Friday, November 5, 2010

Would You Like a Class Action Ban With That Arbitration Clause?

Next Tuesday, the U.S. Supreme Court will hear argument in a very dangerous case for consumers: AT&T Mobility v. Concepcion. If a majority of the Supremes accept AT&T's argument, consumer class actions may be effectively wiped out as a way to combat corporate deception against individuals.

A decision in favor of AT&T would be as damaging to the rights of individual Americans as if the Court upheld a ban on individual ownership of guns. For all the folks who believe that individual gun ownership is an essential protection against an out of control government, know that the class action mechanism is an equally essential protection against the tyranny of an out of control corporate oligarchy. Without it, consumers and employees simply have no weapons with which to fight back.

Like most class actions, the Concepcion case involves an allegation that AT&T has cheated lots of its customers in a small way, by deceiving consumers about the cost of its "free" cell phones which, amazingly, turned out not to be so free. Each act of deception was fairly small, but when spread over AT&T's 60 million customers, it's big money for the corporate giant. It's the classic scam of most successful embezzling schemes: take a small amount over a long period of time from multiple people, and no one is likely to notice. If someone does, pay them back and the other 99 percent will never know.

But the Supremes aren't addressing the merits of the case. Instead, they are considering the language of AT&T's standard form, non-negotiable, take-it-or-leave-it contract, which contains an arbitration clause (surprise!) that also bans its customers from bringing a class action. The issue before the Court is whether the Federal Arbitration Act (FAA), which generally protects arbitration clauses from being treated differently than other contract provisions, also protects class action bans when they hide behind the skirt of an arbitration clause.

If AT&T gets what it's asking for, consumers will see wholesale modifications to every boilerplate contract they have with cell phone companies, cable companies, credit card companies, termite companies, etc. to include a class action ban in the arbitration clause of the contract. None of this will be negotiated or discussed with the consumer, of course. It will simply be buried in the fine print of your next bill, and consumers will be deemed to have consented to the change if they keep honoring the contract. And then the tiny bits of thievery will begin, and there will be nothing that can be done to stop it.

What do I mean by that? Well, it means that you would have no real way to seek relief from one of these corporate giants unless they steal a lot of money from you. If they just take a little every month from you and 60 million other consumers, you will each have to file a separate claim to get any relief. Good luck finding a lawyer to take a case where you've been cheated out of $10 or $30 or even $100.

I know it is not popular right now to be in favor of class actions or trial lawyers. Maybe it never has been. Class actions are routinely criticized because so many folks have received coupons from bogus class action settlements over the years, and it always seems the class action lawyers (on both sides) have been paid millions while each class member gets a coupon or a refund of some paltry amount. But the reality is that there are many class actions that have changed corporate behavior when nothing else could. And class action lawyers, myself included, routinely take on cases that will last for years with no guarantee of ever being paid a dime. There is tremendous risk involved in litigating these cases, and they serve an essential regulatory function that simply cannot be met any other way.

Even if you don't think much of consumer class actions, equally disturbing is the impact this decision, if it goes AT&T's way, could have on employees who face systemic discrimination. Historically, class actions have been a valuable tool in fighting discriminatory conduct based on race, gender, religion, age, or handicap. If class action bans like the one in Concepcion are upheld, look for every employment contract to include a similar ban. That will take away a major tool for employees in the ongoing fight against discriminatory practices by corporations, and a major motivation for corporations to comply with civil rights laws.

As usual, Paul Bland of Public Justice is involved in this fight on the side of consumers. Public Justice filed an amicus brief in the case, and Paul recently participated in an American Constitution Society panel discussion of AT&T Mobility v. Concepcion with my old law school professor, Stephen Ware, now with the University of Kansas School of Law, along with others. Here is a link to the video of the discussion on the AMS website. If you want to hear an impassioned explanation of why this case is important to consumers and employees, check out Paul's remarks (just scroll down to his name on the right side of the video). Prof. Ware's comments, from the perspective of AT&T, are not surprising from such a longtime advocate of arbitration. I can't imagine Prof. Ware ever taking a position critical of arbitration clauses.

You might want to check out these articles from the Washington Post, San Francisco Chronicle, and Los Angeles Times that discuss the case and its possible impact as well. I've also attached a link to a report from the Alliance for Justice which provides more details about the Concepcion case and some great examples of real life force-fed arbitration clauses that consumers deal with every day.

Of course, there is a bill in Congress (S. 931/H 1020) that would fix all this by amending the FAA so that it no longer applies to consumer transactions. That would solve the problem even if the Court rules in favor of AT&T. Unfortunately, most of the co-sponsors of the bill were defeated last Tuesday, and the bill is not likely to see the light of day under the new regime.

That leaves this Supreme Court, the most corporate-minded Supreme Court in history, to protect consumers and employees from this overreaching power grab by corporate America. Do you feel safe now?

Welcome to the new Gilded Age. Long live the Robber Barons.

B

1 comment:

Thomas said...

Great story Bert and you are right on about the importance of this decision.

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