Court Refuses Challenge To FINRA Rule Barring Waivers Of Class Actions, Ruling That Plaintiffs Must Exhaust Administrative Remedies

Charles Schwab & Co. v. Financial Industry Regulatory Authority, Inc., No. C-12-518 EDL (N.D. Cal. 2012), provides a new analysis in the growing body of law addressing the circumstances under which waivers of class action in arbitration provisions are valid. As we have posted on, the Supreme Court has addressed the question whether such state law can prohibit such waivers of class action treatment. We have also posted on the question whether federal law could give way in the same way as state law.

Schwab v. FINRA approaches the question in the same way initially. That is, the District Court recognized that

In AT&T Mobility, the Court held that the Federal Arbitration Act preempted California law striking down class arbitration waivers in consumer contracts as unconscionable as set forth in Discover Bank v. Superior Court, 36 Cal.4th 148 (2005). There, the California Supreme Court held that class waivers in consumer arbitration agreements are unconscionable if...