Reinsurance Focus

Two US Courts of Appeals recently issued opinions bearing on the unconscionability of arbitration agreements. In Coneff v. AT&T, the Ninth Circuit reversed a district court’s refusal to enforce an arbitration agreement between AT&T and current and former customers. The district court had ruled that the agreement’s class action waiver provision was unconscionable based on Washington’s state law invalidating class action waivers. The Ninth Circuit reversed, holding specifically that the Supreme Court’s recent decision in Concepcion controlled. Thus, the FAA preempted the Washington state law. Further, the Court remanded the case to the district court to apply Washington choice of law rules on the putative class action plaintiffs’ procedural unconscionability arguments. Coneff v. AT&T Corp., No. 09-035563 (9th Cir. Mar. 16, 2012).

In Quilloin v. Tenet Healthsystem Philadelphia, Inc., the Third Circuit also reversed a district court’s determination that an arbitration provision was unconscionable and unenforceable. As a threshold issue, the Third Circuit held that the plaintiff did not agree to arbitrate the question of arbitrability itself so the district court did not err in addressing the validity of the arbitration agreement. The Court applied Concepcion and found no basis for substantive unconscionability under Pennsylvania law. Specifically, the Court determined that, among other things, Pennsylvania’s prohibition against class action waivers was preempted by the FAA. Additionally, the Court ruled that the plaintiff did not lack a meaningful choice in agreeing to arbitrate, and thus raised no genuine issue of material fact with regard to procedural unconscionability. The case was reversed and remanded with instruction to stay the proceedings and compel arbitration. Quilloin v. Tenet HealthSystem Philadelphia, Inc., No. 11-1393 (3d Cir. Mar. 13, 2012).

This post written by John Black.

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