Plaintiffs present First Amendment challenge to arbitration before 9th Circuit

Judicial interpretation of the 1925 Federal Arbitration Act violates the First Amendment, an attorney representing a proposed class of consumers suing AT&T Mobility LLC argued before the 9th U.S. Circuit Court of Appeals on Tuesday.

Alexander H. Schmidt, who represents the plaintiffs, said that a string of U.S. Supreme Court decisions upholding employee and consumer arbitration agreements which preclude plaintiffs from pursuing their claims in court have rendered such contracts “state actions.”

And that means the agreements violate the First Amendment’s protection of the right to petition, he said. Roberts v. AT&T Mobility LLC, 16-16915 (9th Cir., filed Jul. 24, 2015).

“Over the last 20 years, there’s been a radical transformation in consumers’ abilities to enforce their rights in this country. It’s a change that’s impacted virtually every American,” Schmidt said, opening his argument. “Because of the proliferation of adhesion consumer arbitration contracts in a variety of industries, consumers can no longer go to court.”

The Supreme Court’s most prominent pro-arbitration ruling came in 2011, when it held in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011) that state laws invalidating arbitration clauses are pre-empted by the Federal Arbitration Act.

The 5-4 decision case has served as a bogeyman for the plaintiffs’ bar, which has decried it and a string of other arbitration decisions as a death knell to employees’ and consumers’ right to air grievances in court.

Judge Richard C. Tallman, who sat on the panel, asked whether the plaintiffs were asking the 9th Circuit to abandon that precedent.

“Are you asking us to revisit the Supreme Court’s decision in Concepcion and tell them in hindsight they were wrong?” he asked, appearing skeptical.

Schmidt denied that his argument required the 9th Circuit to declare Concepcion bad law, saying that the prior case was purely a statutory interpretation dispute, not a constitutional challenge.

But even Judge William A. Fletcher, a decidedly more liberal judge than Tallman, appeared skeptical of Schmidt’s claim.

“We see adhesion contracts every month in this court,” said Fletcher. “And the core of it is you’re going off to arbitration and you can’t go to court. They’re all over the place. And you’re saying every company that insists upon an adhesion contract that has a clause in it that says your going to arbitration violates the First Amendment?”

Schmidt rejected that conclusion, arguing that the lower court’s decision immunized the arbitration act from constitutional scrutiny.

U.S. District Judge Edward M. Chen sent the lawsuit to arbitration in 2016. The case involves a challenge of AT&T’s failure to disclose its data throttling policy for unlimited customers, alleging it is an unfair business practice. Chen found that controlling case law prohibited the suit from continuing in court.

Andrew J. Pincus, a partner at Mayer Brown LLP who successfully represented AT&T in the Concepcion case before the Supreme Court in 2011, endured far fewer questions than did his plaintiff counterpart.

“The petition clause provides only a right to present a petition,” Pincus told the panel. “It doesn’t confer any right to have that petition decided on the merits, [or] addressed. It doesn’t even give you a right to a response to the petition.”

Felix Shafir, a partner at Horvitz & Levy LLP who is uninvolved in the case, noted that the argument presented by the plaintiffs is not novel, but is usually entertained at the district court level. He said that if the 9th Circuit were to find in favor of the plaintiffs — an outcome he views as unlikely — a petition to the Supreme Court seems inevitable, he said.

“In my view, it’s more than a long shot,” Shafir said of the right to petition argument. “It’s based on erroneous premises that are deeply flawed. It’s difficult for me to see any federal appellate court agreeing with this argument.”

But Glenn Danas, a partner at Capstone Law APC who is also uninvolved in the case, said that it could serve as a vehicle to bring the constitutionality of the arbitration act before the Supreme Court, calling the argument “innovative.”

“The plaintiffs make a strong case that the petition clause is intended to protect the right to court, and trumps a more specific federal statute that has been interpreted to allow private actors to infringe the First Amendment rights of others,” he said in an email. “That’s precisely what has happened in the consumer class action context following Concepcion.

“Millions of consumers have, unknowingly, had their constitutional right to their day in court extinguished by the gloss given to the FAA,” he added. “This is not what the FAA was ever intended to cover, as the FAA was intended to govern commercial transactions between equal parties.”

By the close of the arguments, Tallman made clear the limits he saw for the petition clause.

“[I]t says you have the right to petition the government for redress of grievances,” he told Schmidt during rebuttal. “It doesn’t say that the government has to redress them. It simply says you have the right to raise them.”

Judge Michael Daly Hawkins also sat on the Tuesday panel.