long-term debt

In February 2002, Vincent and Liza Concepcion entered into an agreement for the sale and servicing of cellular telephones with AT&T Mobility LLC. The contract provided for arbitration of all disputes between the parties but required that claims be brought in the parties' individual capacity and not as a plaintiff or class member in any purported class or representative proceeding. The agreement authorized AT&T to make unilateral amendments, which it did to the arbitration provision on several occasions. The parties agree that the December 2006 revisions control. The revised agreement requires customers to complete a one-page Notice of Dispute form. It allows AT&T to offer settlement. It provides that AT&T must pay all costs for nonfrivolous claims. Arbitration must take place in the county where the customer is billed. For claims of $10,000 or less, the customer may choose in-person, telephone, or submission-based proceedings. The agreement preserves the right to bring claims in small claims court. It requires AT&T to pay a $7,500 minimum recovery plus twice the claimant's attorney's fees if the arbitration award exceeds AT&T's last written settlement offer. The Concepcions purchased AT&T service advertised as including free phones but were charged $30.22 in sales tax based on the phones' retail value. In March 2006, the Concepcions filed a complaint against AT&T in the United States District Court for the Southern District of California. Their suit was consolidated with a putative class action alleging that AT&T had engaged in false advertising and fraud by charging sales tax on phones it advertised as free. In March 2008, AT&T moved to compel arbitration under the terms of its contract with the Concepcions. The Concepcions opposed the motion on the ground that the arbitration agreement was unconscionable under California law because it disallowed classwide procedures. The District Court denied AT&T's motion. It described the arbitration agreement favorably in several respects. Nevertheless, the court found the provision unconscionable under the California Supreme Court's Discover Bank decision because AT&T had not shown that bilateral arbitration adequately substituted for the deterrent effects of class actions. The Ninth Circuit affirmed. It also found the provision unconscionable under California law as announced in Discover Bank. The court held that the Discover Bank rule was not preempted by the Federal Arbitration Act because the rule was simply a refinement of the unconscionability analysis applicable to contracts generally in California. The Supreme Court granted certiorari.

Carnival Cruise Lines, Inc., a Florida corporation, sold passage tickets for a seven-day cruise aboard its ship the Tropicale to Eulala and Russel Shute, who resided in Washington. The Shutes purchased the tickets through a travel agent in Arlington, Washington. The agent forwarded the payment to Carnival's headquarters in Miami, Florida. Carnival then prepared the tickets and mailed them to the Shutes in Washington. The face of each ticket directed passengers to read the terms and conditions on the last pages. Contract page 1 stated that acceptance of the ticket constituted agreement to all terms and conditions. This included a provision that all disputes arising under or in connection with the contract would be litigated, if at all, in a court located in the State of Florida to the exclusion of the courts of any other state or country. The Shutes boarded the Tropicale in Los Angeles, California. The ship sailed to Puerto Vallarta, Mexico, and then returned to Los Angeles. While the vessel was in international waters off the Mexican coast, Eulala Shute slipped on a deck mat during a guided tour of the ship's galley and was injured. The Shutes filed a negligence suit against Carnival in the United States District Court for the Western District of Washington. Carnival moved for summary judgment. It contended that the forum-selection clause required the suit to be brought in Florida or, alternatively, that the district court lacked personal jurisdiction because Carnival's contacts with Washington were insubstantial. The district court granted the motion on personal jurisdiction grounds. The Court of Appeals for the Ninth Circuit reversed. It first concluded that Carnival's solicitation of business in Washington established sufficient contacts for personal jurisdiction. It then held that the forum-selection clause was unenforceable because it was not freely bargained for and because the Shutes were physically and financially incapable of litigating in Florida. The Supreme Court granted certiorari.

In September 1978 Gary Zurcher lost control of his Honda motorcycle on Interstate Highway 80 in Solano County, California, and collided with a tractor. Zurcher suffered severe injuries while his passenger and wife Ruth Ann Moreno was killed. In September 1979 Zurcher filed a product liability action in the Superior Court of California for Solano County against Cheng Shin Rubber Industrial Co., Ltd., the Taiwanese manufacturer of the motorcycle tube, and other defendants. Zurcher alleged that defects in the tire, tube, and sealant caused the accident. Cheng Shin filed a cross-complaint seeking indemnification from Asahi Metal Industry Co., Ltd., the Japanese manufacturer of the tube’s valve assembly. Zurcher’s claims against Cheng Shin and the other defendants were eventually settled and dismissed, leaving only Cheng Shin’s indemnity action against Asahi. Asahi is a Japanese corporation. It manufactures tire valve assemblies in Japan and sells them to Cheng Shin and other tire manufacturers for use as components in finished tire tubes, with all sales to Cheng Shin taking place in Taiwan. Asahi sold Cheng Shin 150,000 valve assemblies in 1978, 500,000 in 1979, 500,000 in 1980, 100,000 in 1981, and 100,000 in 1982. Those sales accounted for 1.24 percent of Asahi’s income in 1981 and 0.44 percent in 1982. Cheng Shin alleged that approximately 20 percent of its United States sales occur in California. In 1983 an attorney for Cheng Shin examined valve stems at one cycle store in Solano County and found that of 115 tire tubes, 12 Asahi-marked valve stems were incorporated into Cheng Shin tubes. An affidavit from a Cheng Shin manager stated that discussions with Asahi had covered worldwide sales including the United States. Asahi’s president stated the company never contemplated that its limited sales would subject it to lawsuits in California. The Superior Court denied Asahi’s motion to quash service of summons. The Court of Appeal issued a peremptory writ commanding the Superior Court to quash service. The California Supreme Court reversed. The United States Supreme Court granted certiorari.