procured by fraud or duress

Respondents Italian Colors Restaurant and other merchants who accept American Express cards entered into agreements with petitioners American Express and its subsidiary. These agreements required that all disputes be resolved by arbitration and provided that there shall be no right or authority for any claims to be arbitrated on a class action basis. The agreements also included a jury trial waiver and specified that New York law would govern. Respondents filed a class action complaint in the United States District Court for the Southern District of New York. They alleged that American Express violated section 1 of the Sherman Act by using monopoly power in charge cards to force acceptance of credit cards at rates about 30 percent higher than competitors, seeking treble damages under section 4 of the Clayton Act for the class. Petitioners moved to compel individual arbitration under the Federal Arbitration Act. The district court granted the motion and dismissed the lawsuits. On appeal, the Court of Appeals for the Second Circuit reversed, holding the class-action waiver unenforceable because respondents had shown through an economist's declaration that expert analysis costs would be at least several hundred thousand dollars while individual recovery would be at most $38,549 after trebling. The Supreme Court granted certiorari, vacated the judgment, and remanded for consideration in light of Stolt-Nielsen S.A. v. AnimalFeeds International Corp. The Second Circuit stood by its reversal, then reconsidered sua sponte in light of AT&T Mobility LLC v. Concepcion but again reversed. It denied rehearing en banc, after which the Supreme Court granted certiorari to address whether the FAA permits invalidation of arbitration agreements that do not permit class arbitration of federal claims.

In each of three consolidated cases, an employer and an employee entered into a written contract specifying that disputes arising from the employment relationship would be resolved through individualized arbitration proceedings rather than in court. The agreements in the Ernst & Young case, for example, allowed the employee to select the arbitration provider and permitted the arbitrator to grant any relief a court could grant, but required that claims pertaining to different employees be heard in separate proceedings. After their employment ended, the employees filed suit in federal district court. They asserted claims under the Fair Labor Standards Act for unpaid overtime and related state-law claims, and they sought to litigate those claims on behalf of a nationwide class or collective group of similarly situated employees. In the Ernst & Young matter, junior accountant Stephen Morris filed such a suit after leaving the firm. The employers responded by moving to compel arbitration under the terms of the contracts. District courts in some of the cases granted the motions and ordered the employees to proceed in individual arbitrations. In the Ernst & Young case the district court compelled arbitration, but the Ninth Circuit reversed that order. Parallel proceedings occurred in the Seventh and Fifth Circuits, producing conflicting results on whether the arbitration agreements could be enforced. In 2012 the National Labor Relations Board issued its first decision addressing agreements of this type, concluding that the National Labor Relations Act rendered unlawful any contractual requirement of individualized arbitration. Before that Board decision, courts and the Board's own general counsel had treated such agreements as enforceable. The three cases reached the Supreme Court after the Court granted certiorari in 2017 to resolve the disagreement among the circuits and between the Board and several courts of appeals.

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.