by Brian Wolfman
Last week, in Mortensen v. Bresnan Communications, the U.S. Court of Appeals for the Ninth Circuit compelled arbitration in a consumer class action.The consumer's take-it-or-leave-it contract with the defendant Internet service provider contained a requirement to arbitrate disputes. (The clause also banned class arbitration. See footnote 4 of the court's opinion.)
The main question on appeal involved a Montana state-law contract rule. That rule says that adhesive contracts that contain provisions that are "not in the
reasonable expectations of both parties when contracting" is void as
against public policy. Montana courts have said that involuntary
waivers of "fundamental constitutional rights" are outside of consumers'
reasonable expectations. Those rights include the rights to trial by jury and access to the courts. And adhesive pre-dispute arbitration agreements seek to ditch those rights. That's the whole point of them.
So, the question was whether the Montana rule was overriden by section 2 of the Federal Arbitration Act (FAA), which says that arbitration agreements generally should be enforced, or whether the Montana rule was "saved" by section 2's last clause, which says that section 2's general rule of enforceability doesn't apply to "grounds as exist at law or in equity for the revocation of any contract."
You might think that Montana's rule is one that applies to "any contract," not just contracts to arbitrate. And it is a generally applicable rule. But as most of our readers know, that doesn't matter under recent Supreme Court decisions such as AT&T Mobility v. Concepcion. So, it's not surprising that the Ninth Circuit upheld the arbitration clause at issue in Mortensen.
But Mortensen is still worth a look. Check out the breadth of its language, and you get a sense just how far the courts think they can (must?) go under the Supreme Court's recent rulings:
We interpret Concepcion's holding to be broader than a restriction on
the use of unconscionability to end-run FAA preemption. We take
Concepcion to mean what its plain language says: Any general state-law
contract defense, based in unconscionability or otherwise, that has a
disproportionate effect on arbitration is displaced by the FAA. We find
support for this reading from the illustration in Concepcion involving a
case “finding unconscionable or unenforceable as against public policy
consumer arbitration agreements that fail to provide for judicially
monitored discovery.” 131 S.Ct. at 1747 (emphasis added). Other courts
have read Concepcion in a similar way. [footnote omitted]
Some
might argue that our interpretation of Concepcion goes too far beyond
the initial purpose of the FAA, which was to eliminate judicial
hostility toward arbitration and place arbitration provisions on “the
same footing” as all other contractual provisions. [citations omitted]. But we follow the Supreme Court's premise
in Concepcion that the FAA's purpose is to “ensur[e] that private
arbitrations are enforced.” 131 S.Ct. at 1748 (quoting Volt Info. Scis.,
Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 474
(1989)); see also Am. Express Co. v. Italian Colors Rest., ––– S.Ct.
––––, No. 12–133, 2013 WL 3064410, at *6 & n. 5 (June 20, 2013)
(noting that Concepcion established that “the FAA's command to enforce
arbitration agreements trumps any interest in ensuring the prosecution
of low-value claims”). The word “ensure” is defined to mean “to make
(one) sure (as by pledging, guaranteeing, convincing, or declaring)” or
“to make sure, certain, or safe: GUARANTEE.” Webster's Third New
International Dictionary 756 (1993). In our view, Concepcion crystalized
the directive, touched on in Volt, 489 U.S. at 474, that the FAA's
purpose is to give preference (instead of mere equality) to arbitration
provisions. 131 S.Ct. at 1748. [emphasis added] Concepcion outlaws discrimination in
state policy that is unfavorable to arbitration by further limiting the
savings clause. We are bound by our duty to apply Concepcion and do so
here.
