Consumers filed a putative class action alleging statutory and common law consumer protection and false advertising claims under California and Alabama law, specifically alleging that AT&T falsely advertised their mobile service plans as "unlimited" when in fact it intentionally slowed data at certain usage levels. AT&T moved to compel arbitration pursuant the arbitration agreements included in their wireless data service plans and in light of the Supreme Court's 2011 ruling in AT&T Mobility LLC v. Concepcion, which held that the Federal Arbitration Act preempts state law deeming AT&T's arbitration provision to be unconscionable.
Plaintiffs opposed the motion on First Amendment grounds, arguing that an order forcing arbitration would violate the Petition Clause because they "did not knowingly and voluntarily give up their right to have a court adjudicate their claims" and could not "bring their claims in small claims court." The district court granted AT&T's motion to compel arbitration, finding that there was no state action in this case to bring the dispute within the ambit of the First Amendment. After denying reconsideration, the district court granted plaintiffs' motion to certify the order compelling arbitration for immediate interlocutory appeal, finding that there was substantial ground for difference of opinion as to whether state action existed under (1) Denver Area Edu. Telecom. Consortium, Inc. v. FCC or (2) the "encouragement" test. The Ninth Circuit granted permission to appeal.
On appeal, the Ninth Circuit read Denver Area narrowly, reasoning that the case "did not broadly rule that the government is the relevant state actor whenever there is a direct constitutional challenge to a "permissive" statute. The court also found unpersuasive plaintiffs' argument that the Federal Arbitration Act, including judicial interpretations thereof, "encourages" arbitration such that AT&T's actions are attributable to the state. The panel concluded, "[p]ermission of a private choice cannot support a finding of state action," and "private parties [do not] face constitutional litigation whenever they seek to rely on some [statute] governing their interactions with the community surrounding them." The Ninth Circuit affirmed the district court's ruling. Roberts v. AT&T Mobility, Case No. 16-16915 (9th Cir. Dec. 11, 2017).
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