Justia Class Action Opinion Summaries

This case arose when plaintiffs filed a nationwide consumer class action against Life of the South Insurance Company (Life of the South). At issue was whether Life of the South had a right to enforce against plaintiffs the arbitration clause in the loan agreement, between plaintiffs and the car dealership where they purchased their vehicle, where the loan agreement lead plaintiffs to enter into a separate credit life insurance contract with Life of the South. The court held that the loan agreement did not show, on its face or elsewhere, an intent to allow anyone other than plaintiffs, the car dealership, and Chase Manhattan, and the assignees of the dealership of Chase Manhattan, to compel arbitration of a dispute and Life of the South was none of those. The court also held that because the only claims plaintiffs asserted were based on the terms of their credit life insurance policy with Life of the South, which did not contain an arbitration clause, equitable estoppel did not allow Life of the South to compel plaintiffs to arbitrate. Accordingly, the court affirmed the district court's denial of Life of the South's motion to compel arbitration.

Respondents filed a complaint against AT&T Mobility LLC ("AT&T"), which was later consolidated with a putative class action, alleging that AT&T had engaged in false advertising and fraud by charging sales tax on phones it advertised as free. AT&T moved to compel arbitration under the terms of its contract with respondents and respondents opposed the motion contending that the arbitration agreement was unconscionable and unlawfully exculpatory under California law because it disallowed classwide procedures. The district court denied AT&T's motion in light of Discover Bank v. Superior Court and the Ninth Circuit affirmed. At issue was whether the Federal Arbitration Act ("FAA"), 9 U.S.C. 2, prohibited states from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures. The Court held that, because it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," quoting Hines v. Davidowitz, California's Discover Bank rule was preempted by the FAA. Therefore, the Court reversed the Ninth Circuit's ruling and remanded for further proceedings consistent with the opinion.