THIRD CIRCUIT CLARIFIES THAT FEDERAL ARBITRATION ACT DOES NOT NECESSARILY PREEMPT UNCONSCIONABILITY CHALLENGES TO CLASS ARBITRATION PROVISIONS
In an unpublished disposition, the Third Circuit vacated an order compelling arbitration of a putative class action against Verizon Wireless based on Verizon’s alleged unlawful imposition of
administrative charges on class members’ cell phone accounts. The arbitration clause in the customer agreements prohibited class arbitrations. The plaintiffs argued that arbitration provisions in contracts of adhesion that prohibit use of a class action mechanism for low-value claims are unconscionable under New Jersey law. Verizon countered that Third Circuit precedent held that the Federal Arbitration Act preempted such laws. The appellate court concluded its prior cases on the question could not be read as establishing a blanket prohibition on unconscionability challenges to class arbitration provisions since the Federal Arbitration Act permits the use of generally applicable contract defenses to attack arbitration agreements. The order compelling arbitration was vacated and the case remanded to the district court. Litman v. Cellco Partnership, No. 08-4103 (3d Cir. May 21, 2010).
This post written by Brian Perryman.
