On September 13, 2013, California’s Court of Appeals held in Morgan v. AT & T Wireless Services, Inc., 2013 WL 5034436 (Sept. 13 2013) (opinion unpublished and noncitable), that a six and a half month lag between the United States Supreme Court’s ruling in Concepcion and AT&T’s renewed motion to compel individual arbitration constituted a waiver of this right that extended to both named plaintiff’s and putative class members.
In mid-2004, a plaintiff filed a class action complaint in the Los Angeles County Superior Court after purchasing an AT&T cell phone that became useless due to changes in the AT&T wireless network. Though consumers were given replacement phones, the replacements were deemed inadequate. As such, the named plaintiff alleged violations of various consumer law protections.
Because the original contract between AT&T and the consumers required that disputes be resolved through individual binding arbitration, AT&T filed a motion to compel arbitration in mid-2005. However, soon thereafter, California held that clauses in adhesions contracts that prohibited class-wide arbitration were unconscionable in certain circumstances. The AT&T court thus denied AT&T’s motion to compel individual arbitration, but indicated that AT&T could compel class-wide arbitration. AT&T then withdrew its motion, stating that it did not wish to proceed if the class waiver provision was unenforceable.
Nearly six years later, on April 1, 2011, AT&T filed an answer to plaintiffs’ third amended complaint. Less than a month later, the United States Supreme Court held that federal arbitration law preempted state laws that prohibiting class waiver provisions. The California precedent that AT&T had relied upon when it withdrew its motion to compel arbitration was overruled. Yet, despite this change in law, AT&T continued to litigate. Over four months later, in September 2011, plaintiffs moved for class certification. AT&T still continued to litigate – undertaking significant class-certification discovery such as taking depositions and attending status conferences. Not until November 2011, six and a half months after the Concepcion ruling but less than two months after the motion for class certification was filed, did AT&T move to renew its motion to compel arbitration.
In March 2012, the trial court issued an unusual opinion, holding that although AT&T had waived its right to compel arbitration against the named plaintiffs, it had not waived its right to compel arbitration against the putative class members because a defendant cannot move to compel arbitration for putative class members until after a motion for class certification is filed. Sky Sports v. Superior Court of California. In light of this holding, the court then denied class certification, reasoning that the named plaintiffs were not typical of the class as a whole, since the putative class members were still bound to arbitrate.
On appeal, the California appellate panel found Sky Sports was not valid precedent in this case. Sky Sports featured named plaintiffs who had not signed an arbitration agreement, and thus, putative class members who both may or may not have agreed to arbitrate. Before a motion for class certification was filed, defendants in Sky Sports could not move to compel arbitration of those who had not agreed to arbitrate. Thus, defendants could not have waived this right before the motion for class certification was filed that included putative class members who had agreed to arbitrate. In the case at bar, however, both named plaintiffs and all putative class members had agreed to arbitrate – a significant distinction from Sky Sports. Thus, the appellate panel found that unlike Sky Sports nothing precluded AT&T from moving to compel arbitration soon after the Concepcion ruling. Doing so at the pre-certified stage did not cut off non-parties, i.e. the putative class members of any right to arbitrate, since the class members could still opt-out of the class and proceed with individual arbitration if the class was certified. Given this reasoning, the appellate court reversed the order denying class certification and remanded back down to the trial court.
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