Class Action Threat

Posted Nov. 07, 2010, at 6:48 p.m.

Just how far will the U.S. Supreme Court take its defense of corporations? An answer will come when the high court rules on a case it will hear Tuesday that could put an end to class action lawsuits.

Class action suits are those legal claims brought on behalf of a class or group of people. Class action litigants have been the victims of exposure to a carcinogen in the workplace or a drug that had adverse health effects. And often, they are victims of relatively small consumer injustices. One famous case involved those who purchased music CDs that were overpriced earlier in the decade; those who provided evidence of having purchased CDs during a certain time period were issued checks for $13.46.

In cases of catastrophic damage, such as those that result from faulty car brakes or a diet pill that causes heart attacks, as individuals begin to file legal claims, lawyers gather the cases together. By consolidating the cases, they are able to negotiate with the defendant to win a flat rate settlement. But in cases of smaller, financial damages, no individual is going to file suit for $13.46, because the legal cost will far exceed the likely award.

The case on which the Supreme Court will rule was first filed in 2006 by Vincent and Liza Concepcion. The California couple alleged that AT&T Mobility defrauded millions of consumers by advertising free cell phones, then adding a $30 fee for the phone. The Concepcions tried to bring a class action on behalf of consumers also victimized by what they argued was deceptive marketing.

AT&T responded by invoking an arbitration clause and class action ban built into the wireless contract. The lower court rejected that argument because if class actions could be so easily banned, businesses could dodge such claims and engage in unscrupulous practices. Class action bans have been struck down in 20 states, supporters of the Concepcion case say.

AT&T also invoked the Federal Arbitration Act, arguing that the company’s contract with consumers requires disputes to be resolved in binding arbitration. Critics say this is an end run around the unenforceable class action ban. AT&T wants the Supreme Court to rule that the arbitration law protects the contract’s class action suit ban.

While most Americans will never be part of a class action suit, if the court sides with AT&T, yet another consumer protection in the delicate balance of power between individual and corporation will have been crushed. While lawsuits that may be seen as frivolous could threaten to hurt businesses struggling to turn a profit, citizens must retain the right to seek redress in the courts. If not, the divide-and-conquer nature of the AT&T contract would spread quickly across the marketplace, insulating businesses and emboldening them to dabble in deception and worse.

The court has a chance to strike a blow for the middle and working classes by ruling to sustain class action suits. Its decision will speak volumes about its commitment to consumer protection.

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