Think Again...

The U.S. Supreme Court gave California businesses a boost last week with a decision on pre-dispute arbitration agreements that could reinvigorate their use here.

In AT&T Mobility LLC v. Concepcion, the Supreme Court invalidated a 2005 decision by the California Supreme Court, which held that California consumers cannot waive a right to class-wide arbitration. The divided Supreme Court found that California decision to be preempted by the Federal Arbitration Act and, therefore, unenforceable.

The Court's decision re-emphasizes the goals of arbitration under the Federal Arbitration Act, which largely have been ignored by California courts and changes the landscape of California's unconscionability analysis. Employers in this state now have an opportunity to require arbitration of employee and consumer disputes to a far greater degree. Perhaps most important in this age of rampant class actions, the Supreme Court specifically discussed and held that these agreements can preclude class actions and emphasized that arbitration is fundamentally a matter of contract.

Many of our clients have declined to use arbitration as an alternative dispute resolution process. California courts have been hostile to such agreements in the past and previous decisions have limited their usefulness. This decision changes that. The use of arbitration provisions in pre-employment agreements is now one to revisit.