Two Conceptions of Concepcion

Arpan Sura and Robert A. DeRise, both of Arnold & Porter, have written Conceptualizing Concepcion: The Continuing Viability of Arbitration Regulations.  Here's the abstract:

Section 2 of the Federal Arbitration Act (“FAA”) provides that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” In AT&T Mobility Limited, LLC v. Concepcion, a sharply-divided Supreme Court held that the FAA preempted a California unconscionability rule that effectively guaranteed plaintiffs the right to class action arbitrations. A wildly controversial decision, Concepcion has left courts and litigants uncertain about whether longstanding state and federal regulations on the arbitration process remain viable. To take but a few examples, may the draftor of an adhesive contract select the arbitrators unilaterally or eliminate all of a plaintiff's rights to discovery? State and federal courts have traditionally not permitted such behavior. But to date there has been no systematic analysis of the impact of the Concepcion Court’s expansive reasoning on such regulations.

This article — the first of its kind to do so — fills that void. We argue that Concepcion has entrenched, and in many ways rewritten, the fundamental principles of arbitration jurisprudence. What made Concepcion a bellwether was not its narrow holding on class actions, but rather its unprecedented analysis of when and how the FAA trumps other laws. In earlier opinions, the Court had suggested that the FAA would trump rules that were not “generally applicable” but instead were applied to discriminate against arbitration. But in Concepcion, the Court devised a new test that held that the California rule was preempted because it conflicted with the “fundamental attributes of arbitration” — informality, efficiency, reduced costs, and speed.

We argue that the Court’s newly-minted preemption analysis, in combination with its free-floating abstractions about arbitration’s “fundamental attributes,” threaten to jeopardize a bevy of facially neutral contract laws merely because they are applied to arbitration agreements. In formalizing what arbitration is and why it is important, Concepcion has unwittingly upended decades of statutory and common law that hinder arbitration’s “fundamental attributes.” This article describes how the Court arrived upon this precipice, shows how going over — taking Concepcion’s reasoning to its logical conclusion — disrupts a longstanding body of law, and suggests a lodestar to guide courts and litigants safely back from the post-Concepcion cliff.

Meanwhile, Lisa Tripp of Atlanta's John Marshall and Evan R. Hanson have written AT&T v. Concepcion: With Only Four Votes for the Deciding Rational [sic], Is it Precedent?. Here's their abstract:

The Supreme Court’s 2011 decision in AT&T v. Concepcion is considered by many to be a landmark decision which has the potential for greatly expanding the already impressive preemptive power of the Federal Arbitration Act (FAA). It is a well-known case exploring the interplay between state law unconscionability doctrine and the vast preemptive power of the FAA. In spite of its significance as an FAA case, Concepcion’s real importance may lie elsewhere.

AT&T v. Concepcion is ostensibly a 5-4 majority decision with a concurring opinion. However, the differences in the majority and concurring opinions present a unique conundrum for lower courts. Although the Court is not divided in form, there being 5 Justices who joined the majority opinion, it is indisputably divided in substance.

Justice Thomas joined the majority opinion and provided the fifth vote, but wrote a concurring opinion that explicitly rejected the legal reasoning of the majority opinion in its entirety. The putative majority opinion authored by Justice Scalia allows that unconscionability can be a valid defense to the enforcement of an agreement to arbitrate, but in Concepcion, allowing California to apply its unconscionability doctrine (the Discover Bank rule), would frustrate the purposes and objectives of Congress in enacting the FAA. For these reasons the Scalia opinion finds the law is preempted.

Justice Thomas, in contrast, does not believe that unconscionability can ever be a basis to invalidate an agreement to arbitrate and he reaffirmed his emphatic position articulated in Wyeth v. Levine that “[t]his Court’s entire body of purposes and objectives preemption jurisprudence is inherently flawed. The cases improperly rely on legislative history, broad atextual notions of congressional purpose, and even congressional inaction in order to pre-empt state law.” Justice Thomas’s conclusion that the law was preempted turned on the text of the statute which he interprets as not allowing unconscionability-based defenses to preemption. Justice Thomas has reaffirmed his rejection of purposes and objectives preemption in cases decided after Concepcion. This means, looking at the substance of the opinions, that there are but four votes for the ratio decidendi articulated in the Scalia opinion and there is not a single common denominator that the Scalia and Thomas opinions share, except that they agree on the result.

The Concepcion Court is, in substance, equally divided. Four members found that California’s unconscionability doctrine frustrated the purposes and objectives of the FAA, four in the dissent thought the law did not frustrate the purposes and objectives of the FAA, and one found that the purposes and objectives of Congress were immaterial to the resolution of the case.

How should lower courts react to an equally divided court in this situation? The Supreme Court provided the answer over 100 years ago in Hertz v. Woodman: "Under the precedents of this court, and, as seems justified by reason as well as by authority, an affirmance by an equally divided court is, as between the parties, a conclusive determination and adjudication of the matter adjudged; but the principles of law involved not having been agreed upon by a majority of the court sitting prevents the case from becoming an authority for the determination of other cases, either in this or in inferior courts."

Under any rational reading of the opinions, there can be no doubt that “the principles of law involved [have not] been agreed upon by a majority of the court sitting” and this should “prevent[] the case from becoming authority for the determination of other cases, either in [the Supreme Court] or in inferior courts.” Although Hertz dealt with a situation where the votes were literally split, its point that it takes a majority to create a governing rule is inescapable. In looking at the substance of the Scalia and Thomas opinions, there simply are not five votes for any aspect of the controlling rational articulated by Justice Scalia in his putative majority opinion. Because of this, Concepcion must, like two other Supreme Court cases that are similar to it, Branzburg v. Hayes and United States v. Verdugo-Urquidez, be treated as not having a majority opinion for precedential purposes.



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