

quotes Dean lI/itler Reynolds

Inc. v. Byrd,470 U,S. 213,219, 105 S.Ct. 1238,84
L.Ed.2d 158 (1985), as "'rejectfing] the suggestion
that the overriding goal of the Arbitration Act was
to promote the expeditious resolution of claims.' "
Post, at 4 (opinion of BREYER, J.), That is greatly
misleading. After saying (accurately enough) that
"the overriding goal of the Arbitration Act was
[not] to promote the expeditious rèsolution of
claims,'i but to "ensure judicial enforcement of
privately made agreements to arbitrate," 470 U.S.,
at 219, 105 S.Ct. 7238, Dean Willer went on to explain: "This is not to say that Congress was blind to
the potential beneflrt ofthe legislation for expedited
resolution of disputes. Far from it ...." Id., at 220,
105 S.Ct. 1238.

It then quotes a House Report say-

ing that "the costliness and delays of litigation

...

can be largely eliminated by agreements for arbitration)' Ibid. (quoting H,R,Rep. No. 96, 68th Cong.,
lst Sess., 2 (1924)). The concluding paragraph of

this part of its discussion begins as follows:
'.'We therefore are not persuaded by the argument that the conflict between two goals of the

Arbitration Act-enforcement of private

agree-

ments and encouragement of efficient and speedy
dispute resolution-must be resolved in favor of

the latter in order to realize the intent of

the

drafters." 470 U,S., at221,105 S.Ct. 1238.

In the

present case,

of

course, those "two

goals" do not conflict-and it is the dissent's view
that would frustrate both of them.
Contrary to the dissent's view, our cases place

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it beyond dispute that the FAA was designed to
promote arbitration. They have repeatedly described the Act as "embod[ying] [a] national policy
favoring arbitration," Buckeye Check Cashing, 546
U,S., at 443,126 S.Ct. 1204, and "a liberal federal
policy favoring arbitration agreements, notwithstanding any state substantive or procedural
policies to the contrary," Moses H. Cone,460 U.S',
at 24,'103 S.Ct. 927; see also Hall Street Assocs.,
552 U.S., at 581, 128 S.Ct. 1396. Thus, in Preslon
v. Ferrer, holding preempted a state-law rule requiring exhaustion of administrative remedies before arbitration, we said: "A prime objective of an
agreement to arbitrate is to achieve 'streamlined
proceedings and expeditious results,' " which ob-

jective would be "frustrated" by requiring a dispute
to be heard by an agency first. 552 U.S., at
357-358, 128 S.Ct. 978. That rule, we said, would
"at the least, hinder speedy resoluli-o¡ of the controversy." Id., at358,

rz¡ s.ðt.

978.FN5

FN5, Relying upon nothing more indicative of congressional understanding than
statements of witnesses in committee hearings and a press release of Secretary of
Commerce Herbert Hoover, the dissent
suggests that Congress "thought that arbitration would be used primarily where merchants sought to resolve disputes of fact .,.
[and] possessed roughly equivalent bargaining power." Post, at 6. Such a limitation appears nowhere in the text of the
FAA and has been explicitly rejected by
our cases. "Relationships between securities dealers and investors, for example, may
involve unequal bargaining power, but we
fhave] nevertheless held ... that agreements
arbitrate in that context are enforceable." Gilmer v, Interslate/Johnson Lane
Corp., 500 U.S. 20, 33, 111 S.Ct. 1647,

to

26 (1991); see also id., at
S.Ct. 1647 (allowing arbitra-

I 14 L.Ed.2d

32-33, lll

tion of claims arising under the Age Discrimination in Employment Act of 1967
despite allegations of unequal bargaining

power between employers and employees).
Of course the dissent's disquisition on legislative history fails to note that it contains nothing-not even the testimony of a
stray witness in committee hearings-that
contemplates the existence of class arbitra-

tion.
California's Discover Bank rule similarly interferes with arbitration, Although the rule does not
require classwide arbitration, it allows any party to
a consumer contract to demand it ex post. The rule
is limited to adhesion contracts, Discover Bank,36
Cal.4th, at 162-163,30 Cat.Rptr,3d76,l l3 P,3d, at
1110, but the times in which consumer contracts
¡1e-r-e anything other than adhesive are long past,
tN6
Corbo¡ot v. H & R Block Tax Servs,, \nc.,372
F.3d 903, 906 (7th Cir.2004); see also Hill v. Gateway 2000, Inc., 105 F.3d 1147, ll49 (C.^,7 1991).
The rule also requires that damages be predictably
small, and that thé consumer allege a scheme to

cheat consumers. Discover Bank, supra, at
162-163,30 Cal,Rptr.3d76,l l3 P.3d, at I I10. The
former requirement, however, is toothless and malleable (the Ninth Ciicuit has held that damages of
$4,000 are sufficiently small, see Oestreicher v.
Alienware Corp., 322 Fed,Appx. 489, 492 (2009)
(unpublished)), and the latter has no limiting effect,
as all that is required is an allegation. Consumers
remain free to bring and resolve their disputes on a
bilateral basis under Discover Bank, and some may
well do so; but there is little incentive for lawyers
to arbitrate on behalf of individuals when they may
do so for a class and reap far higher fees in the process. And faced with inevitable class arbitration,
companies would have less incentive to continue
resolving potentially duplicative claims on an individual basis,

FN6. Of course States remain free to take
steps addressing the concerns that attend
contracts of adhesion-for example, requiring class-action-waiver provisions in
adhesive arbitration agreements to be highlighted. Such steps cannot, however, con-

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flict with the FAA or frustrate its purpose
to ensure that private arbitration agreements are enforced according to their
terms.

*10 Although we have had little occasion to
examine classwide arbitration, our decision in
Stolt-Nielsen is instructive. In that case we held
that an arbitration panel exceeded its power under $
lO(a)(a) of the FAA by imposing class procedures
based on policy judgments rather than the arbitration agreement itself or some background principle
of contract law that would affect its interpretation.
559 U.S., àt-,130 S.Ct. at 1773-11-76. We then
held that the agreement at issue, which was silent
on the question ofclass procedures, could not be in-

terpreted

to allow them

because

the

"changes

brought about by the shift from bilateral arbitration
to class-action arbitration" are "fundamental." Id.,
130 S.Ct. at 1776. This is obvious as a
ãt
structural matter: Classwide arbitration includes ab-,
sent parties, necessitating additional and different
procedures and involving higher stakes. Confidentialify becomes more difficult. And while it is theoretically possible to select an arbitrator with some

expertise relevant to the class-certification question, arbitrators are not generally knowledgeable in
the often-dominant procedural aspects of certification, such as the protection of absent parties. Thq
conclusion follows that class arbitration, to the extent it is manufactured by Discover Bank rathet
than consensual, is inconsistent with the FAA.

I l] First, the switch from bilateral to class arbitration sacrifices the principal advantage of arbitration-its informality-and makes the process
slower, more costly, and more likely to generate
procedural morass than final judgment. "In bilateral
arbitration, parties forgo the procedural rigor and
appellate review ofthe courts in order to realize the
benefits of private dispute resolution: lower costs,
greater efficiency and speed, and the ability to
choose expert adjudicators to resolve specialized
130 S.Ct. at l'175. But
disputes." 559 U.S., &t
may decide the merits of a
before an arbitrator -,

claim in classwide procedures, he must first decide,
for example, whether the class itself may be certified, whether the named parties are sufficiently representative and typical, and how discovery for the
class should be conducted. A cursory comparison

of

bilateral and class arbitration illustrates the difference. According to the American Arbitration Asso-

ciation (AAA), the average consumer arbitration
between January and Airgust 2007 resulted in a disposition on the merits in six months, four months if
the arbitration was conducted by documents only.
AAA, Analysis of the AAA's Consumer Arbitration

Caseload, online at http://www.adr.org/
si,asp?id:,5027 (all Internet materials as visited
Ãpr. 25, 201l, and available in'Clerk of Court's
case fîle). As of September 2009, the AAA had
opened 283 class arbitrations. Of those, l2l re-

mained active, and 162 had been settled, withdrawn, or dismissed, Not a single one, however,
had resulted in a final award on the merits. Brief for
AAA as Amicus Curiae in Stolt-Nielsen, O.T.2009,
No. 08-l 198, pp. 22-24. For those cases that were
no longer active, the median time from filing to set-

tlement, withdrawal, or dismissal-not judgment on
the merits-was-5_83 days, and the mean was 630
days.Id,, at z¿.FN7

FN7. The dissent claims that class arbitration should be compared to class litigation,

not bilateral arbitration. Post, at

6-7.
Whether arbitrating a class is more desirable than litigating one, however, is not
relevant. A State cannot defend a rule requiring arbitration-by-jury by saying that
parties will still prefer it to trial-by-jury.

*ll [2]

Second, class arbitration requires procedural formality, The AAA's rules governing class
arbitrations mimic the Federal Rules of Civil Procedure for class litigation. Compare AAA, Supplementary Rules for Class Arbitrations (effective Oct.

8, 2003), online at http://www.adr.org/

sp,asp?

id:21936, with Fed. Rule Civ. Proc. 23. And while
parties can alter those procedures by contract, an alternative is not obvious. If procedures are too in-

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formal, absent class members would not be bound
by the arbitration. For a class-action money judgment to bind absentees in litigation, class representatives must at all times adequately represent absent
class members, and absent members muSt be afforded notice, an opportunity to be heard, and a
right to opt out of the class. Phillíps Pelroleum Co.
v. shutts, 472 U.S. 797, 8ll-872, 105 S.Ct. 2965,
86 L.Ed.2d 628 (1985). At least this amount of pro-

cess would presumably

be required for

absent

parties to be bound by the results ofarbitration.

it

unlikely that in passing the FAA
Congress meant to leave the disposition of these
We find

procedural requirements to an arbitrator. Indeed,
class arbitration was not even envisioned by Con-

it passed the FAA in 1925; as the California Supreme Court admjtted in Discover Bank,
class arbitration is a "relatively recent development." 36 Cal.4th, at 163,30 Cal.Rptr.3d 76, 113
P.3d, at lll0. And it is at the very least odd to
think that an arbitrator would be entrusted with engress when

'suring that third parties' due process rights are satis-

fied.

*12 Third, class arbitration greatly increases
risks to defendants. Informal procedures do of
course have a cost: The absence of multilayered review makes it more likely that errors will go uncorreðted. Defendants are willing to accept the costs of
these errors in arbitration, since their impact is limited to the size of individual disputes, and presum-

ably outweighed by savings from avoiding

the
courts. But when damages allegedly owed to tens of
thousands ofpotential claimants aie aggregated and
decided at once, the risk of an error will often become unacceptable, Faced with even a small chance
of a devastating loss, defendants will be pressured
into settling questionable claims. Other courts have
noted the risk of "in terrorem" settlements that class
actions entail, seg, e.g., Kohen v, Pacific Inv. Man-

agement Co. LLC, 571 F.3d 672, 677-678 (C.4.7
2009), and class arbitration would be no different'

Arbitration is poorly suited to the higher stakes
of class litigation. In litigation, a defendant may ap-

peal

a certification

basis and,

decision on an interlocutory
if unsuccessful, may appeal from a final

judgment as well. Questions of law are teviewed de
novo and questions of fact for clear error. In contrast,9 U,S.C, $ 10 allows a court to vacate an arbitral award only wherc the award "was procured
by comrption, fraud, or undue means"; "there was
evident partiality or corruption in the arbitrators";
"the arbitrators were guilty of misconduct in refusing to postpone the hearing ...or in refirsing to hear

evidence pertinent and material to the controversy[,] or of any other misbehavior by which the
rights of any party have been prejudiced"; or if the
"arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award ... was not made." The AAA rules do authorize judicial review of certification decisions,
but this review is unlikely to have much effect given these limitations; review under $ l0 focuses on
misconduct rather than mistake. ¡{nd parties may
not contractually expand the grounds or nature of
judicial review. Hall Street Assocs,, 552 U.S., at
578,128 S.Ct. 1396. We find it hard to believe that
defendants would bet the company with no effective means of review, and even harder to believe
that Congress would have intgQ{¡:d to allow state
courts to force such a decision.FN8

FN8. The dissent cites three large arbitration awards (none of which stems from
classwide arbitration) as evidence that
parties are willing to submit large claims
before an arbitrator. Posl, at 7-8. Those
examples might be in point if it could be
established that the size of the arbitral dispute was predictable when the arbitration

all the
cases prove is that arbitrators can give
huge awards-which we have never
doubted, The point is that in class-action
arbitration huge awards (with limited judicial review) will be entirely predictable,
thus rendering arbitration unattractive. It is
agreement was entered. Otherwise,

not reasonably deniable that requiring consumer disputes to be arbitrated on a class-

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{r*t'

wide basis will have a substantial deterrent

Because it "stands as an obstacle to the accom-

effect on incentives to arbitrate.

parties may and sometimes do agree to aggregation,

class procedures are not necessarily incompatible

plishment and execution of the full purposes and
objectives of Congress," Hines v. Davidowítz, 312
u.s. 52, 67, 6l S,Ct. 399, 85 L.Ed. 581 (1941),
California's Discoyer Bank rule is preempted by the

[3]

The Concepcions contend that

because

with arbitration. But the same could be said about
procedures that the Concepcions admit States may
not superimpose on arbitration; Parties could agree

FAA. The judgment of the Ninth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

to arbitrate pursuant to the Federal Rules of Civil
Procedure, or pursuant to a discovery process rivaling that in litigation. Arbitration is a matter of contract, and the FAA requires courts to honor parties'

expectations. Rent-A-Center, West, 561 U.S., at
130 S.Ct.2772,2774. But what the parties in
the
-, aforementioned examples would have agreed to
is not arbitration as envisioned by the FAA, lacks
its benefits, and therefore may not be required by
state law.

*13 The dissent claims that class proceedings
are necessary to prosecute small-dollar claims that
might otherwise slip through the legal system. See
post, at 9, But States cannot require a procedure
that is inconsistent with the FAA, even if it is desirable for unrelated reasons. Moreover, the claim
here was most unlikely to go unresolved, As noted
earlier, the arbitration agreement provides that AT
& T will pay claimants a minimum of $7,500 and
twice their attorney's fees if they obtain an arbitration award greater than AT & T's last settlement offer. The District Court found this scheme sufftcient
to provide incentive for the individual prosecution
of meritorious claims that are not immediately
settled, and the Ninth Circuit admitted that aggrieved customers who filed claims would be
"essentially guarantee[d]" to be made whole, 584
F.3d, at 856, n, 9. Indeed, the District Court concluded that the Concepcions were betler off under
their arbitration agreement with AT & T than they
would have been as participants in a class action,
which "could take months, if not years, and which
may merely yield an opportunity to submit a claim
for recovery of a small percentage of a few dollarc;' Laster, 2008 V/L 5216255, aT * 12.

@

Il

is so ordered.

Justice THOMAS, concurring.
Section 2 of the Federal Arbitration Act (FAA)
provides that an arbitration provision "shall be val-

id, irrevocable, and

enforceable, save upon such
grounds as exist at law or in equity for the revoca-

tion of any contract." 9 U.S.C. $ 2. The question
here is whether California's Discover Bank rule, see
Discover Bank v. Superior Cl., 36 Cal.4th 148, 30

Cal.Rptr.3d

76, I l3 P.3d 1100 (2005), is

a

"groun[d] ,,. for the revocation ofany contract."

It would be absurd to suggest that $ 2 requires
only that a defense apply to "any contract," If $ 2
means anything, it is that courts cannot refuse to
enforce arbitration agreements because of a state
public policy against arbitration, even if the policy
nominally applies to "any contract." There must be
some additional limit on the contract defenses permitted by $ 2. Cf. ante, at 17 (opinion of the Court)
(state law may not require procedures that are "not
arbitration as envisioned by the FAA" and "lac[k]
its benefits"); post, at 5 (BREYER, J., dissenting)
(state law may require only procedures that are
"consistent with the use of arbitration").
*14 I write separately to explain how I would
flind that limit in the FAA's text. As I would read it,
the FAA requires that an agreement to arbitrate be
enforced unless a party successfully challenges the
formation of the arbitration agreement, such as by

proving fraud or duress. 9 U,S.C. $$ 2, 4. Under
this reading, I would reverse the Court of Appeals
because a district court cannot follow both the FAA
and the Discover Bank rule, which does not relate

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to defects in the making of an agreement.
This reading of the text, however, has not been

fully developed by any party, cf. Brief for Petitioner 41 , n. 12, and could benefit from briefing and ar-

gument in an appropriate case. Moreover, I think
that the Court's test will often lead to the same outcome as my textual interpretation and that, when
possible, it is important in interpreting statutes to
give lower courts guidance from a majority of the
Court. See US Airways, Inc, v. Barnett, 535 U.S.
39t, 4tt, t22 S.Ct. 1516, 152 L.Ed.2d 589 (2002)

(O'Connor, J., concurring). Therefore, although I
adhere to my views on purposes-and-objectives pre-

emption, see llyeth v. Levine,555 U,S, 555,
129 S.Ct. 1187, 173 L.Ed.2d 5l (2009) (opinion
-,

concurring

in judgment), I

reluctantly

join

the

Court's opinion.

I
The FAA generally requires courts to enforce

arbitration agreements

as written. Section 2

provides that "[a] written provision in ... a contract
... to settle by arbitration a controversy thereafter
arising out of such contract .,. shall be valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation ofairy
contract," Signihcantly, the statute does not parallel
the words "valid, irrevocable, and enforceable" by

referencing the grounds as exist for the
"invalidation, revocation, or nonenforcement" of
any contract. Nor does the statute use a different
word or phrase entirely that might arguably encom.
pass validity, revocability, and enforce-ability, The
use of only "revocation" and the conspicuous omission of "invalidation" and "nonsnforcement" suggest that the exception does not include all defenses
applicable to any contract but rather some subset of
those defenses. See Duncan v, lValker, 533 U.S.
167, t74, l2l S.Cr. 2t20, t50 L,Ed,2d 251 (2001)
("It is our duty to give effect, if possible, to every
clause and word of a statute" (intemal quotation
marks omitted)).
Concededly, the difference between revocability, on the one hand, and validity and enforceabil-

@

ity, on the other, is not obvious. The statute do€s
not define the terms, and their ordinary meanings
arguably overlap. Indeed, this Court and others
have referred to the concepts of revocability, validity, and enforceability interchangeably. But this

ambiguity alone cannot justify ignoring Congress'
clear decision in $ 2 to repeat only one of the three
concepts.

*15 To clarifu the meaning of $ 2, it would be
natural to look to other portions of the FAA. Statutory interpretation focuses on "the language itself,
the specific context in which that language is used,
and the broader context of the statute as a whole."
Robinson v. Shell Oil Co., 519 U.S. 337,341, ll7
S,Ct. 843, 136 L.Ed.2d 808 (1997). "A provision
that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme .,, because only one of the permissible moanings produces a substantive effect that is compatible with
the rest of the law," Uniled Sav. Assn. of Tex, v.
Timbers of Inwood Forest Associales, Ltd., 484

u.s, 365, 371, 108 S.Cr. 626, 98 L.Ed.2d
(

r

740

e88).

Examining the broader statutory scheme, $ 4
can be read to clarify the scope of $ 2's exception to

the enforcement of arbitration agreements. When a
party éeeks to enforce an arbitration agreement in
federal court, $ 4 requires that "upon being satisfied
that the making of the agreement for arbitration or
the failure to comply therewith is not in issue," the
court must order arbitration "in accordance with the
terms of the agreement."
Reading $$ 2 and 4 harmoniously, the "grounds
... for the revocation" preserved in $ 2 would mean
grounds related to the making of the agreement.
This would require enforcement of an agreement to
arbitrate unless a party successfully asserts a defense concerning the formation of the agreement to
arbitràte, such as fraud, duress, or mutual mistake,
See Prima Paint Corp. v. Flood & Conklin Mfg,
Co., 388 U.S. 395, 403404,87 S,Ct. 1801, 18
L.Ed.2d 1270 (1967) (interpreting $ 4 to permit
federal courts to adjudicate claims of "fraud in the

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inducement of the arbitration clause itself' because
such claims "g[o] to the 'making' of the agreement

Court said that fraud, duress, and unconscionability "may be applied to invalidate arbitration agreements without contravening $ 2." All three defenses historically concern the making of an agreement. See Morgan Stanley Capital
Group Inc. v. Publíc Util. Dist, No. I of
Snohomish Cty., 554 U.S. 527, 547 , 128

to arbitrate"). Contract defenses unrelated to the
making of the agreement-such as public
policy-could not be the b¡s,is for declining to
force an arbitration ,luur..FN*

en-

FN* The interpretation I suggest would

be

consistent with our precedent. Contract
formation is based on the consent of the

parties, and

we have emphasized

s.cr. 2733, t7t L.Ed.zd 607 (2008)
(describing fraud and duress as
"traditional grounds for the abrogation
of [a] contract" that speak to "unfair

that

"fa]rbitration under the Act is a matter of
consent." Voll Information Sciences, Inc. v.
Board of Truslees of Leland SlanÍord Junï
or Univ., 489 U.S, 468, 479, 109 S.Ct.
t248, t03 L.Ed.2d 488 (1989).

dealing at the contract formation stage");
v. United States, 132 U.S. 406,
4tt, 414, l0 s.cr. 134, 33 L.Ed. 393

Hume

(1889) (describing an unconscionable
contract as one "such as no man in his
senses and not under delusion would

The statement in Perry v. Thornas, 482

u.s. 483, 107 s.ct. 2520, 96 L,Ed.2d

make" and suggesting that there may be

426 (1987), suggesting that $ 2 preserves
all state-law defenses that "arose to govern issues concerning the validity, revoc-

"contracts so extortionate and unconscionable on their face as to raise the
presumption of fraud in their inception"

ability, and enforceability of contracts
generally," id,, at 493, n. 9, 107 S.Ct.

(internal quotation marks omitted)).

2520, is dicta. This statement is found in

a footnote conceming a claim that the
Court "decline[d] to address." Id,, at
493, n, 9, 107 S.Ct. 2520. Similarly, to
the extent that statements in
Renl-A-Center, lVes!, Inc, v, Jackson,
561 U.S.
n. l, 130 S,Ct.
2772,2778 n, I (2010), can be read to
-, suggest anything about the scope of

II
Under this reading, the question here would be
whether California's Discover Bank rule relates to
the making of an àgreement, I think it does not.

state-law defenses under $ 2, those statements are dicta, as well. This Court has
never addressed the questiori whether the
state-law "grounds" referred to in $ 2 are

narrower than those applicable

to

any

In

Díscover Bank,

36 Cal.4th 148,

30

Cal.Rptr.3d 76, l13 P.3d I100, the California Supreme Court held that "class action waivers are, under certain circumstances, unconscionable as unlawfully exculpatory." Id., at 65, 30 Cal,Rptr.3d76,

see also id., at l6l, 30
l13 P.3d, at I108 ("[C]lass action
Cal.Rptr.3d 76,
waivers [may be] substantively unconscionable
inasmuch as they may operate effectively as ex113 P.3d,

at lll2;

culpatory'contract clauses that are contrary to pub-

contract,

Moreover, every specific contract de-

lic policy"). The court

concluded that where

a

class-action waiver is found in an arbitration agree-

fense that the Court has acknowledged is

applicable under $ 2 relates to contract
formation. In Doctor's Associales, Inc, v.
Casarotto, 517 U.S. 681, 687, 116 S.Ct.
1652, 134 L.Ed,2d 902 (1996), this

ment

such waivers "should not be enforced." Id., at 163,
30 Cal.Rptr.3d 76, I 13 P.3d, at I I10. In practice,
the court explained, such agreements "operate to in-

in certain

consumer contracts

of

adhesion,

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(Cite as:

20ll \ryL 1561956

(U.S.))

sulate a parry from liability that otherwise would be

imposed under Califomia law," Id., at 16l, 30
Cal.Rptr.3d 76,113 P.3d, at I108, I109. The court
did not conclude that a customer would sign such
an agreement

only if

under the influence of fraud,

does not "stan[d] as an obstacle" to the Act's
"accomplishment and execution." Hines v. Davidowitz, 312 U.S. 52, 67, 6l S.Ct. 399, 85 L.Ed. 581
(1941). And the Court is wrong to hold that the federal Act pre-empts the rule of state law.

duress, or delusion.

I
The court's analysis and conclusion that the arbitration agreement was exculpatory reveals that
the Discover Bank rule does not concern the making of the arbitration agreement. Exculpatory contracts are a paradigmatic ex-ample of contracts that
will not be enforced because of public policy. l5 G.
Giesel, Corbin on Contracts $$ 85.1, 85.17, 85.18
(rev. ed.2003), Indeed, the court explained that it
would not enforce the agreements because they are
" 'against the policy of the law.' " 36 Cal. th, at
l6l, 30 Cal.Rptr.3d 76, ll3 P,3d, at I108 (quoting
Cal. Civ.Code Ann. $ 1668); see also 36 Cal.4th, at

166, 30 Cal.Rptr.3d 76,

I

l3 P,3d, at lll2

("Agreements to arbitrate may not be used to harbor terms, conditions and practices that undermine
public policy" (internal quotation marks omitted)).
Refusal to enforce a contract for public-policy reasons does not concern whether the contract was
properly made.

*16 Accordingly, the Discover,Bank rule is not

ofany contract" as
I would read $ 2 of the FAA in light of $ 4. Under
this reading, the FAA dictates that the arbitration
a "groun[d] ... for the revocation

agreement here be enforced and the Discover Bank
rule is pre-empted.

The Califomia law in question consists of an
authoritative state-couft interpretation of two provisions of the Califomia Civil Code, The first provision makes unlawful all contracts "which have for
their object, directly or in-directly, to exempt anyone from responsibility for his own ,,. violation of
law," Cal, Civ.Code Ann. $ 1668 (West 1985), The
second provision authorizes courts to

I

670.s(a).

The specific rule of state law in question consists of the California Supreme Court's application
of these principles to hold that "some" (but not
"all") "class action waivers" in consumer çontracts
are exculpatory and unconscionable under Califor-

nia "law." Discover Bank v, Superior Ct.,

dissenting.
The Federal Arbitration Act says that an arbitration agreement "shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law
or in equity for the revocation of any contracl." 9

U.S.C. $ 2 (emphasis added). California law sets
forth certain circumstances in which "class action
waivers" in any contract are unenforceable, In my
view, this rule of state law is consistent with the
federal Act's language and primary objective. It

36

Cal.4th 148, 160, 162,30 Cal.Rptr.3d 76, I l3 P.3d
I 100, I 108, I I l0 (2005). In particular, in Discover
Bank the California Supreme Court stated that,
when a class-action waiver
a consumer contract of adhesion in a
setting in which disputes between the contracting

"is found in

parties predictably involve small amounts of

it is alleged

that the party
with the superior bargaining power has carried
out a scheme to deliberately cheat large numbers
of consumers out of individually small sums of
money, then .., the waiver becomes in practice
the exemption of the party 'from responsibility
for [its] own fraud, or willf.ul injury to the person
or property of another.' " Id., at 162-163, 30
Cal.Rptr,3d 76,113 P.3d, at 1110.
damages, and when

Justice BREYER, with whom Justice GINSBURG,
Justice SOTOMAYOR, and Justice KAGAN join,

"limit the ap-

plication of any unconscionable clause" in a contract so "as to avoid any unconscionable result," $

*17 In such a circumstance, the "waivers

are

unconscionable under California law and should not

be enforced." Id., at 163, 30 Cal.Rptr.3d 76,

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(Cite as:2011 WL 1561956 (U.S.))

P.3d, at I110.

with the basic "purpose behind" the Act. Dean lVir
ter Reynolds Inc. v. Byrd, 470 U.S. 213, 219, 105

The Discover Bank rule does not create a
"blanket policy in California against class action
waivers in the consumer cóntext." Provencher v.
Dell, Inc., 409 F,Supp.2d 1196, l20l
(C.D,Cal.2006). Instead, it represents the
"application of a more general funconscionability]
principle." Gentry v. Superior Ct., 42 Cal.4th 443,

S,Ct. 1238, 84 L.Ed.2d 158 (1985). We have described that purpose as one of "ensur[ing] judicial
enforcement" of arbitration agreements. Ibid,; see
als9 Marine Transit Corp. v. Dreyfus, 284 U,S,

457, 64 Cal.Rptr.3d 773, 165 P.3d 556, 564 (2007).
Courts applying California law have enforced classaction waivers where they satisfy general unconscionability standards. See, e.g., Walnut Producers
of CaL v. Diamond Foods, Inc., 187 Cal.App.4th

ll4

Cal.Rptr,3d 449, 459462
(2010); Arguelles-Romero v. Superior Ct., 184
Cal.App.4th 825, 843-845, 109 Cal.Rptr.3d 289,
305-307 (2010); Smith v. Americredit Financial
Servs., 12c., No. 09cv1076, 2009 WL 4895280

634, 647-650,

(S.D.Cal., Dec.ll, 2009); cf. Provencher, supra, at
l20l (consideÅng Discover Bank in choice-of-law
inquiry). And even when they fail, the parties remain free to devise other dispute mechanisms, including informal mechanisms, that, in con-text, will
not prove unconscionable. See Voh Information
Sciences, Inc.. v, Board of Trustees of Leland Stan-

ford Junior Univ,, 489 U.S. 468, 479, 109 S.Ct.
t248,103 L.Ed.zd 488 (1989).

II
A
The Discover Bank rule is consistent with the
federal Act's language. It "applies equally to class
action litigation waivers in contracts without arbitration agreements as it does to class arbitration
waivers in contracts with such agreements." 36
Cal.4th, at 165=166,30 Cal.Rptr.3d76,I l3 P.3d, at
I I12. Linguistically speaking, it falls directly within the scope of the Act's exception permitting courts

refuse to enforce arbitration agreements on
grounds that exist "for the revocation of any contract;' 9 U.S.C. $ 2 (emphasis added). The majority
agrees. Anle, at9,

to

B

*18 The Discover Bank rule is also consistent

@ 201

I Thomson

4, n. 2, 52 S.Ct. I 66, 7 6 L.Ed. 282 (1932) ("
'The purpose of this bill is to make valid and enforceable agreements for arbitration' " (quoting
H.R.Rep. No. 96, 68th Cong., lst Sess., | (1924);

263,

27

emphasis added)); 65 Cong. Rec.l93l (1924) (ft
creates no new legislation, grants no new rights, except a remedy to enforce an agreement in commer-

cial contracts and in admiralty contracts"), As is
well known, prior to the federal Act, many courts
expressed hoétility to arbitration, for example by re-

fusing to order specific performance of agreements

to arbitrate. See S.Rep. No. 536, 68th Cong., lst
Sess., 2 (1924). The Act sought to eliminate that
hostility by placing agreements to arbitrate " 'upon
the same fooling as other contracls,' " Scherk v, Al-

berto-Culver Co., 417 U.S. 506, 511, 94 S.Ct.
2449, 4l L.Ed.2d 270 (1974) (quoting H.R.Rep.
No, 96, at 2; emphasis added).
Congress was

fully aware that arbitration could

provide procedural and cost advantages. The House
Report emphasized the "appropriate[ness]" of making arbitration agreements enforceable "at this time
when there is so much agitation against the costliness and delays of litigation." Id., at 2. And this
Court has acknowledged that parties may enter into
arbitration agreements in order to expedite the resolution of disputes. See Preslon v. Ferrer, 552 U.S.
346,357, 128 S.Cr. 978, 169 L.Ed.2d 917 (2008)
(discussing "prime objective of an agreement to arbitrate"). See also Mitsubishi Molors Corp, v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105
s.ct, 3346, 87 L.Ed,2d 444 (1985).

But we have also cautioned against thinking
that Congress' primary objective was to guarantee
these particular procedural advantages. Rather, that
primary objective was to secure the "enforcement"
of agreements to arbitrate. Dean Witter, 470 U.5.,

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105

e.g., Keating v. Superior Ct., 109 Cal.App.3d 784,

S.Ct. 1238 (we "reject the suggestion that the overriding goal of the Arbitration Act was to promote
the expeditious resolution of claims"); id., at 219,
217-218, 105 S.Ct. 1238 ("[T]he intent of Congress" requires us to apply the terms of the Act
without regard to whether the result would be
"possibly inefficient"); cf. id., at 220, 105 S.Ct.
1238 (acknowledging that "expedited resolution of
disputes" might lead parties to prefer arbitration),

167 Cal.Rptr. 481, 492 (1980) (officially depublished); American Arbitration Association (AAA),
Supplementary Rules for Class Arbitrations (2003),
http://www.adr.org/sp.asp?id:21936 (as visited
Apr. 25, 2077, and available in Clerk of Court's
case file); JAMS, The Resolution Experts, Class
Action Procedures (2009). Indeed, the AAA has
told us that it has found class arbitration to be "a

The relevant Senate Report points to the Act's basic
purpose when it says that "[t]he purpose of the
[Act] is clearly set forth in seclion 2, " S,Rep. No.
536, at 2 (emphasis added), namely, the section that
says that an arbitration agreement "shall be valid,

class disputes," Brief for AAA as Amicus Curiae in
Stolt-Nielsen S.A. v. AnimalFeeds Inl'l Corp.,
O,T.2009, No. 08-1198, p, 25 (hereinafter AAA

at 221, 105 S.Ct. 1238. See also id., at 219,

irrevocable, and enforceable, save upon

such

grounds as exist at law or in equity for the revocation of any contract," 9 U.S.C. $ 2.

fair, balanced, and efficient means of resolving

Amicus Brief). And unlike the majority's examples,
the Discover Bank rule imposes equivalent limitations on litigation; hence it cannot fairly be characterized as a targeted attack on arbitration.

Thus, insofar as we seek to implement Congress' intent, we should think more than twice before invalidating a state law that does just what $ 2

Where does the majority get its contrary
idea-that individual, rather than class, arbitration
is a "fundamental attribut[e]" of arbitration? Ante,
at 9, The majority does not explain. And it is un-

requires, namely, puts agreements to arbitrate and
agreements to litigate "upon the same footing."

likely to be able to trace its present view to the history ofthe arbitration statute itself.

When Congress enacted the Act, arbitration

III
*19 The majority's contrary view (that Discover Bank stands as an "obstacle" to the accomplishment of the federal law's objective, ante, at 9-18)
rests primarily upon its claims that the Discover
Bank rule increases the complexity of arbitration
procedures, thereby discouraging parties from entering into arbitration agreements, and to that extent
discriminating in practice against arbitration. These
claims are not well founded.

For one thing, a state rule of law that would
sometimes set aside as unconscionable a contract
term that forbids class arbitrdtion is not (as the ma-

jority claims) like a rule that would

require

"ultimate disposition by a jury" or "judicially monitored discovery" or use of "the Fçderal Rules of
Evidence." Anle, at 8, 9. Unlike the majority's examples, class arbitration is consistent with the use
of arbitration. It is a form of arbitration that is well
known in Califomia and followed elsewhere. See,

@

procedures had not yet been fully developed. Insofar as Congress considered detailed forms of arbitration at all, it may well have thought that arbitration would be used primarily where merchants
sought to resolve disputes of fact, not law, under
the customs of their industries, where the parties
possessed roughly equivalent bargaining power.
See Mitsubishi Motors, supra,

at 646, 105

S,Ct.

3346 (Stevens, J., dissenting); Joint Hearings on S.
1005 and H,R. 646 before the Subcommittees of the
Committees on the Judiciary, 68th Cong., lst Sess.,
15 (1924); Hearing on S. 4213 andS.4214 before a
Subcommittee of the Senate Committee on the Judiciary, 67th Cong., 4th Sess., 9-10 (1923); Dept.
of Commerce, Secretary Hoover Favors Arbitra-

tion-Press Release (Dec. 28, 1925),

Herbert

Hoover Papers-Articles, Addresses, and Public
Statements File-No. 536, p. 2 (Herbert Hoover
Presidential Library); Cohen & Dayton, The New

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(Cite as:2011 WL 1561956 (U.S.))

Federal Arbitration Law, 12 Va. L.Rev. 265,281
(1926); AAA, Year Book on Commercial Arbitration in the United States (1927). This last mentioned feature of the history-roughly equivalent
bargaining power-suggests, if anything, that California's statute is consistent with, and indeed may
help to further, the objectives that Congress had in
mind.

courts), And a single class proceeding is surely
more efficient than thousands of separate proceedings for identical claims. Thus, if speedy resolution
of disputes were all that mattered, then the Discover Bank rule would reinforce, not obstruct, that objective of the Act.

Regardless, if neither the history nor present
practice suggests that class arbitration is fundamentally incompatible with arbitration itself, then
on what basis can the majority hold California's law

The majority's related claim that the Discover
Bank rule will discourage the use of arbitration because "[a]rbitration is poorly suited to .,. higher
stakes" lacks empirical support. Ante, at 16. Indeed,
the majority provides no convincing reason to believe that parties are unwilling to submit high-stake

pre-empted?

disputes

*20 For another thing, the majority's argument

will discourage arbitration rests critically upon the \Mrong comparison.
that the Discover Bankrule

The majority compares the complexity of class arbitration with that of bilateral arbitration. See ante,
at 14. And it finds the former more complex. See
ibid. But, if incentives are at issue, the relevanl
comparison is not "arbitration with arbitration" but
a comparison between class arbitration and judicial
class actions, After all, in respect to the relevant set
of contracts, the Discover Bank rule similarly and
equally sets aside clauses that forbid class procedures-whether arbitration procedures or ordinary

judicial procedures

less time than in-court proceedings in which class

is

sought. Compare ante,

at

14

(providing statistics for class arbitration), with Judicial Council of California, Administrative Office of

the Courts, Class Certification in

California:

Second Interim Report from the Study of California
Class Action Litigation l8 (2010) (providing stat-

istics for class-action litigation in

@

arbitration. And there are numerous

Wall Street Journal, Nov. 30, 2010, p.Bl0
(describing initiation of an arbitration in which thç
payout "could be higher" than Sl.5 billion);

Markoff, Software Arbitration Ruling Gives I.B.M,
$833 Million From Fujitsu, N,Y. Times, Nov. 30,

Al

(describing both companies as "pleased
with the ruling" resolving a licensing dispute).
1988, p.

Further, even though contract defenses,

e.g.,

duress and unconscionability, slow down the dispute resolution process, federal arbitration law nor-

are at issue.

V/hy would a typical defendant (say, a business) prefer a judicial class action to class arbitration? AAA statistics "suggest that class arbitration
proceedings take more time than the average commercial arbitration, but may take /ess time than the
average class action in court." AAA Amicus Brief
24 (emphasis added). Data from California courts
confirm that class arbitrations can take considerably

certification

to

counterexamples. Loffus, Rivals Resolve Dispute
Over Drug, Wall Street Joumal, Apr. 16, 2011, p,
B2 (discússing $500 million settlement in dispute
submitted to arbitration); Ziobro, Kraft Seeks Arbitration In Fight With Starbucks Over Distribution,

mally leaves such matters to the

States.

Rent-A-Center, ll'est, Inc. v. Jackson, 561 U.S,

_,

_s

130 s.ct.2772,2775

(2010)

(arbitration agreements "may be invalidated by
'generally applicable contract defenses'

"

(quoting

Doclor's Associates, Inc. v. Casarotto, 517 U.S.

681, 687, l16 S.Cr. t652, t34 L.Ed.zd 902
(1996)). A provision in a contract ofadhesion (for
example, requiring a consumer to decide very
quickly whether to pursue a claim) might increase
the speed and efficiency ofarbitrating a dispute, but
the State can forbid it. See, e.g., Hayes v. Oakridge
Home, 122 Ohio St.3d 63, 67,2009-Ohio-2054, tf

19, 908 N.E.2d 408, 412 ("Unconscionability is

ground

for

revocation

a

of an arbitration agree-

California

2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

23

Page 21

--- S.Ct. ----,201I WL 1561956 (U.S.), I I Cal. Daily Op. 5ew,4842,201I Daily JoumalD.A.R. 5846
(Cite as:2011 WL 1561956 (U.S.))

ment"); In re Poly-America, L. P,, 262 S.W.3d 337,

348 (Tex.2008) ("Unconscionable contracts,
however-whether relating to arbitration or
not-are unenforceable under Texas law"), The
Discover Bank rule amounts to a variation on this
theme. California is free to define unconscionabil-

ity

as

it

sees

fït, and its common law is of no feder-

al concern so long as the State does not adopt a special rule that disfavors arbitration. Cf. Doctor's As-

sociales, supra, at 687. See also ante, at 4, n.
(THOMAS, J., concurring) (suggesting that, under
certain circumstances, California might remain free
to apply its unconscionability doctrine).

*21 Because California applies the same legal
principles to address the unconscionability of class
arbitration waivers as it does to address the unconscionability of any other contractual provision, the
merits of class proceedings should not factor into
our decision. If California had applied its law of
duress to void an arbitration agreement, would it
matter if the procedures in the coerced agreement
were efficient?
Regardless, the majority highlights the disadvantages of class arbitrationS; as it sees them. See
qnte, at l5-16 (refening to the "greatly increasefd]
risks to defendants"; the "chance of a devastating
loss" pressuring defendants "into settling questionable claims"). But class proceedings have countervailing advantages, In general agreements that forbid the consolidation of claims can lead small-dollar claimants to abandon their claims rather than to
litigate. I suspect that it is true even here, for as the
Court of Appeals recognized, AT & T can avoid the
$7,500 payout (the payout"that supposedly makes
the Concepcions' arbitration worthwhile) simply by
paying the claim's face value, such that "the maximum gain to a customer for the hassle of arbitrating a $30.22 dispute is still just $30.22." Laster v.

& T Mobílíty LLC, 584 F,3d 849, 855,
(c,A.9 2009).

AT

856

What rational lawyer would have signed on to
represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim? See,

@

e.g., Carnegie v. Hpusehold Int'\, Inc., 376 F.3d
656, 661 (C.A.7 2004) ("The realistic alternative to
a class action is not l7 million individual suits, but
zero individual suits, as only a lunatic or a fanatic
sues for $30"). In California's perfectly rational
view, nonclass arbitration over such sums will also
sometimes have the effect of depriving claimants of
their claims (say, for example, where claiming the
$30.22 were to'involve hlling out many forms that
require technical legal knowledge or waiting at
great length while a call is placed on hold). Discover Bank sets fofth circumstances in which the California courts believe that the terms of consumer
oontracts can be manipulated to insulate an agreement's author from liability for its own frauds by

"deliberately cheat[ing] large numbers of consumers out of individually small sums of money."

36 Cal.4th, at 162-163, 30 Cal.Rptr.3d 76, ll3
P,3d, at 1l10. Why is this kind of decision-weighing the pros and cons of all
ceedings

class pro-

alike-not Califomia's to make?

*22 Finally, the majority can find no meaningful support for its views in this Court's precedent.
The federal Act has been in force for nearly a century. We have decided dozens of cases about its requirements; We have reached results that authorize

complex arbitration procedures. 8.g., Milsubishi
Motors, 473 U,S., at 629, 105 S,Ct. 3346 (antitrust
claims arising in intemational transaction are arbit-

rable). We have upheld nondiscriminatory

state

laws that slow down arbitration proceedings. 8.g,,

Volt Information Sciences, 489 U.S., at 477479,
109 S.Ct. 1248 (California law staying arbitration
proceedings until completion of related litigation is
not pre-empted). But we have not, to my knowledge, applied the Act to strike down a statè statute
that treats arbitrations on par with judicial and administrative proceedings. Cf. Preslon, 552 U.S., at
355-356, 128 S.Ct. 978 (Actt pre-empts state law
that vests primary jurisdiction in state administrative board).

At the same time, we have repeatedly refened
to the Act's basic objective as assuring that

20l l Thomson Reuters. No Claim to Orig. US Gov. Works.

courts

24

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--- S.Ct. ----,201I WL 1561956 (U.S.), I I Cal. Daily Op. Serv. 4842,201I Daily Joumal D.A.R. 5846
(Cite as:2011WL 1561956 (U.S.))

treat arbitration agreements "like

all other

con-

tracts." Buckeye Check Cashing, Inc. v. Cardegna,
546 U.S. 440,447, 126 S.Ct. t204, t63 L.Ed.zd
1038 (2006). See also, e.g,, Vaden v, Discover

Bank, 556 U.S.

129 S,Ct.

1262,

1273-1274, 173 L.8d.2d 206 (2009);; Doctor's As-

sociales, supra,

-t
-¡
at 687, I l6 S.Ct.

1652: Allied-Bruce Terminix Cos. v, Dobson,5l3 U,S. 265,
28t, I l5 S.Ct. 834, 130 L.Ed.zd 753 (t995);
Rodriguez de Quijas v. Shearson/American Express, (nc.,490 U.S, 477,483484, 109 S.Ct, 1917,
104 L.Ed.2d 526 (1989); Perry v. Thomas,482 U,S.
483, 492493, n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426
(1987); Mitsubishi Motors, lupra, at 627,105 S.Ct.
3346. And we have recognized that "[t]o immunize
an arbitration agreement from judicial challenge"
on grounds applicable to all other contracts "would
be to elevate it over other forms of contract." Prima
Paint Corp. v. Flood & Conklín Mfg. Co,,388 U.S.
395, 404, n. 12, 87 S,Ct. 1801, 18 L.Ed.2d 1270
(1967); see also Marchant v. Mead-Morrison Mfg.
Co.,252 N,Y. 284, 299,169 N.E. 386, 391 (1929)
(Cardozo, C,J.) ("Courts are not at liberty to shirk
the process of fcontractual] construction undèr the
empire of a belief that arbitration is beneficent any
more than they may shirk it if their belief happens

formed the nature of this Nation's laws. We have
often expressed this idea in opinions that set forth
presumptions. See, e.g., Medtronic, Inc. v, Lohr,
518 U.S. 470, 485, l16 S.Cr. 2240, 135 L.Bd.2d
700 (1996) ("[B]ecause the States are independent
sovereigns in our federal system, we have long presumed that Congress does not cavalierly pre-empt
state-law causes of action"). But federalism is as
much a question of deeds as words. It often takes
the form of a concrete decision by this Court that
respects the legitimacy of a State's action in an indi'
vidual case. Here, recognition of that federalist
ideal, embodied in specific language in this particu-

lar statute, should lead us to uphold California's
law, not to strike it down. We do not honor federalist principles in their breach,

With respect, I dissent.
u.s.,201

l.

AT&T Mobility LLC v. Concepcion
--- S.Ct. ----,2011 WL 1561956 (U.S.), ll Cal.
Daily Op. Serv. 4842, 201I Daily Journal D.A.R.
5846

END OF DOCUMENT

to be the contrary"); Cohen & Dayton, 12 Ya.
L,Rev., at 276 (the Act "is no infringement upon
the right ofeach State to decide for itselfwhat contracts shall or shall not exist under its laws").
These cases do not concern the merits and demerits of class actions; they concern equal treatment of arbitration contracts and other contracts.
Since it is the latter question that is at issue here, I
am not surprised that the majority can find no

meaningful precedent supporting its decision.

IV

*23 By using the words "save upon

such

grounds as exist at law or in equity for the revocation of any contract," Congress retained for the
States an important role incident to agreements to
arbitrate, 9 U.S.C. $ 2. Through those words Congress reiterated a basic federal idea that has long in-

@ 201

I Thomson Reuters, No Claim to Orig, US Gov. Works.

25

CERTIFICATE OF SERVICE

I

I am employed in Los Angeles County, California. I am over the age of eighteen

2

years

My business address is 350 South Grand Avenue,

J

and not aparty to the within-entitled action.

4

25th Floor, Los Angeles, California 90071-1503. On May 11,2011, the following documents

5

were served electronically via the CM/ECF system:

JOINT STATUS REPORT REGARDING U.S. SUPREME COURT'S RECENT
DECISION IN AT&T MOBILITY LLC V. CONCEPCION

6
7

I further certify that I mailed the foregoing document in a sealed envelope with postage

8

thereon fully prepaid, in the United States mail at Los Angeles, California addressed as set forth
9

below:
10

1l
t2

l3
t4

Aaron P. Davis
Barry L. Davis
Daniel R. Lever
THORNTON DAVIS & FEIN, P.A.
80 SV/ Eighth Street
Miami, FL 33130
Telephone: [phone]

I am readily familiar with the frrm's practice of collection

15

and processing correspondence

t6

for mailing. Under that practice the envelopes would be deposited with the U.S, Postal Service

t7

on that same day with postage thereon

fully prepaid in the ordinary course of business. I am

if postal cancellation

18

aware that on motion of the party served, service is presumed invalid

19

or postage meter date is more than one day after date of deposit for mailing in affidavit.

I declare that I am employed in the office of

20

2l

date

a member of the bar of this court at whose

direction the service was made.

I declare under penalty of perjury under the laws of the State of California that the above

22
23

is true and correct.

24

Executed on May 11,2011, at Los Angeles, California.

25
S

26

Hernandez

27
28
1

CERTIFICATE OF SERVICE ; CASE NO. CVI l-00409 CRB
70000 I 25 I