| Added On April 28, 2011
The United States Supreme Court ruled this week that AT&T subscribers are ineligible for class action status and all disputes are governed by the boilerplate language found in the original contracts between consumers and their cellular provider. California plaintiffs were seeking to establish class action status and sue AT&T over a variety of problems with the wireless service. This ruling came in opposition of a California state court holding that plaintiffs can band together in a class and recover a $30 fee assessed on the sale of a phone that was advertised as completely free.
Procedurally, California’s courts ruled in favor of plaintiffs who contended that AT&T’s boilerplate arbitration agreements did not control and disgruntled AT&T customers could sue in a court of law. The court opined that since consumers are effectively forced into signing a contract in order to receive cellular service, they should not be prohibited from filing class action lawsuits against massive wireless corporations. These decisions were reached keeping consumers in mind and recognizing the strong likelihood of strong-arm attempts by wireless providers against the embattled consumer.
Unfortunately, the Supremes saw it another way. In an opinion authored by Justice Scalia, boilerplate arbitration language is binding on the consumer despite the fact that the provisions are rarely read and most laypersons do not fully understand the implications of agreeing to settle all disputes with an arbiter as opposed to a judge.
This holding flies in the face of consumer advocacy groups who proclaim that consumers are forced between a rock and a hard place. In reality, there is a very strong likelihood that the prudent consumer is not going to expend money for an attorney and the incidental costs of arbitration over a $30 fee. They are as well ineligible for small claims court as they signed an agreement to submit to arbitration. Thus, consumers are effectively estopped from realizing any real recovery for their claims. These advocacy groups contend that class actions were designed for this type of problem and by stripping consumers of the right to form a class action they are left with no opportunity for recovery.
Curiously, this precedent hardly fits with previous holdings requiring four mega-carriers to refund millions of dollars in early termination fees. Similarly, Verizon was forced to refund users for unfounded data charges. It would be interesting to see how those cases would fare under the latest consumer law precedent.
Dissenters opined that this case has less to do with upholding vague arbitration clauses and more to do with prioritizing traditional state law values over man-made contract law.
Class action lawsuits have been helpful to consumers across the nation. In order to qualify for class action status, plaintiffs must successfully argue that they are all similarly situated with comparable injuries caused by the same product or service. Courts will often grant class action status in consumer fraud or products liability cases. Denial of class action status means that each plaintiff must sue separately. In this case, each plaintiff is prevented from suing because each signed an agreement to submit to arbitration.