Ninth Circuit Holds Arbitration Is Not State Action

In Roberts v. AT&T Mobility, No. 16-16915 (9th Cir. Dec. 11, 2017) (click here for a copy of the decision), the Ninth Circuit quickly dismissed a First Amendment challenge to a consumer arbitration by finding “[t]here is no state action here.”

The plaintiffs filed a class action alleging that AT&T falsely advertised their phone service as “unlimited,” while at the same slowing down data speeds or “throttling.”  In response to AT&T’s motion to compel arbitration, the plaintiffs claimed they had a First Amendment right under the Petitions Clause to bring their claims in court.  The Ninth Circuit found that the constitutional claim failed because there was no state action involved.  According to the Ninth Circuit’s decision, parties are given a private choice to arbitrate under the FAA, and that choice is not attributable to the state.

I hesitate to fully accept the Ninth Circuit’s rationale for all FAA cases.  In some situations where meaningful consent is lacking, parties are forced to arbitrate under compulsion of state action.   Also, although there are many appellate opinions finding no state action in private arbitration, courts from time to time do apply due process concepts to private arbitration.  If courts require due process norms for private arbitration, the courts are arguably treating or assuming the arbitration involves state action.  For example, a Louisiana court has said the following regarding an arbitrator:

Although arbitration proceedings are not held to the same strict rules as are the courts, nonetheless, an arbitrator must be vigilant in affording basic due process requirements. The first and foremost requirement is the opportunity to present evidence and to be heard.

Pennington v. Cuna Brokerage Sec., Inc., 5 So. 3d 172, 176 (La. Ct. App. 2008).

Such statements about an opportunity to present evidence and be heard are classic judicial formulations of due process, which only applies if there is state action.  See also Reed Elsevier, Inc. v. Crockett, 734 F.3d 594, 598 (6th Cir. 2013) (acknowledging “due-process concerns” with complex procedures used in arbitration); Allstate Ins. Co. v. Fioravanti, 299 A.2d 585, 588 (Pa. 1973) (analyzing arbitration proceeding and concluding that the arbitral “hearing had the necessary essentials of due process, i.e., notice and opportunity to be heard”).

Furthermore, in AT&T Mobility LLC v. Concepcion, the Supreme Court appeared to apply due process concepts to private arbitration.  Citing its landmark decision in Phillips Petroleum Co. v. Shutts, which helped define due process rights in the context of judicial class actions, the Supreme Court in Concepcion explained that judicial class actions required several procedural protections in order for the class action to be binding on the parties.  The Court then borrowed this due process analysis from judicial class actions and applied the analysis to arbitral class actions, concluding that “[a]t least this amount of process would presumably be required for absent parties to be bound by the results of [a class action] arbitration.”  Arguably, the Supreme Court in Concepcion conceptualized arbitration as involving state action and triggering due process requirements.  In sum, there is some tension in case law regarding the existence of state action and arbitration.

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