AT&T v. Concepcion’s Rejection of the California Unconscionability Civil Code Statute

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In 1925, apparently responding to mass hostility toward arbitration agreements, Congress passed the Federal Arbitration Act (FAA), which expressly codified the enforceability of contractual arbitration provisions, “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. It is this “saving clause” that provided the most formidable logical obstacle to the AT&T v. Concepcion majority’s creation of a plausible rationale for its holding.

Later, California pioneered the doctrine of unconscionability in both its common law and its statutory law, codifying the judicial authority to refuse enforcement of an unconscionable contract in California Civil Code section 1670.5(a) (and leaving no doubt as to the State’s policy choice about unconscionable contracts). Thus, the FAA’s “saving clause” would appear to quite straightforwardly apply, to the extent that California’s unconscionability doctrine bars the enforcement of all unconscionable contracts, not just contracts with arbitration provisions deemed unconscionable.

Faced with this reading of the FAA’s plain text, the Scalia-authored AT&T majority opinion offers what would be at best a C-plus exam answer, with a convoluted analogy to a case finding “unconscionable or unenforceable as against public policy consumer arbitration agreements that fail to provide for judicially monitored discovery.” AT&T v. Concepcion, 131 S. Ct. 1740, 1747 (2011). Expounding on the same idea, the opinion notes that “[o]ther examples are easy to imagine.” Id. No doubt they are, but this raises the question: How exactly is it that California Civil Code section 1670.5(a) doesn’t apply equally to all contracts? Section 1670.5 would seem to be the exemplar of a statute that puts contracts to arbitrate on “equal footing” with other contracts—the very equality that those who campaigned against arbitration abuse sought in fighting for and passing the FAA.

Yet after meandering through the implications of imagined statutes and implicitly conceding that California’s unconscionability doctrine does in fact apply equally to all contracts, the AT&T opinion simply concludes that as an “obstacle” to arbitration, the doctrine is preempted by the FAA—notwithstanding that the text of the FAA’s “saving clause” contains no such proviso. With an unexplained departure from his strict constructionist, stick-to-the-text jurisprudence, Scalia finds endorsements of arbitration’s efficiency in its legislative history sufficient to graft the necessary exception onto the FAA saving clause—ironic in light of Scalia’s embrace of the principle that “the act cannot be held to destroy itself.” Id. at 1748. In that the only way to deal with the FAA’s saving clause was to destroy it, though, that’s exactly what happened.

The full AT&T v. Concepcion opinion is available here.