Concepcion is the culmination of twenty-five years of Supreme Court arbitration jurisprudence that has turned the FAA into a do-it-yourself tort reform statute. By adding an arbitration clause, a would-be defendant can do away with juries, with pesky discovery into its documents or employees’ testimony, and, now, with class actions. It is a case study in broad-ranging common-lawmaking based on the thinnest of legislative foundations. As now retired Justice O’Connor put it, concurring in Allied Bruce Terminix v. Dobson, “the Court has abandoned all pretense of ascertaining congressional intent with respect to the Federal Arbitration Act, building instead, case by case, an edifice of its own creation.”
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Increasingly since the early 1980s, the Supreme Court has made arbitration agreements into supercontracts. A “normal” contract is subject to the hornbook principle that contract terms exempting the drafting party from its own intentional wrongs are void as against public policy. An adhesion contract term stating that “no class action may be brought against Company” would probably be held void as against public policy, or as an illegal exculpatory clause, or unconscionable by virtually every court in the country. But the U.S. Supreme Court now upholds a clause accomplishing this very thing; it need only be done using the vehicle of an arbitration clause.
Merry Christmas, general counsel. Now get busy amending those contracts!
Sunday, I got an email from Sony that informed me of new terms of service that I would be required to agree to if I wanted to continue watching Netflix on my PS3:
In particular, please review Section 15 of the TOS, which now includes a class action waiver and requires that most disputes be resolved through arbitration.
Now I’m not normally one to indulge in conspiracy theories, but check out the timeline:
- April 26, 2011: Sony admits that data from 77 million user accounts has been stolen from the Playstation Network.
- April 27, 2011: US Supreme Court issues ruling in AT&T v Conception upholding arbitration clause class action waiver.
- April 16, 2011: David Schwartz points out that ” Any and all potential defendants of such claims can immunize themselves from class actions by the simple expedient of adding an arbitration agreement to their contracts. Since these are almost always adhesion contracts, all that’s required is word-processing – certainly not bargaining.”
- April 18, 2011: I receive an email from Sony informing me that I must agree to a new TOS agreement that includes an arbitration clause and class action waiver.
Nothing suspicious there.