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SCOTUS Deals Consumers Another Blow

SCOTUS Deals Consumers Another Blow

One of the reasons the class action lawsuit is such an effective tool at stemming corporate overreach is that it forces guilty parties to bear the consequences of their bad business decisions en masse.  A gentle fleecing of one customer for $40 a year may not seem like a big deal until tens of thousands of fleeced customers are able to aggregate their claims and place an overarching cost to the bad practice.

But thanks to the Roberts Court, businesses have much less to fear from the class action lawsuit.  That’s because, according to the holding in AT&T v. Conception, companies should be free to ban class actions in the fine print of their contracts.

The 5-4 ruling, authored by Justice Scalia, holds that corporations may use arbitration clauses to cut off consumers and employees’ right to band together through class actions to hold corporations accountable.

The decision is the most recent in a series of systematic efforts to roll back consumer protections and class action rights. In Concepcion, a cell phone customer claimed that AT&T’s contract promising a free phone did not mention a $30.22 sales tax charge.  The customer sued, but AT&T argued the suit customer’s claim was barred by the arbitration provision in his contract. 

Relying on a California Supreme Court decision, the California district court ruled the arbitration clause was unconscionable under California law because it prohibited class action proceedings. 

Writing for the majority, Justice Scalia said that the California law was trumped by the Federal Arbitration Act and stood in the way of federal interests.  Even though the FAA contains a “savings clause” that permits arbitration agreements to be declared unenforceable “upon such grounds as exist at law or in equity for the revocation of any contract”, Justice Scalia said that the statute “does not give states free rein to adopt policies that discriminate against arbitration or interfere with its central mechanisms.”

Once again, the Court’s conservative majority is for states rights, except when he’s against them. 

The decision may not bode well for the other big class action under the Court’s consideration, Wal-Mart v. Dukes, the nation’s largest ever employment discrimination class action, and threatens to reach even further.

One potential result could be that virtually no consumer or employee cases involving small claims get heard anywhere.  Many states have consumer protections laws that have deemed provisions banning class actions as unconscionable.  But in finding those laws preempted the Roberts Court has effectively given the green light to business to force consumers to sign away rights as part of doing business.

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photo courtesy of steakpinball via Flickr

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130 comments

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2:04AM PDT on Oct 22, 2012

When Americans failed to heed the warning from Eisenhower in his farewell speech to the nation to beware of the coming military /industrial alliance. So today, nobody can complain what companies are doing to them. The corporations feel safe in the knowledge that the military protects them due to their alliance that America and the world for that matter were warned about all those years ago. Kennedy did his best to overturn this alliance and was executed by elements in his government as an example to others what would happen to anyone who attempted to dismantle this alliance.

7:16AM PDT on Aug 1, 2011

A late comment, but one i just thought of.

Lifetime appointments of these judges were supposed to make them above politics, so they could not be removed based on a political agenda. In fact, the opposite has been the result: they've been able to disregard justice and the law to advance a political agenda without any consequences!

There IS a way to hit back. Have a ballsy, well-moneyed, and publicity conscious multi-state law firm with a strong consumer advocacy bent, such as Fieger Law, based in Michigan, take a clear and obvious mass rip-off and pursue EACH slam-dunk CASE individually, at MASSIVE legal cost to the offending company, in addition to the individual payoffs They will then be BEGGING to make it a class-action.

I'd bet dollars to donuts someone like Fieger would jump at the opportunity to make the point, and get some good publicity in the process.

9:25PM PDT on May 24, 2011

This is disgusting. Corporate law exceeds US law? Must be what Mussolini forgot to do.

Cat skinning 201. Consumer association or others can review such contracts - any containing class action lawsuit EXCLUSIONS should be exposed on net & boycotted. Same effect as class action!
Who needs a fascist supreme court?

9:24PM PDT on May 24, 2011

This is disgusting. Corporate law exceeds US law? Must be what Mussolini forgot to do.

Cat skinning 201. Consumer association or others can review such contracts - any containing class action lawsuits should be exposed on net & boycotted. Same effect as class action!
Who needs a fascist supreme court?

6:47PM PDT on May 15, 2011

JW H.
I quess Jesus was an arrogant progressive

7:52AM PDT on May 7, 2011

This is why we must come together as a nation, it is a siege and if we don't stop the attack America as we know it will be gone. It will be back to public housing or to the poor farm for most of the working class.

9:55AM PDT on May 6, 2011

Boycott companies that have restrictive arbitration clauses!

Easier said than done, but our response should be to form consumer's unions which list companies that do/do not have such clauses, in order to break monopolistic practices by giants like ATT and provide better consumer choice. For instance, Credo Mobile does not have such a clause.

Enlisting the help of Consumer Reports and the Better Business Bureau would be a start. The giant companies want to keep squeezing and ripping off the U.S. consumer? Heck with 'em and buy from small companies!

Of course the right-wing meme is: 'unions bad, giant companies good.' Our rejoinder: 'giant companies bad, consumer choice good.'

In less Flinstonian terms, in NO WAY have Smith, Ricardo, Galbraith or any other conservative economists ever argued that consumers do not have the right to organize their buying power to seek better marketplace choice, in fact they advocate it as an important aspect of price levelling.

Further, no serious economist has ever argued that labor or wages cannot be bargained for or traded in a futures market like any other commodity.

Econ 101: 'unions good. No choices bad', or:
'consumer choice good. Monopolies bad.'

11:00PM PDT on May 5, 2011

As long as a 5-4 GOP majority remains in the SCOTUS, rulings will ALWAYS be in favor of large corporations, the religious right, and anything supported by Republicans. So much for "justice"...

3:46PM PDT on May 4, 2011

Ira - You are praying for someone to die? And you call yourself a progressive?
Susan - when are you going to give away more of your money? What right to you have to take what isnt yours or demand that someone else has to give something away - what arrogance.

12:23PM PDT on May 4, 2011

That's right Peggy W. they are all wannabies! They follow the money and are delutional, as the rich will never part with it nor share it as they have so often proven.

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