Corporate Legal Rights Grow As Courts Block Pro-Consumer Class Action Suits
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One year after a U.S. Supreme Court decision gave corporations free rein to block class action lawsuits, judges have used the decision to prevent at least 76 potential class-action suits from going forward, a new report by Public Citizen and the National Association of Consumer Advocates (NACA) has found.
The report, “ Justice Denied,” tracks the anti-consumer effects of AT&T Mobility v. Concepcion, in which the Supreme Court ruled that corporations could block consumers’ rights to sue collectively—even in the 19 states that have laws protecting such rights.
What began as a dispute over $30 between Vincent and Liza Concepcion and AT&T has turned into a legal monster worth millions of dollars to corporate bottom lines. The corporate lawyers and the court put profits before people, and a year later, we are seeing the ripple effects, as people seeking fairness are losing their legal rights.
The report details three cases in which consumers have felt the direct impact of the ruling:
• Class Actions Against Career Education Corporation (CEC). Before Concepcion, thousands of students collectively sued Career Education Corp., a company that owns a chain of for-profit culinary schools, for misrepresenting the potential earning power of its graduates. The misleading numbers enticed many students to enroll and thus take on debilitating student loans to finance their education. According to the lawsuits, students attending the schools typically emerged with debts in excess of $40,000 and were not able to obtain jobs that paid enough to provide a reasonable chance of repaying their loans. At the time of the lawsuits, CEC did not include a class-action ban in its contracts with students. The collective cases proceeded in court and resulted in payments of up to $20,000 per student. While these cases, filed before Concepcion, achieved a meaningful settlement, other cases are still pending. In a post- Concepcion era, however, students with similar collective claims may not be able to pursue redress because it would be too difficult to overcome the class-action ban the company now includes in its contracts.
• Putative Class Action Against Nissan. Matthew Wolf, a member of the Army reserves, returned an automobile before the expiration of his lease because he was deployed overseas. The Servicemembers Civil Relief Act (SCRA) clearly permits service members to terminate car leases without penalty and to recoup the pro-rated share of payments they have made in advance. But Nissan refused to reimburse the prepaid amount to the reservist. He sought a class-action lawsuit on behalf of an estimated 1,000 service members in similar situations. But, citing Concepcion, a judge ruled that he could pursue redress only for himself, not on behalf of a class.
• Putative Class Action Against T-Mobile. Trent Alvarez’s frequent use of his so-called “unlimited” data plan triggered T-Mobile to slow down his service. T-Mobile had inserted a forced arbitration agreement into the contract it required Alvarez to sign when he bought the phone, but he said he never saw it and filed a class-action complaint against T-Mobile in 2009. The company convinced the judge to suspend the case until Concepcion was decided; the court then rejected Alvarez’s argument that the class-action ban in the arbitration agreement was unenforceable.
These examples are among the dozens of instances documented in the report by Public Citizen and the NACA, revealing that the decision already has left consumers worse off. Other areas where class-action suits have been restricted include cases against payday lenders, debt collectors and banking institutions.
Technically, the court authorized companies to block class-action lawsuits by permitting them to include class-action bans in the forced arbitration clauses of their contracts. Those clauses dictate that any dispute must be settled in a private arbitration forum. By itself, the use of forced arbitration is plainly unfair for many reasons. Typically, corporations outsource the settlement of these disputes to private arbitration companies that have little intention of redressing fair grievances.