August 22, 2012

Consumers and businesses may agree to resolve disputes in individual arbitration, even in Massachusetts

By Deborah J. La Fetra Senior Attorney

In 2011, the United States Supreme Court held in AT&T Mobility v. Concepcion that states could not invoke “public policy” or “unconscionability” as a reason to invalidate arbitration agreements that contain a class action waiver.  The Federal Arbitration Act demands that arbitration agreements be considered the same as any other type of contract.  As a result, state laws and policies – whether enacted by a legislature, or created by courts as part of the common law – can invalidate arbitration agreements only for the general reasons that can void any contract (for example, fraud).  And courts cannot force consumers and businesses into inefficient, expensive, and time-consuming class action procedures when they agreed to proceed on an individual basis.

The ripples of Concepcion are being felt across the country.  In Massachusetts, the Supreme Judicial Court is revisiting a case decided two years before Concepcion, Feeney v. Dellwhich invalidated a consumer contract that contained a class action waiver in the arbitration provision.  The court requested interested groups to file amicus briefs, and naturally PLF jumped at the opportunity.

With help from local counsel Donald R. Pinto, Jr., PLF’s amicus brief, filed yesterday, argues that the 2009 Feeney decision elevated certain public policy concerns codified in the state’s consumer protection law above the controlling federal arbitration statute and substantive federal common law of arbitration.  The key to the public policy discussion in Feeney was the focus on consumers banding together in class proceedings to vindicate small-dollar consumer claims.  But Concepcion declared that interest to be insufficient to overcome FAA preemption and thus cannot justify infringing the freedom of consumers and businesses to contract for alternative dispute resolution.

The court will hear oral argument in the case in October.

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