The recent Supreme Court decision in AT&T v. Concepcion put a new restriction on the ability of consumers to pursue small-value claims against corporations with which they sign a contract containing a mandatory arbitration clause. Mandatory arbitration clauses, commonly used by the mobile telephone industry, are inserted into user contracts and require that claimants pursue arbitration rather than lawsuits to resolve disputes. These clauses effectively eliminate the ability of consumers to pursue class-action lawsuits. Because class-action suits are often the only efficient means of pursuing dispute resolution for small value claimants, these clauses serve to deter small-value claimants from seeking any redress. In Concepcion, the Supreme Court struck down a line of California cases that liberally voided mandatory arbitration clauses which were deemed to be “unconscionable.” The Court reasoned that the state-based evaluation of arbitration clauses was preempted by the federal policy promoting arbitration, as expressed by the Federal Arbitration Act. This Note addresses the concern that the strict holding of Concepcion may result in mandatory arbitration clauses deterring dispute resolution altogether, allowing corporations to go unchallenged. In analyzing the effect of this decision, the Note explores the Federal Arbitration Act and class actions waivers generally, evaluating their economic efficiency and deterrent value. Arguing that mandatory arbitration is actually less efficient than class-action suits while failing to deter illicit corporate behavior, the Note concludes that courts should re-examine how they evaluate these clauses in light of a goal of deterrence. The Note further argues that Congress should amend the Federal Arbitration Act to protect arbitration as an efficient remedy, while also allowing more class-action suits to deter unfair corporate behavior.
The full text of this Note is available to download as a PDF.