Recently, in AT&T Mobility, LLC. v. Concepcion, the United States Supreme Court, in a 5-4 decision, overturned the Ninth Circuit’s ruling that a class action waiver ban was unenforceable under California law.  This ruling has significant consequences for many consumers, as well as employees.

Under a California law, known as the Discover Bank rule, a consumer contract that attempted to prevent consumers from brining class action was generally unenforceable.  This allowed consumers who had signed contracts that required arbitration only between that consumer and the company to ignore the contract language and bring suit in Court with other consumers who were wronged.  The benefit of this was to allow small claims that may not otherwise be pursued to be aggregated and brought as a class action.

In Conception, a married couple brought suit against AT&T claiming that the company had misled them into agreements with undisclosed fees. The Conceptions filed a class action on behalf of them and other consumers who claimed they were ripped off by the hidden fees. The company argued that the case must be brought as a single arbitration claim, and could not be brought as a consumer class action in court.  The Ninth Circuit, relying on California law, held that arbitration agreement was unenforceable. The U.S. Supreme Court disagreed. The High Court ruled that the Discover Bank rule was preempted by the Federal Arbitration Act (“FAA”) because it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” As such, AT&T was permitted to force consumers into arbitration and prevent class actions against it.

As a result of this decision, companies and employers, who generally already have arbitration provisions in their contracts, are now rushing to insert class-action waivers into their agreements. On other hand, consumer and employee advocates have strongly criticized the decision and have already started efforts to have Congress pass legislation to resolve this problem.  Critics claim that the U.S. Supreme Court has essentially gutted class-action litigation, leaving room for companies to rip off consumers for small amounts and never be punished.  As the dissent in Conception pointed out, “What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?”  For consumers’ sake, hopefully Congress will take action soon. Moreover, it may be for the sake of employees as well, as many believe that this ruling will be held applicable in employment contracts as well.

While the Concepcion decision clearly damages the rights of consumers and employees, and Congress needs to do something to remedy this problem, there are numerous strong arguments to be made to protect the rights of consumers and employees, and to permit class-actions lawsuits, even in face of arbitration agreements that explicitly waive class-action lawsuits.  To handle these tough arguments, you need a qualified attorney.

For more information, or if you need legal assistance, please contact the Wagner Legal Group, P.C. at (310) 857-5293 or fill out our contact form on the website.