AT&T Mobility LLC v. Concepcion

Facts

In February 2002, Plaintiffs, Vincent and Liza Concepcion, entered into an agreement for the sale and servicing of cellular telephones with Defendant, AT&T Mobility LLC (“AT&T”). In accordance with an AT&T advertisement, the Concepcions were not charged for new phones. They were charged, however, $30.22 in sales tax based on the phones’ retail value. The agreement provided that all the disputes between the parties would go through arbitration.

In March 2006, the Concepcions filed a complaint against AT&T in the U.S. District Court for the Southern District of California, alleging that AT&T had engaged in false advertising and fraud by charging sales tax on phones that it advertised as free. AT&T moved to compel arbitration under the terms of the agreement with the Concepcions. The Concepcions opposed the motion, arguing that the arbitration agreement was unconscionable and unlawfully exculpatory under California law. The District Court denied AT&T’s motion, finding that the arbitration provision was unconscionable because AT&T had not shown that bilateral arbitration substituted for the deterrent effects of class actions. The U.S. Court of Appeals for the Ninth Circuit affirmed, finding the provision unconscionable under California law. The U.S. Supreme Court granted certiorari.