The United States Supreme Court did corporations a huge favor yesterday by ruling that they can prevent their customers from bringing class action lawsuits by simply including an arbitration clause in their contracts.
The case involved a consumer who wanted to join a class action lawsuit for an alleged bogus $30 charge they and thousands of others got from AT&T. The courts in California, where the case was heard, said that even though the customer had signed an arbitration agreement prohibiting class actions, they could in fact join the lawsuit. The California courts felt that arbitration clauses that prohibit class action lawsuits shouldn't be allowed. The Supreme Court disagreed.
The purpose behind a class-action lawsuit is to give people with small disputes a way to seek relief. It doesn't make sense to sue over a $5.00 fee that was inappropriately charged, for example. But if other consumers are in the same boat, they can get together and sue as a class for a large amount - an amount worth suing over. The legal fees and effort required to go to court to recover $5, or even $500, aren't worth the end result. And you're not going to find a lawyer to take that small of a case. So, class action lawsuits allow consumers to join forces. Obviously, corporations don't like this. It costs them a lot. Not only in legal fees, but if they lose, they often have to pay large amounts (small amounts to a lot of people). It hurts the bottom line. And while the consumer may not reap much more than satisfaction, the big picture is that it stops bad practices.
So now corporations can require consumers to arbitrate their claims separately. Technically, the consumers still have a way to seek relief: They can go through arbitration. But they aren't going to be able to get a lawyer, and just about everyone won't bother. So it's not that these class action claims will simply be broken down into smaller claims. They will disappear. And as Justice Breyer pointed out, corporations can more easily get away with fraud by taking small amounts from a large group of consumers who are left with very little leverage.
So basically the next time you find out that your phone company, cable provider or someone else has ripped you and thousands of others off in the same manner, check to see if the contract you signed with them has an arbitration clause. If it does just grin and bear the loss and move on with your life.
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