This week, Legal Aid submitted an amici curiae brief to the Supreme Court of the United States in AT&T Mobility LLC v. Concepcion (No. 09-893), in support of the respondents, AT&T customers Vincent and Liza Concepcion.
The case has the potential to be a blockbuster for consumer rights. The Supreme Court will address whether businesses can ban class actions as part of mandatory arbitration clauses they have adopted in their standard form contracts with consumers (as well as employees). It has become an increasingly common practice both for businesses to include mandatory arbitration clauses within these standard form contracts—often offered to consumers on a take-it-or-leave-it basis—and to embed within these arbitration clauses a provision that bars consumers from pursuing relief as a class, whether in court or in arbitration. Courts across the country, applying the laws of twenty states, have held these class-action bans unconscionable when prohibiting class actions would effectively permit businesses to escape accountability for widespread misconduct, especially when individual losses are too small for it to be feasible for individuals to pursue separate claims.
AT&T’s wireless service agreement requires that its customers arbitrate any dispute they may have with AT&T (rather than file an action in court). The agreement prohibits customers from proceeding as a class against AT&T in any forum. The agreement also contains a “blow up” clause that specifies that if the class-action ban is held unenforceable, the entire arbitration clause would be “null and void” and any class action litigated in court. In this case, AT&T customers Vincent and Liza Concepcion filed a lawsuit alleging that AT&T had violated California consumer-protection laws by advertising wireless phones as “free” without disclosing the $30.22 fee for sales tax added to their bill. AT&T moved to compel arbitration. The Concepcions challenged the class-action ban as unconscionable.
Applying California law, the U.S. Court of Appeals for the Ninth Circuit held the class-action ban unconscionable, as effectively exculpating AT&T of liability for any possible wrongdoing. AT&T filed a petition for certiorari asking the Supreme Court to hear the case, and the Court granted it. The question before the Supreme Court is whether the Federal Arbitration Act of 1925 precludes courts from declining to enforce class-action bans when they are embedded in arbitration agreements.
The case is critically important to consumers. Legal Aid and its fellow amici are gravely concerned that if the Court accepts AT&T’s position, businesses could effectively strip consumers of their right to pursue small claims in any forum because, for small individual claims, classwide proceedings often offer the only effective means for consumers to obtain redress and to force businesses to halt illegal practices. As the amicus brief argues, class-action bans are properly held unconscionable or unfairly exculpatory where they make important contractual and statutory rights unenforceable—a circumstance that may arise when businesses have engaged in wrongful conduct that inflicts modest damages on individual consumers unlikely to have the knowledge, incentive, or effective means to obtain redress.
Joining Legal Aid on the brief were AARP, the Center for Responsible Lending, the Center for Science in the Public Interest, Consumer Action, Consumer Federation of America, the National Association of Consumer Advocates, the National Consumer Law Center, the National Consumers League, the National Legal Aid and Defender Association, Public Good, and U.S. PIRG (Public Interest Research Group).
The argument will be held on November 9 in the Supreme Court.
To see Legal Aid’s amicus brief, click here.
For a full collection of briefs and key documents in the case, see http://pubcit.typepad.com/clpblog/concepcion/.