Consumer Financial Services Law in Review: 2011's Significant Cases and Emerging Trends

The year 2011 saw an increase in civil filings in federal and state courts, fueled by the ongoing economic downturn. Many of these cases involved consumer credit disputes, foreclosures and contracts. Numerous decisions affecting both substantive law and procedural devices will significantly impact the financial services industry in the future. This article discusses several of these impor-tant cases and previews important issues to be decided in 2012. 

Supreme Court Decisions Affect Class Actions

In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the U.S. Supreme Court continued to treat arbitration clauses favorably, as was done in three 2010 decisions that enforced arbitration agreements “according to their terms.” The Federal Arbitration Act, 9 U.S.C. § 1 et seq., “reflects the fundamental principle that arbitration is a matter of contract.” (Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010); Stolt-Nielson S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010); Am. Express Co. v. Italian Colors Restaurant, 130 S. Ct. 2401 (2010).) According to the Court in Concepcion, the FAA preempts states from “conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures.”

Concepcion reversed Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir. 2009), the most recent in a line of California state and federal court decisions applying Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005), to limit a company’s right to arbitrate if the arbitration clause contained a class action waiver, and thus allowed consumers to avoid arbitration by bringing suit on a classwide basis under California law. Overturning Discover Bank and its progeny, the Concepcion Court explained that “[s]tates cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” The Court clarified that the FAA applies to all consumer arbitration agreements, including those found in “contracts of adhesion,” because “the times in which consumer contracts were anything other than adhesive are long past.”