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Plaintiffs were Discover cardholders whose cardholder agreements with Discover Bank were modified after the cards were issued to include a arbitration agreement that prohibited classwide arbitration. Plaintiffs filed a class action complaint against Discover Bank for allegedly deceptive practices in the collection of late payment fees, and Discover moved to compel arbitration on an individual basis. The California Supreme Court held that in some circumstances class action waivers in consumer contracts of adhesion are unconscionable and therefore unenforceable. The court reasoned that arbitration waivers in consumer contracts are in effect exculpatory clauses because the amount of damages each cardholder suffers is so small that individual cardholders are unlikely to pursue claims. The court thus reasoned that pursuing the claims on a classwide basis was the only effective way to seek redress. The court further noted the class action waiver at issue was one-sided because credit card companies do not usually bring class-action lawsuits against their customers. These two aspects of the class arbitration waivers made the clause unconscionable and thus unenforceable. The court further held that the Federal Arbitration Act does not preempt California law on the issue of unconscionability. The implications are uncertain for employers who include class action waivers in their employee arbitration agreements. Arguably, such class action waivers should be enforceable in the employment context under the court's reasoning, because individual employment claims are not typically so small that individualized arbitration is impracticable. Therefore, unlike waivers in the consumer context, such clauses do not operate as exculpatory provisions. On the other hand, some courts may see such waivers as one-sided in the employment context, just as this court did in the consumer context, because employers are unlikely to pursue classwide claims against their employees. New subscribers can register by email to Fran Penn to receive these updates by email.