Although just three months have passed since the Supreme Court decided AT&T Mobility LLC v. Concepcion et ux., the signficance of the decision is already apparent. This past Thursday, in Raymond Kelly et al. v. Gateway Inc., et al., Judge Josephine Staton Tucker of the Central District of California granted Gateway Computer’s motion to compel arbitration, citing the plain languge of the Concepcion ruling.
In Gateway, the plaintiffs alleged that Gateway knowingly sold LX6810 desktop computers with defective cooling systems that caused the computers to freeze, crash or shutdown. Gateway countered with a motion to compel arbitration arguing that the plaintiffs had agreed to the terms of the Dispute Resolution Provision (DRP) in the computers’ limited warranty. The DRP required that any dispute with Gateway relating to the computers be resolved exclusively through arbitration, and that the plaintiffs waive their right to form or join a class action. The plaintiffs disagreed, asserting that the DRP was unenforceable because the class action waiver provision was substantively unconscionable.
The court rejected the plaintiffs’ arguments, concluding that Concepcion made clear that the Federal Arbitration Act preempts any conflicting state law rules, including California’s Discover Bank rule that arbitration agreements in adhesion contracts could be unconscionable. Accordingly, the class action waiver language in the DRP was not substantively unconscionable. The court further rejected the plaintiffs’ claims that the DRP was procedurally unconscionable because they could not read the paper version of the DRP until after they purchased and opened their computers’ packaging, again citing language from Concepcion: “[T]he times in which consumer contracts were anything other than adhesive are long past.”
While certainly not the last word on this topic, the Gateway ruling demonstrates the significance of Concepcion and the continuing vitality of compulsory arbitration clauses.