"Supreme Court Gets Into Split Over Class-Action Arbitrations"
Yesterday's Daily Journal had an article on Discover Bank v. Superior Court, ___ Cal.4th ___ (Jun. 27, 2005) (see my prior post on the case). The article mentions some of the opinions from other courts on class action waiver unconscionability, summarizes the Discover Bank opinion, then criticizes it roundly. The article concludes by saying that "[i]n the end, regardless of whether the California Supreme Court reached the correct result, the debate is sure to rage on until the U.S. Supreme Court issues its pronouncement on the matter."

I cannot agree. The U.S. Supreme Court may someday decide Federal Arbitration Act preemption, but unless its pronouncement is that all state laws relating in any way to arbitration are preempted, Discover Bank resolves any debate concerning the enforceability of class action waivers in consumer contracts of adhesion in California. This is particularly true since, as the Supreme Court observed, many class action waivers simply "waive the right to class action litigation" and have nothing to do with arbitration. (Slip op. at 2.) To the extent Discover Bank resolved the unconscionability of that kind of waiver, the issue is purely a matter of state law and will be unaffected by any U.S. Supreme Court holding.

Here's another interesting development. As I previously reported, the Court of Appeal went the other way on the unconscionability issue in Parrish v. Cingular Wireless, ___ Cal.App.4th ___ (May 18, 2005). A petition for rehearing was denied on June 17, ten days before Discover Bank was issued on June 27 (Court of Appeal docket). A petition for review was filed on June 27, the very date of the Discover Bank opinion (Supreme Court docket). [Hat tip: California Wage Law]
- posted by Kim Kralowec @ 9:12 AM