Consumer Law & Policy Blog

Return of the Arbitration Fairness Act

Senators Al Franken and Richard Blumenthal, along with Rep. Hank Johnson, announced today their plan to reintroduce the Arbitration Fairness Act in response to today's Supreme Court's decision in AT&T v. Concepcion. The bill, first introduced in 2007, would ban forced arbitration clauses in employment, consumer, and civil rights cases. It has faced heavy opposition from business interests, including the Chamber of Commerce.

In a statement, Franken said that the Supreme Court's decision in Concepcion "essentially insulates companies from liability when they defraud a large number of customers of a relatively small amount of money," and that the law would allow consumers to continue to "play an important role in holding corporations accountable."

In AT&T v. Concepcion, U.S. Supreme Court Deals Crushing Blow to Consumers

by Deepak Gupta

This morning, the U.S. Supreme Court dealt a crushing blow to American consumers and employees, ruling that companies can ban class actions in the fine print of contracts.

Now, whenever you sign a contract to get a cell phone, open a bank account or take a job, you may be giving up your right to hold companies accountable for fraud, discrimination or other illegal practices.

In a 5-4 vote, the justices held that corporations may use arbitration clauses to cut off consumers and employees’ right to band together through class actions to hold corporations accountable.

Class actions are an essential tool for justice in our society. Brown v. Board of Education was a class action. The fate of class actions should not be decided through the fine print of take-it-or-leave-it contracts.

The court’s decision today turns the Federal Arbitration Act of 1925 – a law that was intended to facilitate private arbitration between sophisticated companies – into a shield against corporate accountability.

Today's decision will make it harder for people with civil rights, labor, consumer and other kinds of claims that stem from corporate wrongdoing to join together to obtain their rightful compensation. 

Justice Breyer asks the critical question:  "What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim? Why is this kind of decision—weighing the pros and cons of all class proceedings alike—not California’s to make?"

Supreme Court Rules 5-4: Cell Phone Provider May Not Ban Class Actions By Consumers

by Deepak Gupta

In a 5-4 decision, the Supreme Court has ruled that a consumer class action against a cell phone company may proceed -- despite a contract that purports to require arbitration and ban class actions. 

This is a big victory for consumers. The opinions of the Justices are available here.  Here are some of the latest headlines:

• Contracts can't stop class actions, top court says 
• Supreme Court says . . . consumers can join class actions despite signed contracts
• Consumers can't sign away class-action right

Read on for more details...

Will the Supreme Court Take Up Due Process Limits on Consumer Fraud Class Actions?

by Deepak Gupta

We'll probably learn the answer tomorrow morning, at 10:00 am, when the Court issues its order list from the March 18 conference.  I think there's a good chance that the Court will decide to grant Philip Morris USA v. Jackson, a major tobacco case, known in the Louisiana courts below as Scott v. Philip Morris. (The electronic docket is here.) 

This is a big one. The tobacco companies' petition -- signed by a formidable trio of Alan Untereiner, Paul Clement and Miguel Estrada -- presents the question whether the Due Process Clause "prevents states from employing the class-action device to eliminate fundamental substantive and procedural protections that would otherwise apply to the adjudication of class members' individual claims."  Specifically, the case is about whether litigating a class action despite individual reliance issues can violate due process. Reliance is a hotly contested issue in consumer fraud class actions, though it's not usually framed in constitutional terms.

There's good reason to think that the Justices will be interested in this petition. Apart from the Court's intense interest in all things class action this term (see, e.g., Wal-Mart v. Dukes, AT&T v. Concepcion, Smith v. Bayer), there's the fact that Justice Scalia, back in September, issued a must-read in-chambers opinion granting Philip Morris's request for a stay. Not only did his opinion predict that it was "reasonably probable" that four Justices would vote to grant cert, he also told the petitioners' lawyers which issue to argue in their petition:

Supreme Court Rejects Preemption Defense, 8-0, in Product Defects Case

Good news today from the U.S. Supreme Court.

In a decision issued this morning in Williamson v. Mazda, the Court unanimously held that state-law damages claims seeking to hold an automaker accountable for its vehicle-design choices were not barred by federal regulation of motor vehicles. Justice Breyer wrote the opinion for the Court, which was joined by the Chief and Justices Scalia, Kennedy, Ginsburg, Alito, and Sotomayor; Justice Sotomayor wrote a concurring opinion and Justice Thomas concurred only in the judgment. (Justice Kagan was recused.) 

Justice Thomas's short concurrence is a particularly interesting read for those interested in the development of preemption doctrine. Building on his pathbreaking opinions in Wyeth v. Levine and other recent preemption cases, Justice Thomas takes the position that the plain text of the savings clause in the relevant statute (the Safety Act) should have governed the case, thus obviating the need to engage in any consideration of so-called purposes-and-objectives preemption. Justice Thomas's distinctive, textualist jurisprudence in this area may tip the balance in other preemption cases pending this term, including perhaps AT&T Mobility v. Concepcion.

Thanh Williamson was killed while riding in the second-row aisle seat of a Mazda minivan when it was struck head on by another vehicle. Her seat was equipped with a lap-only seatbelt, which caused fatal internal injuries when the impact of the collision caused her body to jackknife over the belt. After her death, Mrs. Williamson’s family brought suit against Mazda, alleging that the van was defective because it lacked a lap/shoulder belt for the aisle seat. When the minivan was manufactured and sold, the relevant federal safety standard allowed but did not require that seat to have a lap/shoulder belt.

The question before the Court was whether the Williamsons’ damages claims were barred by implied conflict preemption, on the theory that holding Mazda accountable for failing to install a lap/shoulder belt would pose an obstacle to the federal safety standard in effect at the time. In a unanimous decision, the Court held that the claims were not preempted. The case will now return to the trial court, where the Williamsons will have an opportunity to litigate their case on the merits.

One of my colleagues here at Public Citizen Litigation Group, Allison Zieve, helped to secure this important victory in the fight against broad theories of preemption, which are used to deny consumers access to the civil justice system. The Williamsons’ lead counsel in the Supreme Court was Martin Buchanan of San Diego. As co-counsel in the Supreme Court, Allison worked closely with Martin on briefing and argument preparation. Congratulations to Martin on such a resounding victory in his first appearance before the U.S. Supreme Court!

Letter to the Times on Consumer Class Actions

The Times recently published my letter to the editor.

Class-Action Lawsuits

To the Editor:

Re "The Arbitration War" (editorial, Nov. 27):

The legal issues before the Supreme Court in AT&T v. Concepcion may seem complex, but what's really at stake is the ability of people to band together and challenge fraud, discrimination and other wrongful practices.

AT&T wants the court to allow corporations to ban class actions through their contracts with consumers and employees. As your editorial correctly explains, AT&T is asking the court to second-guess state contract law, which protects the state's residents from such overreaching.

Although not without abuses, class actions have become an essential tool for resolving the common legal grievances of large groups of people. Brown v. Board of Education was a class action. The fate of class actions should be decided by our elected representatives, not by private legislation tucked into the fine print of take-it-or-leave-it contracts.

Deepak Gupta

Washington, Nov. 29, 2010

The writer, a lawyer with the advocacy group Public Citizen, recently argued on behalf of the consumers before the Supreme Court in AT&T v. Concepcion.

Supreme Court Grants Cert in Major Class-Action Case, Rewrites Question

by Deepak Gupta

This morning, the Supreme Court granted certiorari in a closely watched class-action case from the Ninth Circuit, Wal-Mart v. Dukes.  Although Dukes is an employment case, involving allegations of gender discrimination -- it's been called the largest class action in history -- the case is likely to have major implications for consumer class actions as well.

Dukes has already been the subject of a lot of press attention. In fact, I can't remember the last time a dispute between private parties garnered as much press at the cert stage, before the Court had even considered it.  The chatter increased even more when the Court emerged from a recent conference without granting or denying the petition. As some observers had predicted, the Court took the additional time to tinker with the two questions presented in Wal-Mart's petition:

I. Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)--which by its terms is limited to injunctive or corresponding declaratory relief--and, if so, under what circumstances.

II. Whether the certification order conforms to the requirements of Title VII, the Due Process Clause, the Seventh Amendment, the Rules Enabling Act, and Federal Rule of Civil Procedure 23.

The second question, to which most of Wal-Mart's petition was devoted, reflected an unusual kitchen-sink approach by Wal-Mart's lawyers. The Court did not grant certiorari on that unmanageably broad question. Instead, the Justices agreed to hear the first question and posed a second question of their own: "Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."

This morning's grant, together with Concepcion and Shady Grove, may reflect a growing interest among the Justices in class actions--a subject with which the Court has previously had relatively little involvement.  Lyle Denniston has more at SCOTUSblog, here.

Post-Argument Coverage of AT&T v. Concepcion

by Deepak Gupta

Because I don't have a crystal ball, I'll leave to others the task of making predictions based on yesterday's oral arguments before the U.S. Supreme Court in AT&T v. Concepcion.  (By the way, here's some of the latest scholarship on such prediction-making.)

If you want to play along at home, you can come up with your own prognostication based on the transcript, one of the excellent summaries by Professors Lawrence Cunningham or Jean Sternlight, or some of the press coverage:

• "Overall," according to SCOTUSblog, "post-argument predictions about the case’s outcome tilt toward a victory by respondents Vincent and Liza Concepcion, but not everyone was willing to make predictions based on the argument." 

• "Recent Supreme Court decisions have generally favored the enforcement of arbitration agreements and have been wary of aspects of class-action litigations. But it was hardly clear at Tuesday’s arguments that those two trends would continue in the latest case." Adam Liptak, Supreme Court Weighs Class-Action Suits, New York Times

• "A victory for consumers and class action litigators seemed possible on Tuesday as the Supreme Court heard arguments in a high-stakes dispute over clauses that block class actions as a way of resolving contract disputes." Tony Mauro, Class actions on the ropes? Not likely, National Law Journal

• "My sense tells me that the anti-consumer, anti-class action bias will win this one. Not so much on the merits, but because of the politics." Steve Berk, AT&T v. Concepcion: Almost live from the Supreme Court,The Corporate Observer

• "[I]t doesn't look as though there are too many votes at the high court to do away with the right of consumers to band together to sue the great American manufacturers of fine print." Dahlia Lithwick, Can You Hear Them Now? The Supreme Court reads the fine print on your cell phone contract, Slate

• "Based on what was said during the argument, I predict a 8-1 or 7-2 vote for the consumers and California, with Alito dissenting and Roberts a toss up. Thomas, who never speaks at oral argument, will vote for the consumers and state on federalism grounds, as he always does in FAA cases." Lawrence Cunningham, Argument in Class Waiver Case Favors Consumers, States, Concurring Opinions

• "The Supreme Court seemed disinclined to let companies use legal fine print to block class actions, with several justices suggesting they might defer to state courts that ruled in favor of consumers." Jess Bravin, Justices Question Contracts That Block Class Actions, Wall Street Journal

• "AT&T's odds are mixed: ... Justices Clarence Thomas and Antonin Scalia are sympathetic to these cases due to their states' rights ideology. But no one will be surprised if AT&T and its big business backers prevail." Stephanie Mencimer, Consumer Protection's Citizens United, Mother Jones

• "In sum, I think Respondents have to be pleased with how the argument went.  A significant number of Justices seemed to recognize that some arbitration provisions are unconscionable, and that second-guessing lower courts’ unconscionability rulings can raise some difficult federalism and administrative issues." Jean Sternlight, ADR Prof Blog

• "While Chief Justice John Roberts and Justice Samuel Alito appeared this morning to join Mr. Pincus in trying to come up with support for preemption in this case, it appears that they may come up a few votes short (with the usual caveat that it is always a risky business to predict how the Court will rule based on oral argument)." Elizabeth Wydra, ACSblog.

For you ultrawonks out there, here's even more coverage:

• David Savage, Supreme Court weighs whether consumers' small suits can be combined, Los Angeles Times
• Robert Barnes, Justices hear case on class-action arbitration, Washington Post
• Jeremy Hobson, Is banning class action lawsuits unconstitutional?, NPR Marketplace (interviewing David Lazarus of the L.A. TImes)
• Ashby Jones, Class-Action Lawyers Breathing Easier After High Court Argument, Wall Street Journal
• Bill Mears, High court to decide dispute over taxes on 'free cell phone,' CNN
• Mark Sherman, Court hears dispute over 'free' phone, Associated Press
• Joan Biskupic, Supreme Court hears sales tax case on 'free' phone, USA Today
• Jon Hood, The End of Class Actions?, Consumer Affairs
• Greg Stohr, Consumer Arbitration case divides U.S. Supreme Court, Businessweek
• Lawyers USA, Supreme Court hears AT&T class action waiver dispute, Daily Record
• Brendan Fischer, Supreme Court Considers Corporate Right to Mandatory Arbitration, Center for Media and Democracy
• David Heath, High Court Ponders If Companies Can Force Consumers to Sign Away Right to Class-Action Suits, Center for Public Integrity
• Erika Morphy, A lot hinges on SC's ruling in $30 cellphone sales case, E-Commerce Times
• Scott Lemieux, Consumer Protection at the Supreme Court, The American Prospect
• Nan Aron, Will the Supreme Court Grant Big Business a License to Steal
• Ian Milhiser, The Supreme Court's One Thousandth Cut Against Consumers, Center for American Progress

We posted some of the pre-argument coverage here -- most notably these columns by David Lazarus in the LA Times and Prof. Brian Fitzpatrick (Vanderbilt Law) in the SF Chronicle.  An archive, including all of the briefs, is available here.

Pre-argument commentary on AT&T Mobility v. Concepcion

by Deepak Gupta

Here's a roundup of some of the latest commentary on the the Concepcion case, which I'll be arguing tomorrow before the U.S. Supreme Court: 

• Brian Fitzpatrick, Supreme Court case could end class-action suits, San Francisco Chronicle
  

• David Lazarus, Consumers' right to file class actions is in danger, Los Angeles Times

• Amanda Becker, Supreme Court case involving class actions could affect waitresses' suit against Hooters, The Washington Post
  

• Matthew Hathaway, Plenty at Stake in Class Action Case Before Supreme Court, St. Louis Post-Dispatch
  

• Alliance for Justice, AT&T v. Concepcion: Will the Supreme Court Give AT&T A License to Steal?
  

• Ed Mierzwinski, Next Up For the Supreme Court That Brought You Unlimited Corporate Campaign Cash: Do Consumers Have the Right to Band Together To Fight Corporate Crime?, Huffington Post

• Stephen C. Webster, AT&T pushes Supreme Court to demolish right to join class action lawsuits, The Raw Story

• David Horton, AT&T v. Concepcion, PrawfsBlawg

• American Constitution Society, 'The Stakes are High' in AT&T V. Concepcion, ACSblog

ACS Briefing on Concepcion

Here's the video of the American Constitution Society's panel discussion on AT&T v. Concepcion held on Tuesday at the National Press Club. If you want to hear some fireworks, skip forward to the presentation by Paul Bland (scroll down on the right). For more restrained academic commentary, listen to the presentations by Nina Pillard (providing an overview of the case) and Steve Ware (flagging what he takes to be AT&T's two key arguments, both having to do with the contours of state contract law).