Lower Court Decisions Show that Concepcion’s Scope Remains Unresolved

Updating a prior post on the impact of the Concepcion decision, two recent lower court cases have demonstrated the limits of Concepcion’s reach and identify at least two particular claims that could render class-action waivers unenforceable: unconscionability and Magnuson-Moss Act claims.

Unconscionability Claims

As previously discussed, class-action plaintiffs have successfully invalidated class-action waiver clauses in consumer contracts under unconscionability claims. The lastest example comes from an Eastern District of California case.In Newton v. Clearwire Corp., a magistrate judge ruled that the Concepcion decision did not bar the plaintiff from invalidating class-action waivers under an unconscionability claim during discovery.The ruling allowed (limited) discovery over the objections of the defendant who argued for Concepcion preemption to compel arbitration, holding that “a contract term is unconscionable if it is the product of “oppression” or “surprise” due to unequal bargaining power of the parties and produces “overly harsh” or “one-sided results” and that [the plaintiff’s] pre-arbitration discovery requests have been narrowly tailored to seek only information related to results produced by the arbitration clause in question.”

Magnuson-Moss Act Claims

Another recent decision by lower courts have further limited (while complicating) the scope of Concepcion.In Kolev v. Euromotors West/The Auto Gallery, the Ninth Circuit upheld the validity of an FTC rule (pursuant to its rulemaking authority under the Magnuson-Moss Act) prohibiting judicial enforcement of mandatory arbitration provisions in warranty claims.The plaintiff in Kolev, who asserted claims for breach of warranty, contract, and unconscionabilty after a car she bought from a dealership developed mechanical problems, won on appeal to the Ninth Circuit after the district court granted the defendant’s motion to compel arbitration. According to Rebekah Kaufman and Alexei Klestoff of Morrison & Foerster, the Ninth Circuit’s decision “creates a circuit split” since the Fifth and Eleventh Circuits have “held that Magnuson-Moss does not bar mandatory arbitration agreements.”Kaufman and Klestoff predict that the Supreme Court will likely step in to resolve the lower court split.

Given the staggering percentage of Ninth Circuit cases under review in the current term (42%, according to Scotusblog.com), it would not be surprising to see the Court ruling on this issue relatively soon.

James Nguyen, Lower Court Decisions Shows that Concepcion’s Scope Remain Unresolved Berkeley Bus. L.J. Network (October 07, 2011),http://thenetwork.berkeleylawblogs.org/2011/10/07/lower-court-decisions-show-that-concepcion%e2%80%99s-scope-remains-unresolved