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Jordan Margolis
Jordan Margolis
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United States Supreme Court Rules in Favor of Corporations over Individual Consumers

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On April 27, 2011, the United States Supreme Court unleveled the playing field between big business and individuals by circumventing the class action mechanism consumers and employees use to fight for justice. AT&T Mobility LLC v. Concepcion, 2011 WL 1561956, holds that the Federal Arbitration Act (FAA) preempts a California state law which says that class action bans in mandatory arbitration clauses are unconscionable. The U.S. Supreme Court majority ruled that this state law requiring the availability of class action arbitration interferes with the“fundamental attributes of arbitration” and creates a scheme inconsistent with the Federal Arbitration Act.

Now, you may be wondering what this case was all about:

  • Liza and Vincent Concepcion sued AT&T in 2006, alleging that the wireless carrier defrauded millions of customers in California by advertising phones as “free,” then tacking on an undisclosed $30 charge for the phone.
  • If multiplied across all AT&T customers, the $30 charge would amount to millions of dollars in allegedly wrongful gains.
  • AT&T sought to dismiss the case by invoking a forced arbitration clause containing a class-action ban that it had placed in the Concepcion’s contract.
  • Both the California District Court and the Ninth Circuit rejected AT&T’s request, holding that the class-action ban was unconscionable under California law because it would exculpate the company from accountability for wrongdoing.

INTERESTING TO NOTE THAT:

  • Courts applying the contract law of 20 states have struck down class-action bans for the same reason – because they would function as a “get out of jail free” card for corporate wrongdoing.

What does this landmark decision mean for American businesses? Dewey & LeBoeuf LLP tells us: "Companies may now use contract provisions with California consumers that prohibit consumers from pursuing class arbitration of contract disputes. Thus, companies that do business in California should be aware that inserting a class action waiver into an arbitration clause in consumer contracts is now a viable option."

But what this decision really means is that American consumers and employees have been left with less recourse to hold corporations accountable for their widespread wrongdoings. The class action mechanism evolved in American jurisprudence to ensure than a defendant who engages in illegal activity (be it fraud, discrimination, physical harm, etc.) on a nominal, individual level must compensate all plaintiffs (in the aggregate) for their injuries.

American Associate for Justice President Gibson Vancecomments that this latest US S. Ct. decision:

"…leaves Americans with practically no recourse to challenge corporate wrongdoing and gives corporations a blueprint to draft forced arbitration clauses to avoid accountability for a wide range of unfair or illegal practices."

Courtney L. Davenport of the AAJ writes that "the dissent—written by Justice Stephen Breyer and joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan—took issue with the majority’s finding that individual arbitration is a fundamental attribute of arbitration, saying that class arbitration is a long-recognized procedure for seeking redress for injury and is necessary to protect individuals with small-dollar claims that wouldn’t be cost-efficient to bring alone."

The Supreme Court has effectively done big business’ bidding for them, and at American consumers’ expense. By preventing individuals to band together to gain equal power in court or in abritration, corporate America is free to protect their deep pockets with fine print contracts of adhesion and force unassuming individuals to forgo their basic right to sue.

Jordan Margolis, The Margolis Firm PC

www.themargolisfirm.com When An Accident Changes Your Life, We Pursue Justice For You