AT&T Mobility LLC v. Concepcion

Facts

The Concepcions (Plaintiffs) sued AT&T (Defendant) in federal district court in the form of a putative class action, alleging that AT&T engaged in false advertising and fraud. The plaintiffs had purchased cell phones from AT&T advertising free phones, but were charged around $30 in sales tax. During the purchase, plaintiffs signed a service agreement that contained an arbitration provision requiring all disputes between the parties to be resolved in arbitration and prohibiting class action arbitration. AT&T filed a motion to compel arbitration, based on the arbitration provision in the service agreement. The federal district court denied the motion and declined to require arbitration instead of permitting a lawsuit. Based on a California Supreme Court case, the federal district court found that the arbitration provision was unconscionable. However, a federal law, the Federal Arbitration Act, arbitration is considered “valid, irrevocable, and enforceable” to ensure “that private arbitration agreements are enforced according to their terms.”