Supreme Court Could Effectively Kill Class Actions

David Lazarus writes in the LA Times about the threat to class action lawsuits posed by AT&T; read the article here. In a case before the U.S. Supreme Court At&T is arguing that any business that issues a contract to customers should be able to prevent them from joining class-action lawsuits, taking away arguably the most powerful legal tool available to consumers.   A class action lawsuit is one in which a large group of people collectively bring a claim to court (or less common in which a class of defendants is being sued).

 For example suppose a telecommunications company like AT&T overcharges each customer a modest amount it might not be worth it for each of the thousands of customers to sue.  But, with a class action the plaintiffs are allowed to band together in seeking compensation from the large business. 

The ability to ban class actions would potentially also apply to employment agreements such as union contracts.  This would incentivize large employers to ignore labor laws on overtime and wage and hour issues.  

The case is AT&T Mobility vs. Concepcion. The basic question before the court is whether companies can bar class actions in the fine print of their take-it-or-leave-it contracts with customers and employees. The courts in California have ruled that class-action bans are unconscionable and contrary to public policy.

Next week the Supreme Court decides whether the Federal Arbitration Act of 1925 preempts state courts from striking down class-action bans. The federal law requires both sides in a dispute to take their grievance to an arbitrator, rather than a court, if both sides have agreed in advance to do so.

U.S. District Court for the Southern District of California ruled that a class-action ban violates state law and is not preempted by the federal law. The U.S. 9th Circuit Court of Appeals upheld the lower-court ruling last year. AT&T subsequently petitioned the Supreme Court to hear the case.  The Supreme Court is generally pro-business and so consumers are likely to be disappointed by the Supreme Court’s decision.


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