Supreme Court Issues Blow to Consumer Class Actions

 Supreme Court Issues Blow to Consumer Class Actions

By Kimberly Mirando

Before the ruling, consumers who bought a product or service had been able to band together to sue corporations in a class action lawsuit if they were dissatisfied or felt they had been cheated. This allowed consumers to bypass the often-used arbitration agreements in product and service contracts that say customers must resolve disputes against companies through individual arbitration – a costly and daunting option that keeps many consumers from taking on major corporations, but one that companies prefer because it costs them less money and allows them to avoid shelling out large awards of money. By combining their small, individual claims, consumers could bring a major lawsuit against a corporation and actually win. Customer arbitration agreements are widely used by cell phone carriers, cable providers, credit card companies, stock brokerage firms and other large businesses.

Unfortunately, in Wednesday’s decision, the Supreme Court said that under the Federal Arbitration Act companies can force these disgruntled customers to arbitrate their complaints individually, not as part of a group.

Consumer-rights advocates say this will spell the end for small claims involving products or services and that a ban on class action lawsuits would be unfair to cheated consumers. Justice Stephen G. Breyer, one of the justices that opposed the ruling, said that requiring consumers to sign arbitration agreements and forbidding class action claims allows a company to “insulate” itself “from liability for its own frauds by deliberately cheating large numbers of consumers out of individually small sums of money.”

Breyer added that a ban on class action lawsuits would prevent lawyers from representing clients for small claims. “What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?” he wrote. Three other justices joined his dissent.

Time will tell what the ruling in the AT&T Mobility v. Concepcion case will mean for future consumer class action lawsuits. Top Class Actions will continue to work for consumers in the mean time!