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legal news & tips for employees published by Law Office of Eugene Lee


US Supreme Court Says Class Actions Can Be Banned

Have you ever sat down and read the “fine print”? That long, boring document with tiny print that falls out of the box of whatever you just bought? Me neither. But maybe we all should from now on.

In AT&T Mobility LLC v. Concepcion et ux., AT&T had charged consumers $30.22 for phones that they had advertised as “free”. That didn’t seem right to two consumers, Vincent and Liza Concepcion, who decided to bring a class action lawsuit against AT&T. The Concepcions chose to bring the lawsuit as a class action because it made no economic sense for them to individually sue AT&T for just $30.22. By bringing everyone together in a class action, the Concepcions could sue AT&T for all of the money that had been overcharged to all consumers in the class.

However, it turns out AT&T’s fine print had a clause that prohibited class actions, thereby forcing the Concepcions and other consumers to sue AT&T individually. Today, the US Supreme Court held that that obscure clause was enforceable.

What does this mean? It means companies now have the power to ban class actions against them and force consumers to bring individual lawsuits, no matter how small the amount of money at stake. Consumer-rights advocates are saying that this ruling would spell the end for small claims involving products or services. They say the devil is in the details. But in this case, it is in the fine print.

Employees are not safe either. The Concepcion ruling will likely spill over into labor and employment law cases throughout the country, as employers who read Concepcion start incorporating class action bans into their own employee policies and contracts. Also, as Andrew Cohen of the Atlantic Monthly points out, Concepcion is a foreshadowing of how the Supreme Court will likely rule on Wal-Mart v Dukes, a class action being brought by 1.5 million women against Wal-Mart for discriminatory pay practices.

Now that the Concepcions’ class action has been thrown out by the highest court in the land, it appears AT&T will get to keep the millions of dollars it fraudulently collected from consumers after all. This is because, as Justice Stephen Breyer noted in his dissent, who in their right mind is going to bother with an individual lawsuit against AT&T for $30.22?

Breyer wrote in his dissent (joined by Associated Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan):

In general agreements that forbid the consolidation of claims can lead small dollar claimants to abandon their claims rather than to litigate. I suspect that it is true even here, for as the Court of Appeals recognized, AT&T can avoid the $7,500 payout (the payout that supposedly makes the Concepcions’ arbitration worthwhile) simply by paying the claim’s face value, such that “the maximum gain to a customer for the hassle of arbitrating a $30.22 dispute is still just $30.22.” What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim? In California’s perfectly rational view, non class arbitration over such sums will also sometimes have the effect of depriving claimants of their claims (say, for example, where claiming the $30.22 were to involve filling out many forms that require technical legal knowledge or waiting at great length while a call is placed on hold). Discover Bank sets forth circumstances in which the California courts believe that the terms of consumer contracts can be manipulated to insulate an agreement’s author from liability for its own frauds by “deliberately cheat[ing] large numbers of consumers out of individually small sums of money.” Why is this kind of decision–weighing the pros and cons of all class proceedings alike–not California’s to make?

The Concepcion decision takes its place next to Citizens United v. Federal Election Commission and Lilly M. Ledbetter v. The Goodyear Tire & Rubber Co., Inc. as one of the worst decisions in recent memory to come from the Supreme Court’s conservative faction (Chief Justice Roberts and Associate Justices Antonin Scalia, Samuel Alito, Clarence Thomas and Anthony Kennedy). It is now up to Congress to pass a law that effectively overturns Concepcion, just as they overturned the Ledbetter decision with the Lilly Ledbetter Fair Pay Act of 2009.

If you believe companies and employers should not be allowed to steal even small amounts of money from their customers and employees, please write to your congressional representative and ask him or her to support H.R.1020 and S.931, both entitled “The Arbitration Fairness Act of 2009″. And look for a bill to be introduced in Congress that explicitly overturns Concepcion.