3rd Circuit Weighs in on Concepcion - COTW #56

The latest Case of the Week, Litman v. Cellco Partnership, 2011 WL 3689015 (3d Cir. Aug. 24, 2011), arises from a dispute regarding Verizon's contracts for cell phone service. A number of customers attempted to file a class action lawsuit based on allegedly unlawful "administrative charges." There's only one problem... each customer's contract provided: "This Agreement doesn't permit class arbitrations" and required individual arbitration.

There's another twist though: such class arbitration waivers are "unconscionable and therefore unenforceable under New Jersey (state) law." But just one more twist: the Federal Arbitration Act(FAA) makes arbitration agreements generally enforceable save certain defenses. So, how does this interplay between the FAA and state law play out?

Well, if you've been following the Supreme Court, you may remember a case called AT&T v. Concepcion. It had a very similar setup. In Litzman, the Third Circuit described the holding in Concepcion as follows:

We understand the holding of Concepcion to be both broad and clear: a state law that seeks to impose class arbitration despite a contractual agreement for individualized arbitration is inconsistent with, and therefore preempted by, the FAA, irrespective of whether class arbitration "is desirable for unrelated reasons."

Therefore, the New Jersey stat law is preempted by the FAA and the class arbitration waiver must be enforced.

What the heck do these cell phone cases have to do with employment law? As I wrote previously, analyzing Concepcion as employment law:

[R]eplace cell phone contracts with employment contracts. Would the analysis be different? It's tough to say for certain, but I suspect employers will view this as a green light (or at least a flashing yellow) to tie employees in to arbitration agreements with class waivers. And it gives them a solid argument for enforcing those agreements.

I'll keep an eye out for such an application in the future.

Posted by Philip Miles, an attorney with McQuaide Blasko in State College, Pennsylvania in the firm's civil litigation and labor and employment law practice groups.