Litman v. Cellco Partnership
655 F.3d 225
| 3rd Cir. | 2011Background
- Litman and Wachtel entered Verizon Wireless Customer Agreements containing a mandatory arbitration clause and a class-arbitration waiver.
- They alleged Verizon charged fixed-price customers unlawful administrative charges, constituting a unilateral price increase under the contracts.
- Litman and Wachtel asserted Muhammad v. County Bank of Rehoboth Beach, which held class arbitration waivers unconscionable under New Jersey law, rendered unenforceable, and moved to compel only individual arbitration.
- The District Court granted individual arbitration, and the Third Circuit vacated, ruling Muhammad was not preempted by the FAA and that class arbitration should be available; the Supreme Court later vacated and remanded after Concepcion.
- On remand, the court held Concepcion supersedes Homa and abrogates Muhammad, so the FAA preempts Muhammad, and the arbitration must be enforced to require individual arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Muhammad preempted by the FAA? | Litman/Wachtel argue Muhammad is not preempted. | Verizon contends FAA preempts Muhammad. | Muhammad preempted; FAA governs. |
| Does Concepcion require classwide arbitration to be available under the FAA where a contract specifies individual arbitration? | Litman/Wachtel rely on Muhammad to bar class waiver. | Verizon argues Concepcion allows class waiver rejection only under state law. | Concepcion prohibits state requirements for class arbitration; class waiver invalid. |
| What arbitration result follows from FAA preemption: enforce contract terms for individual arbitration or permit class arbitration anyway? | Litman/Wachtel seek class arbitration or unconscionability defense under state law. | Verizon seeks enforcement of individual arbitration per contract. | Arbitration must be individual; class arbitration foreclosed. |
Key Cases Cited
- Muhammad v. County Bank of Rehoboth Beach, 189 N.J. 1 (2006) (class arbitration waiver unconscionable under NJ law)
- Homa v. American Express Co., 558 F.3d 225 (3d Cir. 2009) (FAA preemption of Muhammad not held)
- Gay v. CreditInform, 511 F.3d 369 (3d Cir. 2007) (state-law preemption analysis of class waivers in PA context)
- AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) (class arbitration preempted under FAA; state rules can't force class arbitration)
- Discover Bank v. Superior Court, 30 Cal.4th 111 (2005) (California rule on class waivers preempted by FAA)
- Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA policy favoring arbitration and enforcement of arbitration agreements)