JURIST - Paper Chase: Supreme Court rules federal arbitration law preempts state law

[JURIST] The US Supreme Court [official website; JURIST news archive] on Wednesday ruled [opinion, PDF] 5-4 in AT&T v. Concepcion [Cornell LII backgrounder; JURIST report] that the Federal Arbitration Act (FAA) [text], which provides for judicial facilitation of private dispute resolution through arbitration when the transaction involves interstate commerce, preempts states from enforcing alternate solutions when arbitration clauses are considered unconscionable. The US Court of Appeals for the Ninth Circuit held [opinion, PDF] that the FAA does not preempt a California unconscionability law, which allowed a class action against AT&T mobile despite a contractual clause prohibiting such proceedings. Reversing the Ninth Circuit, Justice Antonin Scalia wrote for the majority that, "[s]tates cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons." Justice Clarence Thomas filed a concurring opinion. Justice Stephen Breyer filed a dissent.

In 2002, Vincent and Liza Concepcion purchased a discounted cellular telephone from AT&T and later accused the company of false advertising and fraud upon discovery that they had been charged sales tax on the device's full value. Despite an arbitration clause in their service contract, the couple brought a federal class action suit against the company. Counsel for the Concepcions urged the Supreme Court to uphold the lower court rulings, arguing, in part, that the California law is valid because it "[ensures] that arbitration is a matter of consent and not coercion, and that it represents merely a choice of forum, but not an exemption from the law."