High Court Hands AT&T Win in Decision Limiting Class-Action Lawsuits
The Supreme Court Wednesday ruled in favor of AT&T in a case examining whether a state can prohibit wireless contracts that allow only arbitration, not class-action lawsuits. A divided court, split along ideological lines, confirmed that the Federal Arbitration Act (FAA) places sharp limits on these lawsuits. Justices heard arguments on AT&T Mobility v. Concepcion in November (CD Nov 10 p1).
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"The switch from bilateral to 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,” Justice Antonin Scalia wrote in the majority opinion. “Class arbitration greatly increases risks to defendants. … When damages allegedly owed to tens of thousands of potential claimants are aggregated and decided at once, the risk of an error will often become unacceptable. Faced with even a small chance of a devastating loss, defendants will be pressured into settling questionable claims."
"States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons,” the court held. Scalia was joined by Chief Justice John Roberts and Justices Clarence Thomas, Anthony Kennedy and Samuel Alito. Justices Stephen Breyer, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan dissented.
The majority could find no “meaningful support” for its views in the court’s precedent, Breyer said in a dissent. He warned that agreements forbidding the consolidation of claims will mean more claimants will abandon their 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 asked.
"The opinion preserves the validity of the contracts many carriers have with their customers,” said a wireless industry attorney. “So it’s an important decision, but not as important as it would have been had it been decided the other way. I do think it will have broad significance for other consumer agreements, but that’s beyond my expertise."
Sen. Patrick Leahy, D-Vt., chairman of the Judiciary Committee, said the opinion is bad for consumers. “This is the latest in a series of cases where five conservative justices have hampered the rights of consumers to be protected by state laws,” Leahy said in a written statement. “Class actions are an effective way to ensure consumer protection, but today’s opinion by the Roberts Court continued to move in a direction that undermines this access to justice for hardworking Americans."
In 2002, Liza and Vincent Concepcion signed a service contract with AT&T to buy a phone for $149 and get a second at no charge. AT&T billed the Concepcions for $30.32 in sales tax, including on the second phone. In 2006, the Concepcions filed a class-action lawsuit arguing that they shouldn’t have to pay anything for the second phone. But the service contract they signed said any disputes they had with AT&T had to be taken to arbitration. A federal district judge in California found this prohibition to be “unconscionable” under state law and ruled that the lawsuit could proceed. The U.S. Court of Appeals for the 9th Circuit, in San Francisco, upheld the lower court and AT&T sought Supreme Court review.