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Pre-Empting State Consumer Protection Laws, Supreme Court Rules In Favor Of Corporate Power Once Again

The conservative wing of the U.S. Supreme Court has again preempted state laws designed to protect American consumers. In yet another ruling that favors large corporations at the expense of working-class families, the Supreme Court held last week that state laws cannot override “unfair” arbitration provisions. The decision, AT&T v. Concepcion, will have devastating implications for millions of consumers because it unilaterally favors clauses imposed by corporations where consumers do not have a say. It preempts laws from about half of states that limit unjust arbitration clauses. As experts have already noted, this ruling is the “biggest ever” on class action suits.

This decision is another blow to people who want to collectively address a problem, and to states who want to find a fruitful way of addressing issues that are potentially unfair to the average consumer.

The lawsuit was originally filed by a California couple, the Concepcions, who sued a cell phone provider that charged them $30.22 in sales tax on a cell phone that was advertised as being free. The couple alleged that such a fee constituted false advertisement for working-class consumers like them; hence, they intended to enter into a class action suit to call attention to this egregious abuse, rather than submitting to a single arbitration proceeding. They based their complaint on a California law that prohibits contracts containing unconscionable clauses, enacted to prevent any fraud that leaves one contractual party on an unequal footing from the other. While state and federal courts agreed with the plaintiffs’ contention, the U.S. Supreme Court ordered that the state law contravenes the purposes of expediency behind the Federal Arbitration Act of 1925 (FAA).

Writing for the majority, Justice Antonin Scalia held that the California law stood as an obstacle to the accomplishment and execution of the intent of Congress when it enacted the FAA, which was to streamline arbitration proceedings because they are faster and cheaper. The minority, led by Justice Stephen G. Breyer, pointed to FAA’s §2 establishing that an arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” In his dissenting opinion, Justice Breyer insisted that the California law does not reject arbitration clauses altogether, but, consistent with the FAA, puts a stop to arbitration clauses that are unconscionable. Banning class action, said Justice Breyer, would prevent lawyers from representing small claims. For low-income and minority households, class action suits are often the only remedy at hand.

The decision not only applies to cell phone users, but to anyone who purchases a computer, a car, opens a bank account, or subscribes to a cable TV service. Moreover, as an article in the Los Angeles Times points out, “many employers include the same kind of fine print for new hires, blocking class-action suits for employees with discrimination or wage complaints.” In other words, this ruling is not only a setback for consumers, but also for workers, many of whom face the same hurdles when filing class action suits.

Both consumers and employees often file class action suits, not for financial gain, but to call into attention the repetitive abuses that a particular defendant makes to a class of citizens. With this decision, companies can simply add an arbitration exclusivity clause to a contract in order to take away the right to litigate a wrong. This decision is a roadblock for the millions of Americans and the states that seek to protect them. Preempting progressive state policies, as Progressive States Network has explained before, deters on-the-ground solutions to emerging problems and issues. It is time that conservatives in every branch of the government stop putting the interests of working families on the back burner.

Full Resources from this Article

Pre-Empting State Consumer Protection Laws, Supreme Court Rules In Favor Of Corporate Power Once Again

United States Supreme Court – AT&T Mobility LLC v. Concepcion
Wall Street Journal – Court Gives Business New Shield Against Class Actions
Los Angeles Times – Companies Can Block Customers’ Class-Action Lawsuits, Supreme Court Rules
Reuters – Supreme Court Rules for AT&T in Arbitration Case
Ars Technica – Supreme Court: AT&T Can Force Arbitration, Block Class-Action Suits
Progressive States Network – Protecting State Consumer Protection from Preemption in Federal Financial Reform

This article is part of PSN's email newsletter, The Stateside Dispatch.
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