The United States Law Week

INSIGHT: Beyond the Headline—Affirmation,
Innovation in AT&T Mobility LLC v. Concepcion

July 18, 2018, 1:00 PM

When the Supreme Court (Court) handed down its opinions in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), the majority’s holding engendered breathless (at least in legal terms) headlines. Clearly, as arbitration’s opponents and proponents concurred, five jurists, led by Justice Antonin Scalia, had consigned bans on class-action arbitration waivers into oblivion in the hallowed name of the Federal Arbitration Act (FAA), 9 U.S.C. §§1–16.

Possibly due to the legal establishment’s quick recognition of its utility and peril, however, feverish debate over this holding’s validity and advisability beclouded the lead opinion’s subtle affirmation of older filaments of legal thought and endorsement of a new analytical approach to the FAA’s so-called “Savings Clause.”

Time’s passage has changed little, this initial ignorance ossifying instead. As a result, in opinion after opinion issued over the past eight years, these gravid assertions have rarely featured, and defects traceable to their inexplicable omission and damaging to their precedential value now plague much of arbitration law’s post-Concepcion jurisprudence. To discern these latent possibilities and buried flaws, one must return to, and pull back the curtain on, this most controversial matter.

Legal Landscape: Past and Present

According to myth, arbitration first emerged in 2500 BC. See John C. Norling, Note, The Scope of the Federal Arbitration Act’s Preemption Power: An Examination of the Import of Saturn Distribution Corp. v. Williams, 7 Ohio St. J. on Disp. Resol. 139, 139–40 (1991); Frank D. Emerson, History of Arbitration Practice and Law, 19 Clev. St. L. Rev. 155, 155–56 (1970). This ancient method of dispute resolution survived the dark ages and ascended into commercial prominence during the Renaissance. 1 Martin Domke et al., Domke on Commercial Arbitration §2:3 (3d ed. 2009); see also Black’s Law Dictionary 119 (9th ed. 2009). In fact, many business disputes in England were seemingly decided by arbitration up to the time of Lord Mansfield, the famed British barrister called to the bar by Lincoln’s Inn on Nov. 23, 1730. Henry Baum & Leon Pressman, The Enforcement of Commercial Arbitration Agreements in the Federal Courts, 8 N.Y.U. L.Q. Rev. 238, 239–40 (1930); cf. Sarah E. Rudolph, Blackstone’s Vision of Dispute Resolution, 22 Mem. St. U. L. Rev. 279, 294 (1992) (pointing out that William Blackstone saw nothing objectionable in certain rows’ resolution by arbitration). Notwithstanding this fact, the English courts of the 18th century viewed arbitration with suspicion. Domke on Commercial Arbitration, supra, §2:4.

The judges of the new United States inherited this animus. Rudolph, supra, at 293. For example, while sitting as a circuit judge in 1845, Justice Joseph Story opined: “It is certainly the policy of the common law, not to compel men to submit their rights and interests to arbitration, or to enforce agreements for such a purpose.” Tobey v. County of Bristol, 23 F. Cas. 1313, 1321 (C.C.D. Mass. 1845). Less than 30 years later, the Court itself damned “agreements in advance to oust the courts of jurisdiction conferred by law” as “illegal and void.” Ins. Co. v. Morse, 87 U.S. 445, 451 (1874); see also Owsley v. Yerkes, 187 F. 560, 563 (2d Cir. 1911) (relying on this case). A party may “enter into an agreement” submitting all disputes “to arbitration or to the decision of a single judge,” Justice Ward Hunt conceded in Insurance Co. v. Morse, but no authority would bar that person “from resorting to the ordinary legal tribunals of the State.” Ins. Co., 87 U.S. at 451. For decades after, America’s courts classified arbitration agreements, but “specialized kind of forum-selection clause[s]” in the terminology of Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974), as unenforceable if they were not freely bargained for, created additional expense for one party, or denied one party a remedy. Carnival Cruise Lines v. Shute, 499 U.S. 585, 601 (1991) (Stevens, J., dissenting). Only “rare exceptions” punctured this habitual “refus[al] … to order specific enforcement of executory agreements to arbitrate.” Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 593 (2008) (Stevens, J., dissenting).

This veneer began to crack in the first half of the Roaring Twenties. See Henry C. Strickland, The Federal Arbitration Act’s Interstate Commerce Requirement: What’s Left for State Arbitration Law?, 21 Hofstra L. Rev. 385, 388–90 (1992); Emerson, supra, at 160. Established in 1919, the International Chamber of Commerce (ICC), the voice of the global community, strongly trumpeted the value of arbitration as a means of resolving international commercial disputes. In response to the pleas of its own corporations and moneyed class, New York, a state in which commercial arbitration had existed with and without the benefit of statutes and separate from, and in connection with, court adjudication since its founding in 1624, enacted America’s first arbitration act on April 19, 1920. In 1924, the Court upheld this statute’s application to a maritime dispute. Red Cross Line v. Atl. Fruit Co., 264 U.S. 109, 123–25 (1924); see also Virginian Ry. v. Sys. Fed. No. 40, 300 U.S. 515, 552 (1937) (pointing to this case as one of the earliest examples of the courts’ sudden receptiveness to arbitration). That this enactment provided “a statutory legal remedy of a character unknown to the common law,” “declare[d] a new public policy, and abrogate[d] an ancient rule” factored not at all, Berkovitz v. Arbib & Houlberg Inc., 130 N.E. 288, 289 (N.Y. 1921), to the consternation of one of the Court’s more splenetic justices, Red Cross Line, 264 U.S. at 130–31 (McReynolds, J., dissenting).

Pre-Concepcion FAA

1. Purpose and Structure

On Feb. 12, 1925, Congress enacted the FAA, modeling its key sections on the Empire State’s arbitration statute. E.g., S. Rep. No. 68-536, at 3 (1924); H.R. Rep. No. 68-96, at 1–2 (1924); Kulukundis Shipping Co. S/A v. Amtorg Trading Corp., 126 F.2d 978, 983 (2d Cir. 1942). Aiming to nix the common law’s aversion to arbitration, this relatively sparse legislation was designed to enforce arbitration agreements entered into by parties who had substance-neutral and remedy-neutral reasons for preferring non-judicial, but binding, dispute resolution in the business-to-business context. In time, as foreshadowed by Bernhardt v. Polygraphic Co. of Am. Inc., 360 U.S. 198 (1956), and introduced by Prima Paint Corp. v. Flood & Conklin Mfg., 388 U.S. 395 (1967), the FAA assumed exalted status as the genesis of an extensive “body of federal substantive law of arbitrability, applicable to any arbitration agreement within … [its] coverage” and as the manifestation of “a liberal federal policy favoring arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); see also, e.g., Buckeye Check Cashing, 546 U.S. 440, 443 (2006) (“Section 2 [of the FAA] embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contract[.]”). At present, the FAA governs “notwithstanding any state substantive or procedural policies to the contrary,” “any doubts concerning the scope of arbitrable issues … [to] be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses, 460 U.S. at 24–25; see also Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1139 (9th Cir. 1991) (quoting Moses, 460 U.S. at 24–25).

In adjudicating motions to compel arbitration, state and federal courts generally undertake a two-step inquiry. Carey v. 24 Hour Fitness, USA Inc., 669 F.3d 202, 205 (5th Cir. 2008); Wash. Mut. Fin. Grp. v. Bailey, 364 F.3d 260, 263 (5th Cir. 2004). The seized judge first inquires whether the parties truly decided to arbitrate the dispute at issue. Carey, 669 F.2d at 205. This so-called “arbitrability” review revolves around two subsidiary questions: “(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.” J.P. Morgan Chase & Co. v. Conegie ex rel. Lee, 492 F.3d 596, 598 (5th Cir. 2007); accord, e.g., Century Indem. Co. v. Certain Underwriters at Lloyd’s, 584 F.3d 513, 523 (3d Cir. 2009); Chambers v. Groome Transp. of Ala., 41 F. Supp. 3d 1327, 1335 (M.D. Ala. 2014). Notably, “ordinary state-law principles that govern the formation of [any] contract” dictate the course of this determination. Morrison v. Amway Corp., 517 F.3d 248, 254 (5th Cir. 2008) (relying on First Options of Chicago Inc. v. Kaplan, 514 U.S. 938 (1995)). If a court answers “yes” to this first question, it must then ascertain whether any federal statute or policy renders the relevant claims nonarbitrable. Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002). Throughout this process, the merits of the parties’ substantive contentions are irrelevant. Snap-On Tools Corp. v. Mason, 18 F.3d 1261, 1267 (5th Cir. 1994).

In line with this nation’s federalist tradition, Section 2 of the FAA (“Section 2” or “§2”) constitutes its “primary substantive provision.” Moses, 460 U.S. at 24; see also, e.g., Cronus Invs., Inc. v. Concierge Servs., 107 P.3d 217, 222 (Cal. 2005) (quoting language). Per this section’s first clause, widely known as the FAA’s “Command Clause,” the FAA preempts any contrary state law in cases involving interstate contracts or maritime transactions, 9 U.S.C. §2; Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985), and hence reaches the limit of Congress’ power under the Constitution’s Commerce Clause, Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273–77 (1995). Pursuant to the Savings Clause, Section 2’s second clause, any court may refuse to enforce an arbitration agreement on “such grounds as exist at law or in equity,” under federal or state law, “for the revocation of any contract.” 9 U.S.C. §2; Sydnor v. Conseco Fin. Servicing Corp., 252 F.3d 302, 305 (4th Cir. 2001). Applicable to a wide variety of contracts in both state and federal court and unchanged since the FAA’s enactment, §2’s two clauses aim to “strike a careful balance federal regulation of arbitration agreements specifically and state regulation of contracts generally.” Jodi Wilson, How the Supreme Court Thwarted the Purpose of the Federal Arbitration Act, 63 Case W. Res. L. Rev. 92, 93, 98 (2012).

2. Regnant Construction of Section 2

Beginning in the early 1980s, these paired sentences took on a definite cast as the Court reformed the federal common law of arbitration and expanded its displacement of state law.

In a series of cases, a majority of sitting justices construed the Command Clause as preempting three types of state laws and cabined to two implicit federal exceptions. The first set of verboten laws was obvious: any that prohibited arbitration outright. Perry v. Thomas, 482 U.S. 483, 491–92 (1987). The Rehnquist Court limned the second category—any laws which targeted arbitration agreements for suspect treatment—in the 1980s and 1990s. Doctor’s Assocs. Inc. v. Casarotto, 517 U.S. 681, 687 (1996). The third, in turn, built upon the principles of conflict and field preemption: as the Court explained in 2008, any statute or regulation that “frustrate[d]” realization of the FAA’s prime objectives must fall. Preston v. Ferrer, 552 U.S. 346, 357–58 (2008). At the same time, the Court derived two constraints from the same rationale: either (1) the real possibility that a party might be saddled with prohibitive arbitration costs that “could preclude a litigant … from effectively vindicating her federal statutory rights in the arbitral forum” or (2) an implicit congressional intention to preclude a waiver of judicial remedies for the statutory rights at issue would be sufficient to invalidate any arbitration clause. Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 (2000); Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth Inc., 473 U.S. 614, 628 (1985).

With equal constancy, the Court described the “grounds” encompassed by the Savings Clause as “generally applicable contract defenses … .” Doctor’s Assocs., 517 U.S. at 687; see also Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005) (so contending). At this point, this acceptable coterie consists of such relatively well-defined contractual concepts as fraud and duress and such amorphous ones as unconscionability and public policy. See Aaron-Andrew P. Bruhl, The Unconscionability Game: Strategic Judging and the Evolution of Federal Arbitration Law, 83 N.Y.U. L. Rev. 1420, 1463 (2008). From amongst this hodgepodge, the Court transformed unconscionability into one of the more potent and controversial doctrines within federal arbitration law. David Horton, Unconscionability Wars, 106 Nw. U. L. Rev. 387, 393 (2012). Even so, this defense’s delineation has stayed relatively unchanged for decades, with many state variants requiring both procedural and substantive unconscionability to justify striking down a particular contractual provision. See, e.g., Sanders v. Certified Car Ctr. Inc., 93 Va. Cir. 404, 406 (Va. Cir. Ct. 2016) (observing that, under Virginia law, “contracts of adhesion are not per se unconscionable; courts also must look to the substance of the agreement”); Sanchez v. Valencia Holding Co. LLC, 353 P.3d 741, 748 (Cal. 2015) (internal quotation marks omitted) (describing this as the “prevailing view” of California law). In its most oft-cited iteration, this defense essentially bars enforcement of a clause that is “so one-sided … under the circumstances existing at the time of the making of the contract” based on “the general commercial background and the commercial needs of a particular trade or case.” U.C.C. §2-302 cmt. 1; Colin P. Marks, The Irony of AT&T v. Concepcion, 87 Ind. L.J. Supp. 31, 35 (2012).

Concepcion’s FAA: What the Court Said

In Concepcion, these clauses’ settled meanings underwent “a change” partly obscured by the majority’s central holding. Litman v. Cellco P’ship, 655 F.3d 225, 231 (3d Cir. 2011). As even a perfunctory internet search reveals, the Court’s basic holding—the FAA barred state laws prohibiting agreements which both compelled arbitration and waived any right to a class action in such a setting—undammed a mind-numbing cascade of articles and judicial opinions. See, e.g., Adams v. AT&T Mobility LLC, 816 F. Supp. 2d 1077 (W.D. Wash. 2011); Alfeche v. Cash Am. Int’l Inc., No. 09-0953, 2011 BL 208897 (E.D. Pa. Aug. 12, 2011); Cottonwood Fin. Ltd. v. Estes, 810 N.W.2d 852 (Wis. Ct. App. Jan. 31, 2012); Gustavus L.L.C. v. Eagle Inv., No. 24899, 2012-Ohio-1433 (App. 2d Dist. Mar. 30, 2012). Buoyed by Concepcion’s progeny, retail businesses rapidly adapted their consumer contract language to include class arbitration waivers, especially once American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013), further legitimized such provisos.

Yet, in reaching this conclusion, Justice Scalia had wandered beyond the case’s bare necessities. Instead, this juridical pugilist utilized broad terms untethered to Concepcion’s particular facts—the California state courts’ refusal to enforce a contractual provision prohibiting class-wide arbitration—whose logic, if scrupulously followed, negates several traditional contract defenses and advances a new test for federal preemption of state regulation under the Savings Clause. See Concepcion, 563 U.S. at 344, 346, 346–47 n.5, 348. Possible to read narrowly, the lead opinion’s internal undercurrents hint at a broader mandate, one merely waiting on clever lawyers’ confident deployment.

1. Clarifying the Players’ Views

Before dissecting this exegesis, the strange role played by Justice Clarence Thomas in the Court’s arbitration jurisprudence up to Epic Systems Corp. v. Lewis, No. 16-285, 2018 BL 178768 (U.S. May 21, 2018), merits illumination. In Concepcion, the Georgian’s idiosyncratic view fully surfaced. True, Justice Thomas signed on with the majority. Nevertheless, he wrote a separate concurrence in which he articulated his view that the FAA’s Savings Clause only applies to defenses regarding the formation of the arbitration agreement and not the substance of the agreement. Concepcion, 563 U.S. at 355 (Thomas, J., concurring). Justice Thomas thus felt that though claims of fraud and duress were covered by this provision, public policy-based defenses that went to the substance of the agreement were not. Id. He, therefore, would have found for AT&T simply on the ground that the Discover Bank rule is not a defense that is available under the FAA. Id. As his concurrence exemplifies, unlike Justice Scalia, who abandoned his federalism-based attack on the FAA’s expansion after Southland Corp. v. Keating, Justice Thomas has consistently adhered to a federalist position with regards to the FAA, dissenting in all four cases since Allied-Bruce in which the Court has applied the FAA to state court litigation. Still, this Georgian’s focus, though couched in terms of public policy, can be read as a broad-based attack on unconscionability claims in general. In other words, his concurring opinion’s logic would not even recognize such a defense’s potential viability. Consequently, although Justice Scalia’s opinion was technically only a plurality one, Justice Thomas is counted as part of the majority. On balance, after all, he would have completely refused to recognize any state-law defense to enforcement as valid under the Savings Clause, a more radical construction than even the Court’s dominant majority has so far stomached.

2. Implicit Affirmation of Past Guidance

In clear terms, Justice Scalia first characterized a contract’s status as one of adhesion and the parties’ inequality in bargaining power, two familiar bogeymen, as irrelevant, standing alone, to an analysis of an arbitration clause’s unconscionability. See Concepcion, 563 U.S. at 346 & n.5. In his view, invalidating an arbitration agreement based solely on these factors nearly always endangers that process’ “fundamental attributes,” a trigger for a finding of invalidity recognized in Preston v. Ferrer. Id. at 344, 346. Thus, pure logic mandated these elements’ reprioritization. See Concepcion, 563 U.S. at 344, 346–47; cf. Chassen v. Fid. Nat’l Fin. Inc., 836 F.3d 291, 298 (3d Cir. 2016) (citing these concerns). As such, the majority generally cast doubt on the viability of any state law defense in which these contractual features’ impropriety factors into the analysis. See Elite Logistics Corp. v. Hanjin Shipping Co., 589 F. App’x 817, 820 (9th Cir. 2014) (Smith, J., dissenting) (“[T]he Supreme Court [in Concepcion] … clarified that an arbitration clause is not procedurally unconscionable merely because it appears in a contract of adhesion.”). If so, then much of procedural unconscionability doctrine would now be newly enfeebled. See Newton v. Am. Debt Servs., 549 F. App’x 692, 693 (9th Cir. 2013) (holding that, because defendants “concede the arbitration agreement was an adhesion contract,” it was “oppressive []and therefore procedurally unconscionable[]”); Finastra USA Corp. v. Zepecki, No. 18-cv-00725, 2018 BL 82255 (N.D. Cal. Mar. 9, 2018) (“‘Procedural unconscionability exists in a contract of adhesion … .’” (quoting Performance Team Freight Sys. Inc. v. Aleman, 194 Cal. Rptr. 3d 530, 542 (Cal. Ct. App. 2015))). Based on such extrapolation, in those jurisdictions where both forms of unconscionability must be found for this defense to apply, no arbitration clause could be deemed unconscionable and invalidated despite the Savings Clause in Concepcion’s aftermath, a stunning rebuke to much prior judicial construction.

What made this pronouncement less than revolutionary was the fact that two opinions issued in 1991 had voiced the same displeasure with these factors’ historical prominence. In Gilmer v. Interstate/Johnson Lane Corp., the Court had treated “[m]ere inequality in bargaining power” as an insufficient reason to hold arbitration agreement unenforceable in the employment context. 500 U.S. 20, 33 (1991); cf. Guidotti v. Legal Helpers Debt Resolution L.L.C., 74 F. Supp. 3d 699, 714 (D.N.J. 2014) (holding, based on Gilmer, that a disparity in bargaining power between a sophisticated nationwide business and a private individual consumer will not alone render a contract unconscionable). In Carnival Cruise Lines v. Shute, it held a pre-dispute forum selection clause buried in a contract of adhesion to be free from fraud, duress, coercion of any kind, and other contract defenses. 499 U.S. at 693–94. Hence, even before Concepcion, few contracts of adhesion could possibly contravene the Savings Clause under Gilmer or Carnival Cruise Lines, a defensible, if not inexorable, construction that quickly made its way into the judicial mainstream. See, e.g., Mansfield v. Vanderbilt Mortg. & Fin. Inc., 29 F. Supp. 3d 645, 652 (E.D.N.C. 2014) (acknowledging validity of Concepcion’s statement that “the times in which consumer contracts were anything other than adhesive are long past”); cf. Bose Corp. v. Ejaz, 732 F.3d 17, 22 (1st Cir. 2013) (“Absent fraud, an individual ‘who signs a written agreement is bound by its terms whether he reads and understands them or not.’”).

Indeed, a single sentence in Concepcion likely portends a cautious application of this reiterated derogation, exactly as happened after Gilmer and Carnival Cruise Lines. This specific language appears in footnote six of Justice Scalia’s opinion, which reads: “Of course States remain free to take steps addressing the concerns that attend contracts of adhesion—for example, requiring class-action-waiver provisions in adhesive arbitration agreements to be highlighted. Such steps cannot conflict with the FAA or frustrate its purpose to ensure that private arbitration agreements are enforced according to its terms.” Concepcion, 563 U.S. at 347 n.6. Implicitly authorizing the passage of adhesion-specific statutes, this observation cannot be easily squared with the majority’s indifference to the power imbalances inherent in all such form contracts—and key to their utility for consumers and businesses alike.

3. Creation of a Novel Test

But Justice Scalia did not stop with his disparagement of once sacred objections. Instead, the incisive justice whose tenure overlapped with most of the FAA’s doctrinal developments made one more contribution to this law’s construction. David S. Schwartz, Justice Scalia’s Jiggery-Pokery in Federal Arbitration Law, 101 Minn. L. Rev. Headnotes 75, 78 (2016). Perhaps the author of eight majority opinions in FAA cases, including such notable ones as Rent-a-Center v. Jackson and American Express Company, a man who had dissented in only two of the Court’s nineteen majority FAA opinions, could do no less.

Whatever the explanation, as Justice Scalia proceeded to demarcate the FAA’s preemptive scope, the colleagues he so ably coaxed developed an entirely new view of the Savings Clause. Hereinafter, under the FAA, the state laws, including a standard contract defense like fraud, duress, and unconscionability, once protected from invalidity by this sentence’s operation could no longer survive if they somehow “interfere[d] with fundamental attributes of arbitration.” Concepcion, 563 U.S. at 344, 348; see also, e.g., Raglani v. Ripken Prof’l Baseball, 939 F. Supp. 2d 517, 521 (D. Md. 2013) (citing this language). To the extent that any such law undermined arbitration’s procedural informality, its “principal advantage,” or rendered it “slower” or “more costly,” it wielded neither rightful sting nor dispositive weight despite its status as a general defense never designed to target arbitration for disfavored treatment. Concepcion, 563 U.S. at 344, 348. Albeit not explicitly ratified by Justice Thomas, this analytical approach constituted a decided majority’s preferred interpretive tactic for setting the future limits of the FAA’s Savings Clause.

Unlike its nod to Gilmer and Carnival Cruise Lines, this audacious reading lacked any obvious anchor in older precedent. Reasonably apprehended, its animating logic principally outlawed “discrimination in state policy that is unfavorable to arbitration.” Morris v. Ernst & Young, LLP, 834 F.3d 975, 989 (9th Cir. 2016). Without clearly saying so, Justice Scalia had thereby rejiggered the FAA’s purpose, from barring unequal treatment of arbitration clauses relative to other contractual provisions to preferring them outright. Mortensen v. Bresnan Commc’ns, LLC, 722 F.3d 1151, 1160 (9th Cir. 2013). The FAA had always evinced a clear preference for the enforcement of arbitration agreements, but had been read to do no more than place them on an equal footing with other contracts. Buckeye Check Cashing Inc., 546 U.S. at 443; Rent-A-Center, West Inc. v. Jackson, 561 U.S. 63, 67 (2010). After Justice Scalia’s Concepcion, the Savings Clause could no longer save from preemption any generally applicable contract defense that “sacrifices the principal advantage of arbitration — its informality — and makes the process slower, more costly, and more likely to generate procedural morass than final judgment,” not to mention increasing the “risks to defendants.” Litman, 655 F.3d at 231 (quoting Concepcion, 563 U.S. at 345, 350, yet holding it to do more than bar prohibition on class arbitration). In so propounding, a justice’s subtlety hid an analytical evolution unlikely to be reversed by either his immediate successor, see, e.g., Ragab v. Howard, 841 F.3d 1134, 1140–41 (10th Cir. 2016) (Gorsuch, J., dissenting); Chelsea Family Pharmacy PLLC v. Medco Health Solutions Inc., 567 F.3d 1191, 1200–01 (10th Cir. 2009) (Gorsuch, J., concurring), or his joiner’s potential ones, see Verizon New England Inc. v. NLRB, 826 F.3d 480 (D.C. Cir. 2016) (Kavanaugh, J.).

Post-Concepcion FAA: Judicial and Scholarly Discord

1. Haphazard Judicial Recognition

Recognition of this new methodology’s concoction soon appeared in a handful of opinions. In Mortensen v. Bresnan Communications LLC, the Ninth Circuit explicitly recognized Concepcion’s creation of a newfangled interpretive archetype. 722 F.3d at 1154, 1159; see also Meadows v. Dickey’s Barbecue Rests. Inc., 144 F. Supp. 3d 1069, 1083 n.7 (N.D. Cal. 2015) (applying Concepcion’s disproportionate-effects test). The Tenth Circuit soon did the same. Walker v. BuildDirect.com Techs. Inc., 733 F.3d 1001, 1004–05 (10th Cir. 2013); see also Jerry Erwin Assocs. v. Estate of Asher, No. 16-cv-0016 JB/LF, 2017 BL 428562 (D.N.M. Nov. 30, 2017) (“[T]he FAA ‘limits state-law grounds for refusing to enforce an arbitration clause.’” (quoting Walker, 733 F.3d at 1004))). That same year, one Fourth Circuit panel observed that Conception invalidates any contract defense if it “increases formality” or “risks to defendants,” “the primary concerns underlying Concepcion.” Noohi v. Toll Bros. Inc., 708 F.3d 599, 612 (4th Cir. 2013). Citing the latter opinion, another Fourth Circuit trio later stressed that any state law that interferes with “the fundamental attributes of arbitration” must be deemed preempted, seemingly contravening Justice Scalia’s latitude. Muriithi v. Shuttle Express Inc. 712 F.3d 173, 180 (4th Cir. 2013). Some state courts proved equally perceptive. E.g., Torrence v. Nationwide Budget Fin., 753 S.E.2d 802, 811 (N.C. Ct. App. 2014); Sonic-Calabasas A Inc. v. Moreno, 311 P.3d 184, 201 (Cal. 2013). Mortensen and Walker, Muriithi and Noohi, Torrence and Sonic—all acknowledged that such “generally available contract defenses” as unconscionability were no longer good enough, all by themselves, to defeat the FAA’s preemption via the guides of the Savings Clause.

Problematically, many more courts have failed to grasp the reality, much less the radical nature, of this quiet doctrinal innovation, pivotal to one of the last opinions authored by a jurisprudentially ascendant bloc’s most influential icon. In fact, Mortensen, Walker, and their ilk do not actually represent even a marginal majority. See Christopher R. Leslie, Arbitration Bootstrap, 94 Tex. L. Rev. 265, 292–96 (2015) (canvassing a handful of apposite cases). The Mortensen Court may have rightly “interpret[ed] Concepcion’s holding to be broader than a restriction on the use of unconscionability to end-run FAA preemption.” 722 F.3d at 1158; see also, e.g., Iskanian v. CLS Transp. Los Angeles LLC, 327 P.3d 129, 135–36 (Cal. 2014) (endorsing a broad construction of Concepcion). But multiple courts, including the Ninth Circuit in a later case, have found otherwise. See, e.g., Elite Logistics Corp. v. Hanjin Shipping Co., 589 F. App’x 817, 818 n.2 (9th Cir. 2014) (“[W]e have held that Concepcion did not fundamentally alter the legal landscape of procedural unconscionability.” (citing Coneff v. AT
&T, 673 F.3d 1155, 1161 (9th Cir. 2012))); Brown v. MHN Gov. Servs. Inc., 306 P.3d 948, 953 (Wash. 2013); Figueroa v. THI of N.M. at Casa Arena Blanca LLC, 306 P.3d 480, 484–87 (N.M. Ct. App. 2012). Revealingly, even the Fourth Circuit’s Noohi contained contrary analytical nuggets—and was not even zealously followed by subsequent panels. Squabbling academics, in turn, offered little aid to the curious or befuddled. See Richard Frankel, Concepcion and Mis-Concepcion: Why Unconscionability Survives the Supreme Court’s Arbitration Jurisprudence, 2014 J. Disp. Resol. 225, 227, 238–39 (2014) (summarizing the contending views).

2. Concepcion’s Pendent Questions

Compounding this uncertainty, the lead opinion left three questions central to its new test’s operation unanswered.

The first uncertainty concerns the mechanics of this new standard’s application. Simply put, while the lead opinion in Concepcion held that class-wide arbitration interferes with “fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA,” it gave little clarity as to what specific notions deserve this august label. Concepcion, 563 U.S. at 344. At some points, it emphasizes choice; at others, it waxes about several procedural mechanisms, including efficiency, procedural flexibility, arbitrator expertise, speed of resolution, cost, and even “informality.” See Frankel, supra, at 231. In other words, the majority left the identity and relative weight of arbitration’s “fundamental attributes” unspecified. Instead, by sleight of hand, the Court’s majority bestowed the unhappy obligation of deciding what precisely deserved this suddenly momentous appellation on other courts and other lawyers.

The next two unresolved ambiguities center on this new criterion’s cognizable limitations. First, even after perusing the majority opinions, one cannot definitely say whether the FAA now preempts all rules with a “disproportionate impact” on arbitration agreements or only some. Compare Anjanette H. Raymond, It Is Time the Law Begins to Protect Consumers from Significantly One-Side Arbitration Agreements within Contracts of Adhesion, 91 Neb. L. Rev. 666, 705 (2013) (arguing that the FAA now preempts any such rule), with Frankel, supra, at 238–42 (contending otherwise). Second, whether a case-by-case approach or a categorical one provides the appropriate analytical framework for assessing the applicability of state law contract defenses remains an open question in Concepcion’s wake. Compare Brewer v. Mo. Title Loans, 364 S.W.3d 486, 492 (Mo. 2012), with Schnuerle v. Insight Commc’ns Co. L.P., 376 S.W.3d 561, 580–81 (Ky. 2012) (Schroder, J., concurring in part and dissenting in part).

Lessons for Practitioners and Questions for Judges

The tensions induced by Concepcion’s ambiguity offer new opportunities and fresh challenges. Before its promulgation, a mere finding of unconscionability under applicable state law satisfied the Savings Clause. Afterward, if its logic is accorded due fealty, even a decisive demonstration of its existence should not suffice. This is the disjointed state that any lawyer and judge confront in an FAA case, one too easy to overlook. Still, guidelines can still be sketched.

If Concepcion is properly read, attorneys warring over the enforcement of an arbitration clause on the basis of its purported unconscionability must now be ready to address three distinct issues:

  • (1) whether a clause can be so damned under generally applicable state law;
  • (2) whether a determination of unconscionability can be made without undue emphases on a contract’s adhesive nature or the parties’ inequality in bargaining power; and
  • (3) whether that defense, as applied to the facts at hand, jeopardizes the “fundamental attributes of arbitration.”

For plaintiffs’ attorneys, their appointed tasks are simply stated, if arduous to perform. First, they must prove unconscionability. Second, they must either (1) show how this conclusion follows regardless of a contract’s adhesive character or the parties’ power disparities and demonstrate how the unconscionability defense, as used here, does not truly threaten arbitration’s basic impetus or confine it to it, or (2) argue for limiting Concepcion to its basic facts and clear holding, i.e. the invalidity of state prohibitions on class action arbitration waivers.

Defense attorneys, meanwhile, must do the opposite: (1) defend an arbitration clause’s propriety under generally applicable state law; (2) point out that Gilmer, Carnival Cruise Lines, and Concepcion foreclose any unconscionability determination even tangentially predicated on inequalities in power or adhesion contracts; and (3) demonstrate that unconscionability’s application in the case at hand imperils arbitration’s procedural informality, speed, and cost effectiveness and thus cannot be used to invalidate an arbitration clause per Concepcion. In the Fourth, Ninth, and Tenth Circuits, defense lawyers hold a stronger hand, able to invoke Noohi, Mortensen, or Walker. In the circuits where no such similarly explicit mooring can be dredged, they must content themselves with urging a trial court or appellate panel to endorse these opinions’ beguiling ratiocination.

Irrespective of the lawyer’s side, both plaintiffs and defendants must be prepared to deal with two unwelcome truths. First, contradictory, if incorrect, case law abounds. Second, the Concepcion majority said much by implication and left much to be determined by future courts, including what are the “fundamental attributes of arbitration” and whether all rules with a “disproportionate impact” on arbitration agreements or only some have survived. Unfortunately, Justice Thomas’ concurrence only further accentuates this already considerable uncertainty.


Sometimes, an opinion’s dictum changes the law’s trajectory and endows a humdrum piece with an influence not wielded by its immediately authoritative text. Concepcion’s holding, of course, has long since made its mark, having already become another bedrock of America’s arbitration jurisprudence. While many have been slow to recognize its concealed cogency, Concepcion’s dicta enshrine a new understanding of the Savings Clause possessed with equally disruptive potential. To defendants, the method of explication drawn by a departed legend affords a brand-new weapon; to plaintiffs, this same schematic further weakens an already crumbling rampart. For both, it opens a new front in a longstanding war over the merits of an ancient process favored by the commercial world’s “prosaic agencies” yet dogged by frenzied controversy.

Author Information

John C. Lynch is a partner and executive committee member with Troutman Sanders LLP in the firm’s Virginia Beach, Va., office. He can be reached at john.lynch@troutman.com.

Amir Shachmurove is an associate at the firm’s Washington office. He can be reached at ashachmurove@post.harvard.edu.

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