Arbitration Decision Suggests SCOTUS Majority Are Pro-Business More Than Jurisprudential Conservatives

By Mike Dorf

On Wednesday, the Supreme Court handed down a 5-4 ruling in AT&T Mobility LLC v. Concepcion.  In an opinion by Justice Scalia, the Court found that the Federal Arbitration Act (FAA) preempts California's contract rule treating class action waivers as unconscionable (where the individual harm is not large enough for the typical claimant to file suit).  The opinion is unpersuasive.  Indeed, the case is arresting because the Court's ruling runs away from principles that conservatives purport to value in other contexts.

First, a brief recap of the issue.  The petitioner (an entity I shall oversimplify by calling AT&T) advertised a "free" cell phone, but subscribers were charged roughly $30 as a tax on the retail value of the phone.  Subscribers brought a class action in federal district court alleging false advertising (and other claims) to recover the tax and other relief.  AT&T sought to compel arbitration, citing the agreement to arbitrate in the service contracts, and the FAA.  The lower courts ruled that arbitration was not required because California law made a contractual waiver of the right to bring a class action unenforceable as unconscionable, and the FAA contains an exception to the general obligation to enforce arbitration agreements where non-enforcement is based "upon such grounds as exist at law or in equity for the revocation of any contract.”   Because California law forbids enforcements of waivers of the right to bring a case as a class action whether in court or in arbitration, the lower courts reasoned that these were neutral grounds for non-enforcement, rather than discrimination against arbitration.

AT&T had argued that California's law, though nominally arbitration-neutral, was in fact discriminatory.  In the briefs and oral arguments, AT&T offered the following sorts of analogies: Suppose state law forbade enforcement of an agreement to waive a right to submit a case to a jury, or suppose state law forbade enforcement of an agreement to waive a right to conduct adversarial discovery.  Such prohibitions would be thinly veiled efforts to render arbitration agreements unenforceable, because arbitration, by contrast with litigation,  characteristically does not use juries or the discovery process associated with litigation.

In my post-oral argument discussion of the case, I characterized this argument as weak because, whereas juries and formal discovery are foreign to arbitration, class-based resolution of disputes in arbitration is routine.  The four dissenters agreed.  But the majority did not.  Justice Scalia thought that class treatment was like a jury or discovery because class treatment of a case is less expeditious than individual arbitration.  Justice Scalia cited statistics showing that typical class arbitrations take substantially longer to resolve than do individual-case arbitrations.  His argument is not especially persuasive, and for reasons I'll explain, it's particularly odd coming from him and the other conservatives in the majority.

On its own terms, Justice Scalia's claim that class arbitration is less expeditious than individual-case arbitration is suspicious because his time-to-completion stats compare apples to oranges.  He cites statistics showing that the average time to resolution of class arbitrations is nearly four times as long as for individual arbitrations.  However, in that longer time, arbitrators are resolving thousands of cases.  The longer time that class treatment takes may well be justified by the efficiency of resolving many cases at once.  At the very least, that seems like a sufficient possibility to undermine the conclusion that class resolution is in some fundamental sense contrary to the purposes of arbitration.

And that brings me to the core problem with the opinion coming from these Justices: In other contexts, the conservatives, led by Justice Scalia, have been very hostile to the notion that a statute should be interpreted according to its purpose, where that purpose is not clearly expressed in the text.  As Justice Scalia, Judge Easterbrook, and other textualists in the sway of public choice theory like to say, statutes are compromises among legislators serving multiple purposes, and part of the legislative deal is a decision not to pursue all purposes at all costs.  Thus, they say, courts should stick to the text.

Indeed, Justice Thomas wrote a concurrence in AT&T explaining that he was uncomfortable with the majority's reliance  on the FAA's purposes and objectives, rather than its text.  He concurred rather than dissented because he proferred a reading of the FAA's saving clause that would only validate state court non-enforcement on grounds that there was a defect in the making of a contract (such as fraud), but no other Justice joined him in this theory that had not been briefed or argued by the parties.  Putting aside Justice Thomas's idiosyncratic (but perhaps correct) reading of the saving clause, his separate opinion underscores how in this particular case and pre-emption cases more generally, the other conservatives are seemingly willing to elevate the interests of big business--which generally favors pre-emption--over their jurisprudential commitments to textualism and federalism.

In the AT&T case, moreover, the majority opinion exhibits tension with another jurisprudential principle favored by Justice Scalia and other conservatives.  In cases under the Equal Protection Clause and the Free Exercise Clause, Justice Scalia and his fellow travelers have repeatedly argued against disparate impact tests.  To discriminate, they say, is to use a criterion that on its face draws an impermissible distinction or, in rare circumstances, to use a formally neutral criterion that was adopted for the purpose of discriminating and has a disparate impact.

Yet in the AT&T case, the majority is willing to find that California's no-class-waiver rule does not apply to "any contract" because, even though it does apply to any contract, it impedes what Justice Scalia deems to be the purpose of the FAA.  It is possible to make this argument for the hypothetical no-jury-waiver and no-discovery-waiver rules, because then the state rule, while formally applying to any contract, would really apply only to arbitration contracts.  But the existence of arbitration class actions means that it's very hard to say that the California law's (supposed) disparate effect on arbitration must be evidence that the California no-class-waiver rule was adopted for the purpose of singling out arbitration.  Consequently, it appears that the Court's conservatives are betraying their general hostility to disparate impact for its own sake.

Now it is possible to go overboard with charges of result orientation.  I'm not saying that the conservatives have no principles and simply use purported jurisprudential commitments as a cover for substantive ideological ones.  After all, the Court, in an elegant opinion by CJ Roberts, recently invoked textualist principles to rule against AT&T (as I discussed here).  The basically legal realist claim I am making here is more subtle: That the conservatives frequently (not always) abandon the jurisprudential principles they otherwise espouse because of their ideological commitments.

Do the liberals do the same thing?  Sure.  But there is an asymmetry.  Liberals generally acknowledge the fact that a judge's values influence how she decides a case, except during their confirmation hearings, when they become formalists.  Conservatives espouse formalism even after they have been confirmed, and also claim that their methodological druthers, unlike the liberals' methodological druthers, don't leave substantial room for the imposition of their values.  That claim is not worth very much when the people making it abandon their preferred methodology to reach results that match their normative commitments.

Finally, let me note an unrelated peculiarity of the case.  The standard-form contract in the case was in some respects very generous to arbitration plaintiffs, conferring advantages in arbitration that would have been unavailable in ordinary litigation.  That fact is discussed by the majority but it is ultimately a distraction.  The Court's rule will apply across the board to arbitration contracts, including those that are much less favorable to plaintiffs.