In AT&T Mobility v Concepcion, (May 24, 2010), the Supreme Court will review the Ninth Circuit's decision in Laster v AT&T Mobility LLC, 584 F.3d 849 (9th Cir. 2009), which involved a consumer class action claim that AT&T's offer of a "free" phone to anyone who signs up for its service is fraudulent to the extent that the phone company charges the new subscriber sales tax on the retail value of each "free" phone. When plaintiffs sought to litigate the claim as a class action, AT&T demanded that the plaintiffs' claims be submitted to individual arbitration pursuant to the written agreement, which requires arbitration but bars class action arbitration. AT&T argued that the "premium" payment to customers under the arbitration clause (US$7,500 if the arbitrator issues an award in favour of the customer that is greater than AT&T's last written settlement offer made before the arbitrator was selected) is sufficiently generous that class action arbitration is not necessary to allow individual claimants to enforce their rights.

The Ninth Circuit held that the arbitration clause containing the class action waiver is unconscionable under California law and therefore unenforceable. The court added that the FAA does not expressly or impliedly preempt California law governing the unconscionability of class action waivers in standard form contracts, commonly used in commercial transactions with consumers.

The Supreme Court is expected to use this opportunity to clarify the law regarding class action waivers, which was left unresolved in the Court's decision in Stolt-Nielsen SA, et al. v AnimalFeeds Int'l Corp., (Apr. 27, 2010) (see Legal update, Supreme Court rules class arbitration is unavailable when agreement is silent). If the Court rules in favour of AT&T and relieves corporations of the obligation of satisfying the often strict requirements of state unconscionability law, waivers to class action arbitration will become more common in consumer contracts and less vulnerable to court challenge.