Class action waivers still unconscionable in California: Discover Bank v. Superior Court
Last Monday, June 27, the Supreme Court held that "at least under some circumstances, the law in California is that class action waivers in consumer contracts of adhesion are unenforceable, whether the consumer is being asked to waive the right to class action litigation or the right to classwide arbitration." Discover Bank v. Superior Court, ___ Cal.4th ___ (June 27, 2005) (slip op. at 2). The Court went on to explain:

We do not hold that all class action waivers are necessarily unconscionable. But when the waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then, at least to the extent the obligation at issue is governed by California law, the waiver becomes in practice the exemption of the party “from responsibility for [its] own fraud, or willful injury to the person or property of another.” (Civ. Code, § 1668.) Under these circumstances, such waivers are unconscionable under California law and should not be enforced.

(Id. at 17.) The opinion has some very strong language concerning the importance of class actions in California. Among other things, the Court observed:

[A]s the above-cited cases of this court have continually affirmed, class actions and arbitrations are, particularly in the consumer context, often inextricably linked to the vindication of substantive rights. Affixing the "procedural" label on such devices understates their importance and is not helpful in resolving the unconscionability issue.

(Id. at 15.) If the Supreme Court reaches the procedural/substantive question in the Prop. 64 retroactivity cases, this language supports the argument that the new class certification requirement is a substantive, rather than a procedural, change in the law.

(I'm back from a wonderful vacation but very annoyed with Blogger for not fixing the problem with the way the blog is displaying. At least now I'll be here to hound them about it.)
- posted by Kim Kralowec @ 10:34 AM