AT & T v. Concepcion: A Descriptive Comment: Part II

In the last post, we had seen a portion of the majority judgement in AT & T v. Concepcion. We also had comments from Mr. Sumit Rai summarizing the political facet of the case.

In this post, we summarize the rest of the majority judgement:

• A shift from bilateral to class arbitration makes the process slower and costlier. There are several procedural issues that need to be decided in a class arbitration Examples are issues such as determination of class, whether the parties are sufficiently representative of the class etc.
• According to the statistics of arbitrations conducted under the aegis of the American Arbitration Association (AAA), bilateral consumer arbitrations between January and August 2007 have taken six months on average and four months when decided on the basis of documents alone. On the other hand, class arbitrations, till 2009 september, about 283 class arbitration have been initiated under AAA. Out of 283, 162 have been settled, dismissed or withdrawn. Not even one out of the remaining 121 has been decided on merits. The median time of those cases inactive cases is 583 days and the mean is 630 days. [Median: The median of a finite list of numbers can be found by arranging all the observations from lowest value to highest value and picking the middle one. If there is an even number of observations, then there is no single middle value (Source: Wikipedia). Mean refers to the average]
• In class action, procedural formality is a necessity. If procedures are too informal, those members of the class who were absent wouldn’t be bound by the arbitration. It is unthinkable that an arbitrator should be entrusted with protecting due process rights of third parties. In fact, class arbitration was not even envisaged when the Federal Arbitration Act was enacted.
• Class arbitration increases risk for defendants. Errors in awards would not go corrected because of the limited review of arbitral awards. The Defendants would be more willing to accept costs of these errors in case these consumer disputes are bilateral rather than if the errors were made in class arbitrations where damages would be very high.
• Arbitration is not suited for class actions. In class litigation, questions of law and fact are reviewed. However, in class arbitration, review is done on very limited grounds, especially when the parties cannot contractually expand the grounds for review.
• Since the arbitration agreement provides that in case the arbitral award is greater than the last settlement offer of AT&T, AT & T would pay $ 7500 and twice the attorney fees to the petitioners. This according to both the courts below would adequately compensate the petitioners in case they were entitled to it. The District court was right in concluding that the petitioners were better of as individual petitioners than as a member of a class which would probably get relief after months, if not years and even if they succeed, they would only get a few dollars. 

The Supreme Court reversed the decision of the Circuit Court and remanded the matter to the trial court. The decision would be critically analysed in a future post.