The Supreme Court’s 5-to-4 vote in AT&T Mobility v. Concepcion is a huge gift of non-accountability to America’s corporations. By upholding the arbitration clause in AT&T’s customer agreement requiring the signer to waive the right to take part in a class action, the court provided other corporations with a clear model of how to avoid class actions. But that was given even greater effect when the ruled out class-based arbitrations.
These are major losses for individuals who may not have the resources to challenge big companies in court or through arbitration, particularly for small amounts for the consumer that with the power of a large market segment add up to millions for a corporation.
When Vincent and Liza Concepcion signed a two-year contract for AT&T cellphone service, they received what they were told were two free phones. AT&T then charged them $30.22 in sales tax for the phones. They sued the company for fraud in federal court and their case and another were consolidated as a class action.
AT&T argued that the contract required the Concepcions to submit their claim to individual arbitration. A federal trial court, upheld by the United States Court of Appeals for the Ninth Circuit, struck down the AT&T arbitration clause as unconscionable under California law and allowed the plaintiffs to move forward against the company in a class action in federal court.
But Justice Antonin Scalia, writing for the majority, reversed that decision and, in a shocking example of judicial activism, ruled that class-based arbitrations also would not be permitted. Justice Scalia argued that “class arbitration sacrifices the principal advantage of arbitration — its informality — and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.”
In his dissent, Justice Stephen Breyer dramatically acknowledges the damage to consumers: “What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?” And he made clear that many rational couples would not press their own case for that amount if it meant “filling out many forms that require technical legal knowledge or waiting at great length while a call is placed on hold.”
Thankfully, Senators Al Franken and Richard Blumenthal and Representative Hank Johnson have just introduced the Arbitration Fairness Act. It would make required arbitration clauses unenforceable, although the bill’s chances are not strong in the current political environment.