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Associate Justice Stephen G. Breyer wrote in a dissent that today’s Supreme Court 5-4 opinion striking down the use of a California unconscionability law was a breach of basic federalism principles.

AT&T Mobility v. Concepcion, No. 09-893 (details here), overturns a Ninth U.S. Circuit Court decision invalidating a consumer cell phone contract that barred class arbitration.

"[T]his rule of state law is consistent with the [Federal Arbitration] Act’s language and primary objective,” write Breyer. "It does not 'stan[d] as an obstacle' to the Act’s 'accomplishment and execution.' [Citation omitted.] And the Court is wrong to hold that the federal Act pre-empts the rule of state law."

The three other dissenters joined Breyer’s 12-page opinion. It fires at every aspect of Associate Justice Clarence Thomas’s majority decision, which struck down the rule in Discover Bank v. Superior Court, 36 Cal. 4th 148, 113 P. 3d 1100 (2005).

Breyer defends Discover Bank, a California Supreme Court case used by the Ninth Circuit, which established an analysis for unconscionability of class waivers.  Discover Bank struck down the credit card issuer’s class arbitration ban.

Breyer notes that the case didn't create a “blanket policy” against waivers, instead applying a “more general” unconscionability principle.

The U.S. Supreme Court majority found that the California law conflicts with the Federal Arbitration Act and would hurt the act’s goals.

Breyer counters that the state law as applied by Discover Bank is consistent with the FAA. He details the procedural advantages of arbitration that factor in its Congressional and judicial support, though he states that the Court also has “cautioned against thinking that Congress’s primary objective was to guarantee these particular procedural advantages.”

The dissent also notes that, under Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985), the Court rejected “the suggestion that the overriding goal of the Arbitration Act was to promote the expeditious resolution of claims.”

That point draws a rebuke in the majority opinion. “That is greatly misleading,"” writes Associate Justice Antonin Scalia, following in his majority AT&T Mobility opinion with a quote from Dean Witter Reynolds:

We therefore are not persuaded by the argument that the conflict between two goals of the Arbitration Act—enforcement of private agreements and encouragement of efficient and speedy dispute resolution—must be resolved in favor of the latter in order to realize the intent of the drafters.
Scalia then notes that in AT&T Mobility, “those ‘two goals’ do not conflict—and it is the dissent’s view that would frustrate both of them.” (Emphasis in the majority opinion.)

But in the dissent, Breyer warns that the Court, in implementing Congressional intent "should think more than twice before invalidating a state law that does just what [FAA] §2 requires, namely, puts agreements to arbitrate and agreements to litigate 'upon the same footing.'"

Breyer also disputes what he states is the majority’s view that Discover Bank increases the complexity of arbitration procedures, as well as "individual" cases being a "fundamental attribut[e]” of arbitration. He says the FAA’s history doesn’t back this up.

He also writes that the majority should be comparing class arbitration with judicial class action matters rather than with two-party arbitration. The class process is more efficient, Breyer contends, also citing American Arbitration Association statistics, and other advantages.

He focuses on the federalism point at several places in the opinion. For example, the dissent notes that “California is free to define unconscionability as it sees fit, and its common law is of no federal concern so long as the State does not adopt a special rule that disfavors arbitration.”

Breyer’s dissent concludes by noting that FAA Sec. 2 leaves an important role for the states in regulating arbitration agreements, via the saving clause.

“Through those words Congress reiterated a basic federal idea that has long informed the nature of this Nation’s laws. We have often expressed this idea in opinions that set forth presumptions. . . . But federalism is as much a question of deeds as words. It often takes the form of a concrete decision by this Court that respects the legitimacy of a State’s action in an individual case. Here, recognition of that federalist ideal, embodied in specific language in this particular statute, should lead us to uphold California’s law, not to strike it down. We do not honor federalist principles in their breach.”
--Russ Bleemer, Editor, Alternatives

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