Supreme Court Considers Class Action Ban

Corporate interests already exercise an inordinate level of control over Americans' daily lives. This morning, in AT&T Mobility v. Concepcion, the Supreme Court heard oral arguments in a case that threatens to give yet another advantage to powerful corporations over individual Americans. AT&T is essentially asking the Court to take a wrecking ball to state consumer protection laws.

At issue is whether states have the right to protect consumers from contracts that are so unfair as to be unconscionable - where one party has so much bargaining power over the other that the weaker one has little choice but to agree to highly disadvantageous terms.

This case started when AT&T offered phone purchasers a "free" second phone, then charged the consumers for the taxes on the undiscounted price of the "free" phone. AT&T allegedly pulled this scam on thousands of its customers. One of its victims, the Concepcions, brought a class action suit against AT&T. However, AT&T had a service contract where consumers had to agree to resolve any future claims against the cell phone company through arbitration, rather than the courts. In addition, customers had to agree not to participate in any class action against AT&T. So AT&T asked the court to enforce the agreement it had imposed upon the Concepcions by throwing out the class action suit and forcing them into arbitration, one lone family against AT&T without the protections of courts of law or neutral judges.

However, the court denied AT&T's motion, determining that the "no class action" contractual provision was unconscionable under California law and, therefore, not enforceable. Moreover, the court rejected AT&T's claim that the Federal Arbitration Act preempts state law in this case, making the contract fully enforceable against the Concepcions. (The Federal Arbitration Act generally encourages courts to compel arbitration in accordance with the terms of arbitration agreements.) The Ninth Circuit upheld the lower court decision. However, hoping to get a different result from the corporate-friendly Roberts Court, AT&T appealed.

As countless Americans can attest, it is not at all uncommon for a giant telecommunications service provider to provide extremely complex monthly bills that are nearly impossible for the average person to understand. It is certainly not unheard of for such bills to hide relatively small charges for services never ordered, or mysterious taxes or fees that the company should not be charging. Unfortunately, the vast majority of consumers who are cheated in these situations don't even realize it. Moreover, because the amounts at issue are relatively little, there is little incentive for consumers to undertake the significant expenses of recovering their loss. Even when the company pays out to the tiny percentage of defrauded customers who go to the trouble to engage in lone arbitration against the company, the overall scheme remains profitable.

Class actions are a tool that allows the entire universe of cheated consumers to recoup their losses, making possible a potentially significant financial loss to the company that sets out to defraud its customers. If the Supreme Court rules for AT&T, it will devastate state-level consumer protections and essentially grant a permission slip for rampant corporate fraud against consumers.

As the Alliance For Justice points out in its excellent analysis of this case, it is not only consumer protections that are at risk should AT&T win this case. Class action suits have often been the only way for employees experiencing illegal discrimination to contest it without spending vast amounts of money and risking retaliation. Depending on how the Roberts Court rules, it may enable employers to easily cut off this avenue of anti-discrimination enforcement by simply refusing to hire anyone who does not agree to resolve future conflicts through arbitration, with a ban on class action.

As described in People For the American Way Foundation’s Rise of the Corporate Court report, the Roberts Court has not been shy in twisting the law in order to rule in favor of corporations and against average Americans. AT&T Mobility v. Concepcion may turn out to be another gift of power to the already-powerful.

PFAW