Reviving the plutocracy–U.S. Supreme Court ends consumer class actions


A win for the plutocracy*

Yesterday’s decision in AT&T Mobility LLC v. Concepcion represents a breathtakingly bad opinion that does profound harm to consumers. It’s a bit geeky, but the takeaway is that this is a huge win for the rich and powerful.

The problem-One of the favorite great business abuses of consumers is the nickel and dime charge. It’s no doubt happened to you. Your bank, credit card company, phone provider, utility, car dealer or cable company has incorrectly charged you a few bucks. Maybe it was a one-time $10 fee on your checking account, or maybe the cable TV company illegally collected a six dollar late fee. But of course, in this era of massive corporate sizing, you are one of a million customers. So at the same time you got billed ten bucks, so did a million other customers. And zotz…just like that…the bank has collected $10 million illegally from its customers.

Here is the tally for those keeping score at home: Bank illegally enriched $10 million. Consumers hosed. That’s why consumers have class actions. With capable counsel and a willing representative, consumers had the tools to fight the nickel and diming problem.

The ruling: The Court effectively ended future consumer class actions with yesterday’s decision. The Court broadly interpreted federal preemption under the Federal Arbitration Act. The Federal Arbitration Act requires courts to enforce valid arbitration agreements. State courts have been ruling that arbitration agreements that limit consumer remedies and ban class actions are not valid under state law. The U.S. Supreme Court decided that those state law rulings were entitled to no deference and were of no effect. Here is the bottom line: No state law may prevent a corporation from: 1) requiring arbitration of all disputes between the consumer and the business; and 2) from prohibiting class actions for those disputes.

What it means for consumers. The problem is that now there will be no class actions for nickel and diming cases, so when a bank, cable company, cell phone provider or car dealer illegally charges a million customers $10, their arbitration clause will be upheld, and consumers will not be able to band together into a class to recover the money.

This will take place soon with emails and letters from cable companies, credit card providers, banks, cell phone companies and the like. It will start with revisions to your credit card agreements, cell phone terms and conditions, and cable terms of service. Buried in that long document will be a change in terms that will add or change the arbitration clause. They will all contain class action bans. Thanks to the Supreme Court, they will likely be enforceable.

Consumers have now been stripped of their abilities to enforce state consumer laws by an over-zealous Supreme Court. Consumer protection will stand and fall on state regulation and state enforcement. Have you seen the state budget lately? I’m sure there’s plenty of extra cash available for consumer protection enforcement. Even with those states that can afford enforcement, the Supreme Court has forced states to increase regulation if states want to have consumer protection. Because God knows–or at least the Roberts Court knows–that private enforcement by consumer class action lawyers is bad for business.

We will either see more regulation, or–more likely–we will see no control. Most businesses operate rationally. If you tell someone that ripping off consumers for $10 million may subject them to a class action case that will cost them that much or more, they will act to avoid facing that liability. But if bending the rules gets you $10 million without consequences, we all know how it ends.

Load up the troughs and get out of the way. Those hogs are hungry!

It’s a win for the plutocrats.


*Plutocracy: “[Gk ploutokratia, fr. ploutos wealth] 1: government by the wealthy 2: a controlling class of rich men.” Webster’s New Collegiate Dictionary, p. 878 (1979)


phidda says

If the T-Mobile merger goes through, ATT will have around 126 million customers. A dollar extra charge in a month is $126,000,000,000 to their bottom line. Times that by 12 and you are talking real money.

David Sugerman says

Amazing, isn't it? And the Supreme Court is worried about those bothersome consumer class action cases. I hope they all have suck-hard AT&T service and get locked into long, lousy contracts with plenty of illegal chippy charges.

Nick Merrill says

Shameful decision! I've been calling it an oligarchy, but I think your choice of terms is more accurate -- we do live in a plutocracy. Maybe both terms work, or maybe "corporatocracy" is better. The point is, it ain't democracy and won't ever be until serious campaign finance reform is implemented.

Hopefully Ginsburg and Stevens retire quickly so President Obama can appoint sane Justices to preserve at least those seats. And hopefully Obama gets a second term (killing bin Laden almost assures it I think) and one of the less sane plutocrats on the bench is forced to resign and can be replaced with a more reality-attuned person. Alittle 5-4 going the other way the pendulum swings would be a great thing for the not-so-rich-we-can-do-whatever-we-want-and-screw-the-people-who-actually-work-for-a-living bunch.

David Sugerman says

I think our best hope on this particular action is Congressional action on arbitration. I have my doubts about that, too....

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