District Court (Cal.) Rejects Contention that California Law Requires Class Action Waiver in Arbitration Clause to be Separately Highlighted

In Blau v. AT & T Mobility, 2012 WL 10546 (N.D.Cal. 2012), Judge Breyer found no unconscionability impediment to enforcing an arbitration clause with a class-action waiver in a class action case filed arising from consumer telephone contracts.

Plaintiffs filed a class action against Defendants relating to AT & T’s alleged aggressive marketing of “their service to users of smartphones and other data hungry devices,” despite “knowing [that] their network infrastructure could not possibly accommodate the demands the increased usage would cause.”   They initially brought suit in February 2011, but stipulated to stay the case pending the Supreme Court’s decision in AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011).  Following Concepcion, Plaintiffs filed an amended complaint in June 2011, adding federal claims. The Complaint includes causes of action for: (1) breach of contract-express warranty; (2) breach of contract-the implied warranty of merchantability; (3) false advertising under California Business and Professions Code § 17500; (4) unfair and deceptive acts under the Consumer Legal Remedies Act ( CLRA); (5) fraud; (6) fraud by concealment; (7) violation of the Federal Communications Act (FCA); (8) violation of the Magnuson–Moss Warranty Act (MMWA); and (9) violation of RICO.  Judge Breyer enforced the arbitration clause, rejecting Plaintiffs’ contention that California law requires the class-action waiver to be separately highlighted:

Under California law, an arbitration agreement is unenforceable if it is both procedurally and substantively unconscionable. See Davis v. O’Melveny & Meyers, 485 F.3d 1066, 1072 (9th Cir.2007). Courts use a sliding scale: the more procedural unconscionability there is, the less substantive unconscionability is required, and vice versa. See Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000). Plaintiffs argue that “In Concepcion the Supreme Court explicitly stated that States could “requir[e] class-action-waiver provision in adhesive arbitration agreements to be highlighted” and that “California has just such a rule.” Opp’n to Mot. to Compel at 12 (citing Concepcion, 131 S.Ct. at 1750 n. 6).  ¶   But Plaintiffs fail to point to “just such a rule” in California, instead relying on the holding in Armendariz, 24 Cal.4th at 114, 99 Cal.Rptr.2d 745, 6 P.3d 669, that “a contract or provision which does not fall within the reasonable expectations of the weaker or ‘adhering’ party will not be enforced against him.” Id. at 13, 99 Cal.Rptr.2d 745, 6 P.3d 669. And they argue that “[i]t does not fall within the reasonable expectations of a consumer that a corporation would ask them to sign a contract that violates the law.” Id. The Court finds that reasoning to be circular.  ¶  Moreover, Plaintiffs concede that there is no issue of consumers’ reasonable expectations if the arbitration waiver provision is “up front and bold.” Id. It is. The first page of AT & T’s terms of service advises consumers that their agreements require the use of individual arbitration to resolve disputes, “rather than jury trials or class actions.” See Rives Decl. Ex. 1 at 1, Ex. 3 at 1. It explains clearly and in boldface type: “arbitration under this Agreement will take place on an individual basis; class arbitrations and class actions are not permitted.” Id. Ex. 1 at 14, Ex. 3 at 13. As discussed above, Plaintiffs agreed to Defendants’ terms of service, and never assert that they were denied an opportunity to review all of the terms to which they were agreeing. Having agreed to the terms of service, Plaintiffs are presumed to have read them. See, e.g., Randas v. Y.M.C.A. of Metro. L.A., 17 Cal.App.4th 158, 21 Cal.Rptr.2d 245, 248 (Ct.App.1993).