INTRODUCTION AND SUMMARY OF ARGUMENT
The Ninth Circuit's ruling is the latest in a growing line that invalidates class-action-waiver clauses in arbitration agreements as "unconscionable" under California law. See, e.g., Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976 (9th Cir. 2007); Discover Bank v. Super. Ct., 113 P.3d 1100 (Cal.
2005). The cases in this line all rest on a new conception of unconscionability, one that grants courts the power to strike down contracts because of a perceived injustice to non-parties, even when the agreements are unquestionably equitable as between the parties themselves. As the Ninth Circuit's latest ruling demonstrates, California's new conception of unconscionability doctrine even extends to invalidate contracts (like AT&T Mobility's arbitration agreement) that incontrovertibly favor the party with less bargaining power.
This approach to unconscionability does not comport with the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., which requires that arbitration agreements be enforced according to their terms. A court may disregard or invalidate an arbitration agreement only if the agreement could be revoked "upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Ninth Circuit's decisions in this area have put it at odds with the Supremacy Clause and, unsurprisingly, with many federal and state courts. Of more practical concern, manipulating the unconscionability doctrine to invalidate class-action waivers threatens to rob companies and consumers alike of the benefits of arbitration that the FAA was intended to safeguard and promote.
I. Given the consequences of the Ninth Circuit's ruling, this Court need not and should not await further disagreement among courts to address the power of the States to invalidate class-action waivers in arbitration agreements. Individual arbitration serves the needs of consumers in a way that class actions cannot. If even one jurisdiction--especially a jurisdiction as large as California--invalidates individual arbitration agreements simply because they are individual arbitration agreements, the costs to consumers of goods and services will increase, while their ability to obtain full and speedy redress for their injuries will decrease. Companies, for their part, will lose the certainty and efficiency that comes with having a single set of rules applicable to disputes with all consumers. Because of the extremely pro-consumer terms of the AT&T Mobility arbitration agreement at issue in this dispute, this case presents an ideal starting point for the Court in this area; it can rule on the preemptive effect of the FAA without the need to test the limits of how far state law may go in invalidating contracts less favorable to the party claiming "unconscionability."
II. The Ninth Circuit's decision and the California decisions it follows conflict with the FAA. The particular brand of unconscionability the California courts have crafted for arbitration agreements with class-action waivers is not the sort the FAA respects.
The Court should grant certiorari to correct the Ninth Circuit's misunderstanding of Section 2 of the FAA.