on Nov 10, 2010 at 3:38 pm
Arguing for the petitioner, AT&T Mobility, Andrew Pincus began by emphasizing that the plain language of Section 2 of the Federal Arbitration Act â€œis not limited to statutes that discriminate facially against arbitrationâ€; rather, because it refers to â€œany contract,â€ â€œthe rule must be applicable to contracts generally.â€ Pincus immediately faced questions from Justices Scalia and Sotomayor about state-law unconscionability doctrines and scenarios in which such doctrines might run afoul of Section 2. And although Pincus countered that the â€œcritical questionâ€ was whether the state is â€œapplying the same principles . . . of unconscionability to arbitration agreements  as to other agreementsâ€ â€“ which, he contended, California had not done in the arbitration context â€“ that assertion met with skepticism from several Justices: Justice Scalia asked Pincus whether the Court would be required â€œto tell the State of California what it has to consider unconscionableâ€; Justice Ginsburg observed that AT&T Mobility did not â€œhave anything that says â€“ the California court hasnâ€™t said: We are applying a special definition of unconscionability to arbitration agreementsâ€; and Justice Kagan noted that the Discover Bank rule on which the lower court relied â€œapplied both in the arbitration sphere and in the litigation sphere.â€ Pincus repeatedly emphasized, however, that â€œthe principles that were applied in order to find unconscionability here . . . are different than the principles applied in every other contextâ€ â€“ for example, the court considered whether the contract was unconscionable at the time that the dispute arose, rather than at the time of contracting, and it looked to the effect on people other than the parties to the dispute.
The Court next sought to flesh out the contours of the rule that AT&T Mobility would have it adopt: if a prohibition on class arbitrations was not unconscionable, what would be? Pincus again reiterated that the determination of which procedures were or were not unconscionable should be made using a stateâ€™s generally applicable unconscionability doctrine, which was not at issue here. And he again emphasized that neither AT&T nor the Concepcions had identified other unconscionability cases, outside the arbitration context, that looked at the effect on non-parties, at whether a provision was unconscionable at the time of the dispute, or at whether something was the equivalent of a statutory procedure. â€œThere are none. And thatâ€™s the problem,â€ Pincus concluded.
Representing the Concepcions, Deepak Gupta disputed Pincusâ€™s assertion that the California courts, under the Discover Bank rule, looked at the fairness of the contract as of the time of the dispute. Rather, he explained, the question was not whether the contract was fair to the Concepcions â€œonce they have chosen to make a claimâ€; rather, the question is â€œwhether itâ€™s fair to any AT&T customerâ€ â€“ which, he contended, it was not.
Justice Sotomayor pressed Gupta to explain how he would distinguish â€œbetween facially neutral contract law defenses that implicitly discriminate against arbitration and those that do not.â€ Gupta described the inquiry as an â€œobjective determination. You would see whether the State court is telling the truth. Is this law really being applied in the same way in the arbitration context and outside of the arbitration context.â€ After the Chief Justice balked at Guptaâ€™s efforts to draw an analogy with the independent and adequate State ground context, Gupta then explained that, in addition to the question whether a state was discriminating against arbitration,â€ there were additional limiting principles to apply, such as whether the rule is â€œtantamount to a rule of non-enforceability of arbitration agreements.â€ In conclusion, Gupta again emphasized that California â€œhas made a judgment that if you preclude class-wide relief, that will . . . gut the Stateâ€™s substantive consumer protection laws, because people will â€“ in the context of small frauds not be able to bring those cases.â€