The fate of consumer and employee class actions will rest in the hands of the Supreme Court this November. In AT&T v. Concepcion, the U.S. Supreme Court will decide whether corporations can ban class actions in the fine print of their contracts with consumers and employees. (Ruling Update)
Will the Supreme Court Issue a Wildly Activist Decision in AT&T Mobility v. Concepcion? (Update** MUST SEE Video of heated press briefing)
By Paul Bland, Claire Prestel, and Melanie Hirsch
The consumer and civil rights communities are closely watching AT&T Mobility v. Concepcion, a case that will be argued in the Supreme Court this November. Depending on how broadly the Court reads the question presented in Concepcion, the case could decide the fate of consumer and employee class actions for years to come.
The Corporate Abuse at the Heart of Concepcion
The Concepcion case involves the widespread corporate practice of using standard-form contracts to ban class actions. Many state courts have held such class-action bans unenforceable, but AT&T Mobility ("ATTM") has asked the Supreme Court to find that at least some of that state law is preempted by the Federal Arbitration Act ("FAA"). To understand why the Court's holding in Concepcion could be so significant, it is important to understand how class-action bans come to be and why they are often disastrous for consumers and employees.
Class-action bans are contract terms that purport to prevent consumers and employees from ever participating in class proceedings. As in Concepcion, they are often buried in companies' standardized arbitration clauses. Class-action bans favor companies at consumers' and employees' expense, but companies can impose them unilaterally because they draft the contracts. Consumers and employees rarely have time to read the lengthy agreements companies send them, let alone the ability to understand their dense legalese. And even if they did, few consumers or employees could negotiate the contracts' terms.
Companies love imposing class-action bans because they dramatically undermine enforcement of consumer- and employee-protection laws. Unlike European countries which mostly rely on large and powerful government agencies to enforce consumer protection and civil rights laws, the U.S. has relatively small government agencies which handle relatively few cases. Most enforcement of these laws in the U.S. is done by private parties. We rely upon individual consumers or employees who've been cheated or discriminated against to bring cases enforcing these laws. Many types of illegal behavior can be addressed through individual cases by a single consumer. But the reality is that many types of illegal behavior that harm very large numbers of people - thousands, sometimes hundreds of thousands of individuals - can only be meaningfully addressed through class actions.
In many circumstances, very few individuals would ever bring a claim (in court, or in a small claims court, or in arbitration) when their rights are violated. For a huge percentage of the population, for many types of illegal activities there are realistic barriers to individuals bringing cases on their own. Many people never realize when their rights are violated, for example, and many people do not have the knowledge or skills to begin to pursue a case to protect their rights. For those who know to seek out a lawyer, very few lawyers will handle cases that are quite small, and few if any lawyers will handle fairly complex cases that involve only a few thousand dollars.
These are only a few examples of situations where the realistic situation is that a case will either be handled on a class action basis or it will never be brought at all.
This is why large corporations are hoping that the Concepcion case will wipe away most class actions - because they want to make it impossible for the vast majority of cheated consumers and employees who've suffered discrimination to bring any kind of case, in any forum. The idea is to atomize individuals, to prevent them from grouping together in a way that lets them enforce these rights.
WILL CONCEPCION BE SIGNIFICANT?
In the worst case scenario, Concepcion could wipe away the vast majority of consumer and employee class actions for years to come. But that result is far from inevitable. For one thing, ATTM submitted a narrow question in its petition for certiorari, and if the Court sticks to the question presented (as it should), then the decision may not have much significance. On the merits, if the Court agrees with the overwhelming majority of lower courts, which have held that state law in this area is not preempted, then the decision should not have much significance. Indeed, if the Court simply applies the language of the FAA, and doesn't invent new rules of federal law for the purpose of wiping away state law, then the decision should not be significant at all.
If many members of the corporate defense bar get the Court to use this case to grant their fondest wishes for immunity from consumer protection and civil rights laws granted, however, then this case could have the kind of impact on class actions that an asteroid landing in Mexico millions of years ago had on dinosaurs.
Most cases, including Concepcion, get to the Supreme Court because the party that lost below files a petition for certiorari, presenting specific questions for the Court to review. In Concepcion, ATTM took care to draft a narrowly worded question. Essentially ATTM asked: does the FAA preempt state law prohibiting class-action bans in those cases where class actions are unnecessary for the effective vindication of consumer and employee rights?
This question may sound convoluted, and it is. The last part asks the Court to assume that individual consumers and employees can vindicate their legal rights without a class action. It's striking that ATTM asks the Court to begin with this assumption as though it were an uncontroversial and obvious abstract legal principle instead of a factual issue to be resolved on a case-by-case basis in light of actual admissible.2 In any event, if the Court limits its holding in Concepcion to the question presented, then whatever that holding is, it should not apply whenever class actions are necessary for the effective vindication of statutes aimed at protecting consumer and employee rights.
But notwithstanding ATTM's narrowly worded question, some of its corporate allies (and particularly the U.S. Chamber of Commerce) are claiming that Concepcion raises the issue of whether the FAA preempts any and all state law that would limit class-action bans embedded in arbitration clauses--regardless of whether consumers and employees have other adequate avenues for vindicating their rights. These ATTM allies argue that it does not matter what the evidence in a case would show, that it does not matter what the state law at issue says, and that there is simply a federal right for any corporation to put in any contract a term that bans class actions (so long as the contract includes an arbitration clause).
It's unlikely that the Supreme Court will be tempted to take such an extreme position. But at this point, it is clear that advocates for unlimited corporate power hope and imagine that the U.S. Supreme Court will strip state law in this way. And it's clear that a lot of corporate defense lawyers privately believe that the Court is so definitively in their clients' collective pocket that companies can get whatever they want from this case. I've heard several defense lawyers privately predict a 5-4 ruling that wipes away the vast majority of class actions in America, and I know of several cases that had been in mediation, where the evidence of liability is overwhelming and the only barrier to a recovery for the consumers was a class action ban that's unenforceable or probably unenforceable under state law, where defendants have walked away from the settlement table because they suddenly believe that the Court will uphold class-action bans in all cases and immunize them from any meaningful liability.
You have to hand it to the tort reforming corporate apologists: they are asking the Court to issue a decision that would be an immediate candidate for Most Activist Decision Ever.
READ article in its entirety at CL&P Blog
See also: Sept. 9th
Sun Sentinel Talk Back South Florida Blog
Will the Supreme Court Issue a Wildly Activist Decision in AT&T Mobility v. Concepcion? (Update** MUST SEE Video of heated press briefing)
By Paul Bland, Claire Prestel, and Melanie Hirsch
Image via Wikipedia
The Corporate Abuse at the Heart of Concepcion
The Concepcion case involves the widespread corporate practice of using standard-form contracts to ban class actions. Many state courts have held such class-action bans unenforceable, but AT&T Mobility ("ATTM") has asked the Supreme Court to find that at least some of that state law is preempted by the Federal Arbitration Act ("FAA"). To understand why the Court's holding in Concepcion could be so significant, it is important to understand how class-action bans come to be and why they are often disastrous for consumers and employees.
Class-action bans are contract terms that purport to prevent consumers and employees from ever participating in class proceedings. As in Concepcion, they are often buried in companies' standardized arbitration clauses. Class-action bans favor companies at consumers' and employees' expense, but companies can impose them unilaterally because they draft the contracts. Consumers and employees rarely have time to read the lengthy agreements companies send them, let alone the ability to understand their dense legalese. And even if they did, few consumers or employees could negotiate the contracts' terms.
Companies love imposing class-action bans because they dramatically undermine enforcement of consumer- and employee-protection laws. Unlike European countries which mostly rely on large and powerful government agencies to enforce consumer protection and civil rights laws, the U.S. has relatively small government agencies which handle relatively few cases. Most enforcement of these laws in the U.S. is done by private parties. We rely upon individual consumers or employees who've been cheated or discriminated against to bring cases enforcing these laws. Many types of illegal behavior can be addressed through individual cases by a single consumer. But the reality is that many types of illegal behavior that harm very large numbers of people - thousands, sometimes hundreds of thousands of individuals - can only be meaningfully addressed through class actions.
In many circumstances, very few individuals would ever bring a claim (in court, or in a small claims court, or in arbitration) when their rights are violated. For a huge percentage of the population, for many types of illegal activities there are realistic barriers to individuals bringing cases on their own. Many people never realize when their rights are violated, for example, and many people do not have the knowledge or skills to begin to pursue a case to protect their rights. For those who know to seek out a lawyer, very few lawyers will handle cases that are quite small, and few if any lawyers will handle fairly complex cases that involve only a few thousand dollars.
These are only a few examples of situations where the realistic situation is that a case will either be handled on a class action basis or it will never be brought at all.
This is why large corporations are hoping that the Concepcion case will wipe away most class actions - because they want to make it impossible for the vast majority of cheated consumers and employees who've suffered discrimination to bring any kind of case, in any forum. The idea is to atomize individuals, to prevent them from grouping together in a way that lets them enforce these rights.
WILL CONCEPCION BE SIGNIFICANT?
In the worst case scenario, Concepcion could wipe away the vast majority of consumer and employee class actions for years to come. But that result is far from inevitable. For one thing, ATTM submitted a narrow question in its petition for certiorari, and if the Court sticks to the question presented (as it should), then the decision may not have much significance. On the merits, if the Court agrees with the overwhelming majority of lower courts, which have held that state law in this area is not preempted, then the decision should not have much significance. Indeed, if the Court simply applies the language of the FAA, and doesn't invent new rules of federal law for the purpose of wiping away state law, then the decision should not be significant at all.
If many members of the corporate defense bar get the Court to use this case to grant their fondest wishes for immunity from consumer protection and civil rights laws granted, however, then this case could have the kind of impact on class actions that an asteroid landing in Mexico millions of years ago had on dinosaurs.
For the Court to Wipe Away Consumer and Employee Class Actions, It Will Have to Ignore ATTM's Question Presented.
Most cases, including Concepcion, get to the Supreme Court because the party that lost below files a petition for certiorari, presenting specific questions for the Court to review. In Concepcion, ATTM took care to draft a narrowly worded question. Essentially ATTM asked: does the FAA preempt state law prohibiting class-action bans in those cases where class actions are unnecessary for the effective vindication of consumer and employee rights?
This question may sound convoluted, and it is. The last part asks the Court to assume that individual consumers and employees can vindicate their legal rights without a class action. It's striking that ATTM asks the Court to begin with this assumption as though it were an uncontroversial and obvious abstract legal principle instead of a factual issue to be resolved on a case-by-case basis in light of actual admissible.2 In any event, if the Court limits its holding in Concepcion to the question presented, then whatever that holding is, it should not apply whenever class actions are necessary for the effective vindication of statutes aimed at protecting consumer and employee rights.
But notwithstanding ATTM's narrowly worded question, some of its corporate allies (and particularly the U.S. Chamber of Commerce) are claiming that Concepcion raises the issue of whether the FAA preempts any and all state law that would limit class-action bans embedded in arbitration clauses--regardless of whether consumers and employees have other adequate avenues for vindicating their rights. These ATTM allies argue that it does not matter what the evidence in a case would show, that it does not matter what the state law at issue says, and that there is simply a federal right for any corporation to put in any contract a term that bans class actions (so long as the contract includes an arbitration clause).
It's unlikely that the Supreme Court will be tempted to take such an extreme position. But at this point, it is clear that advocates for unlimited corporate power hope and imagine that the U.S. Supreme Court will strip state law in this way. And it's clear that a lot of corporate defense lawyers privately believe that the Court is so definitively in their clients' collective pocket that companies can get whatever they want from this case. I've heard several defense lawyers privately predict a 5-4 ruling that wipes away the vast majority of class actions in America, and I know of several cases that had been in mediation, where the evidence of liability is overwhelming and the only barrier to a recovery for the consumers was a class action ban that's unenforceable or probably unenforceable under state law, where defendants have walked away from the settlement table because they suddenly believe that the Court will uphold class-action bans in all cases and immunize them from any meaningful liability.
You have to hand it to the tort reforming corporate apologists: they are asking the Court to issue a decision that would be an immediate candidate for Most Activist Decision Ever.
READ article in its entirety at CL&P Blog
See also: Sept. 9th
Sun Sentinel Talk Back South Florida Blog
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