Class-action ramifications possible for millions of consumers

"A case involving AT&T Mobil that went before the U.S. Supreme Court yesterday has sweeping ramifications for potentially millions of consumers," the Chicago Tribune said last Monday morning.

"If the court rules for the telecom," the Tribune article says, "any business that issues a contract to customers, such as for credit cards, cell phones or cable TV, could prevent them from joining class-action lawsuits…. and that could also apply to employment agreements such as union contracts."

At issue is whether the Federal Arbitration Act of 1925 pre-empts state courts from striking down class-action bans and whether companies can bar class actions in the fine print of their take-it-or-leave-it contracts with customers and employees.

The case is AT&T Mobility v. Concepcion, 09-893.

AT&T Mobility in their petition for certiorari maintains that "the lower courts are in disarray as to whether and, if so, when, the FAA preempts state-law limitations on class waivers in arbitration provisions… Courts generally would have no need to reach the FAA preemption issue unless they first were to conclude that the applicable state law would bar enforcement of the arbitration provision. But 25 States and the District of Columbia already have held that provisions that require arbitration to be conducted on an individual basis are enforceable so long as arbitration is free or inexpensive and individual remedies (including statutory fee-shifting awards) are not limited, so a preemption ruling is unlikely in cases governed by the law of those States."

In Ohio, cases such as Cuyahoga County’s Alexander v. Wells Fargo Fin. 1, and Stachurski v. DirecTV, Credit Acceptance Corp. v. Davisson, Price v. Taylor, and Howard v. Wells Fargo, Minn., “Tr.” from Ohio's Northern District Court, were among those exemplifying that position.

Concepcion's position entering the arena was that "Every federal circuit and every state supreme court to confront the question presented has held that the Federal Arbitration Act (FAA) does not preclude courts from striking down particular class-action bans as unconscionable under generally applicable state contract law…. Every federal circuit and state court of last resort to have decided the question has reached the same conclusion: The FAA does not preclude courts from striking down particular class-action bans under generally applicable state contract law -- The courts of last resort in at least nine states--Alabama, California, Illinois, Massachusetts, New Jersey, New Mexico, North Carolina, Washington, and West Virginia -- have squarely reached that conclusion."

A link to ScotusBlog's transcript of the oral arguments is available here.