Marc J. Goldstein Arbitrator & Mediator NYC
July 15, 2011

Doubts Persist About Concepcion’s Bearing on Arbitrability of Federal Statutory Causes of Action

The Supreme Court’s decision in AT&T Mobility v. Concepcion may be narrowly conceived as a decision about pre-emption of State law by the Federal Arbitration Act (“FAA”).  If that view prevails, class arbitration may have continuing vitality, particularly in regard to federal statutory claims.


There are reasons to conceive of Concepcion as a case more about limitations on State power in arbitration and less about the problematic features of class arbitration.   Indeed, the question presented for decision in Concepcion, as stated by Justice Scalia in the majority opinion, was “[w] hether the FAA prohibits States from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures.”  But Justice Scalia’s pre-emption analysis relied in specific ways upon the proposition that a particular vision of arbitration – as a simple, streamlined, low-cost, informal procedure – was enacted into law via the FAA in 1925. The majority in Concepcion concluded that California’s rule treating as unconscionable agreements that prohibited class-wide proceedings, in many consumer adhesion contracts, “interferes with fundamental attributes of arbitration” that, according to the majority, have nearly the same status under the FAA as the words of the statute themselves.


Certainly the majority opinion does not go so far as to put these “attributes of arbitration” in parity, under the FAA, with the goal of enforcing arbitration agreements according to their terms.  Indeed the opinion readily concedes that an agreement to arbitrate under the Federal Rules of Civil Procedure and the Federal Rules of Evidence is enforceable under the FAA.


And yet it would be dangerous to assume that the Concepcion majority’s articulation of the FAA’s objectives is only transient and opportunistic, and that it has only a case-specific significance as the majority’s response to the Plaintiffs’ position that the California unconscionability rule applies equally to litigation and arbitration class action waivers. We are left to wonder whether the Court’s provocative (provoking the wrath of, inter alia, Justice Breyer and the three other Justices who joined his dissenting opinion) assertion that FAA is a policy prescription for a particular style of dispute resolution will factor in some future decisions of the Court when pre-emption of State law is not the issue.


An early test case could involve the Second Circuit’s decision in March 2011 in In re American Express Merchants Litigation, 634 F.3d 137 (2d Cir. Mar. 8, 2011) (herein, “Amex”).    Amex involves a proposed antitrust class action in court by a class consisting of merchants who accept American Express cards for payment by their customers.  The District Court granted Amex’s motion to compel arbitration despite the existence of a class action waiver.  The Second Circuit, in 2009, reversed.  The requirement to arbitrate antitrust claims individually and not collectively, the Court held, violated federal public policy as reflected in the Clayton Act’s provisions for private civil enforcement remedies, in this particular instance, because the record showed that the cost of individual antitrust litigation, in relation to the damages recoverable by the typical individual member of this proposed class, was so prohibitive that no claims were likely to be prosecuted and therefore Amex was effectively exempted from potential antitrust liability.  In re American Express Merchants Litigation, 554 F.3d 300 (2d Cir. 2009).  The Supreme Court granted certiorari, vacated the Second Circuit’s judgment, and remanded for reconsideration in light of the Supreme Court’s decision in the Stolt-Nielsen case.  The Second Circuit’s decision in March 2011, six weeks before Concepcion, found nothing in the Stolt-Nielsen decision that affected its earlier ruling.  Presently before the Second Circuit are letter briefs from the parties, filed in June, concerning the effect if any of Concepcion on the Court’s earlier decisions. And the docket reflects that Amex has obtained leave from the Supreme Court to postpone the filing of a petition for writ of certiorari until the Second Circuit has had opportunity to decide whether Concepcion warrants any change in its position.



While these developments are being awaited, a United States Magistrate Judge in the Southern District of New York, after taking submissions from the parties on the effect of Concepcion, last week found no reason to change his prior ruling – made one day after Concepcion and after an initial reading of it – denying a motion to compel arbitration made by Goldman Sachs in a gender discrimination class action. (Chen-Oster v. Goldman, Sachs & Co., 2011 WL 2671813 (S.D.N.Y. July 7, 2011), denying reconsideration of Chen-Oster v. Goldman, Sachs & Co., 2011 WL 1795297 (S.D.N.Y. April 28, 2011).  The District Court’s decisions in this case, unlike those of the Second Circuit in Amex, depend not on the economics of individual versus class proceedings, but on the substantive elements of the federal statutory cause of action. Under Title VII of the federal civil rights statute, an individual plaintiff (in litigation or arbitration) is prohibited from making the claim made in Chen-Oster — a “pattern and practice” discrimination claim.   The Magistrate Judge in Chen-Oster, while noting that his decision to deny enforcement of the arbitration clause is compelled by Amex as the controlling Second Circuit law, as Amex is not expressly overruled by Concepcion, nevertheless stated in dicta that, if the Second Circuit slate were clean, Concepcion would not dictate a change of course.  The Magistrate Judge conceived Concepcion as entirely having to do with the ability of State law to impose limitations on arbitrability under the FAA, and, further, as having to do with plaintiff’s right to proceed on a class rather than individual basis, not with plaintiff’s right to bring a claim at all. Said the Court: “This case demands consideration of a separate issue: whether the FAA’s objectives are also paramount when, as here, rights created by a competing federal statute are infringed by an agreement to arbitrate.”


Without more specific guidance from the Supreme Court, the Second Circuit would be hard-pressed to justify a reversal of its position in Amex.  The recovery of treble damages and legal fees by private parties in civil actions under the antitrust laws is a right conferred expressly by statute. As to the objectives of the FAA, streamlined proceedings and informality, to the extent they are legitimately considered to be objectives rather than collateral benefits, are at best secondary rather than primary goals that the 1925 Congress sought to achieve, even by the admission of the Concepcion majority. The Second Circuit, mindful that the history of US jurisprudence supporting the arbitrability of federal statutory claims has emphasized that there is generally no dilution of the substantive rights resulting from proceedings in an arbitral rather than judicial forum, and also mindful that the primacy of substantive federal statutory rights over federal solicitude for the arbitration clause dates back (at least) to the Supreme Court’s famous “Mitsubishi footnote” of 1985*, will have substantial reasons to conclude that the vindication-of-statutory-rights quarter of the arbitration class action waivers field is not altered by Concepcion.  The table would then be set for the Supreme Court to hear the Amex case, and in that context perhaps to reveal whether a majority of the Court will take seriously, beyond the State law pre-emption context, the Concepcion majority’s assertions that particular procedural attributes of arbitration beyond its consensual nature were enshrined into law by Congress when it passed the FAA in 1925.


* Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n. 19 (1985):  “We merely note that in the event the choice-of-forum and choice-of–law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies for antitrust violations, we would have little hesitation in condemning the agreement as against public policy.”


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