AT&T Mobility LLC v. Concepcion
Citation and Court
563 U.S. 333 (2011), Supreme Court of the United States
Facts
The Concepcions entered a wireless contract with AT&T Mobility containing an arbitration clause and a class arbitration waiver. When they alleged AT&T had committed fraud, they sought to pursue a class action. California courts held the class arbitration waiver unconscionable under California law. AT&T argued the FAA preempted California’s rule.
Issue
Whether the Federal Arbitration Act preempts California’s rule that class arbitration waivers in consumer contracts are unconscionable and therefore unenforceable.
Holding
The FAA preempts California’s Discover Bank rule barring class arbitration waivers; state rules that disproportionately disfavor arbitration — even when framed as general contract doctrines — are preempted by the FAA.
Rule / Doctrine
The FAA reflects a strong national policy favoring arbitration agreements and preempts state law rules that “stand as an obstacle” to the enforcement of arbitration agreements according to their terms. A state unconscionability rule that effectively bars class waivers in arbitration agreements is preempted, even if framed neutrally, because it places arbitration on unequal footing with other contracts.
Significance
Concepcion dramatically expanded the enforceability of class arbitration waivers in consumer and employment contracts, triggering a wave of litigation over FAA preemption of state law. It is now a foundational case for both arbitration law and the conflict between federal preemption and state consumer protection policy.