A case before the United States Supreme Court could allow corporations to use "fine print" to avoid class-action lawsuits, say consumer advocacy groups Public Citizen and the Consumer Federation of America.
The case, AT&T Mobility v. Concepcion, concerns two California residents who argue AT&T defrauded millions of customers by deceptively advertising phones as "free" and then tacking on an undisclosed $30 charge.
AT&T claims that a binding, mandatory arbitration clause in its contract forbids the class-action case and that a California ruling should be dismissed since it's blocked by a federal law.
The use of mandatory arbitration clauses and bans on class-action lawsuits has become common in consumer agreements for products and services such as credit cards, cable and Internet providers, bank accounts and home-contracting services, the Consumer Federation of America says.
Were AT&T to prevail, the CFA says, it could establish a precedent allowing businesses to use binding arbitration clauses to bar consumers from banding together to pursue class-action suits.
"A ruling by the Supreme Court in AT&T's favor would have dire consequences for the rights of consumers to obtain redress," Rachel Weintraub, CFA"s Director of Product Safety and Senior Counsel, said in a statement. "Without access to class actions, consumers will be boxed into mandatory arbitration proceedings, which are held by arbiters often handpicked by the corporation and most often side with corporations."
Public Citizen, whose attorneys are lead counsel for the Concepcions, says an AT&T victory would also prevent redress of discrimination, fraud or other violations of the law, with broad implications for the enforcement of both civil rights and consumer protections.
"When a large number of consumers have claims for small amounts, it is not feasible to pursue the claims without a class action. Concepcion is exactly that kind of case. The Concepcions allege that AT&T illegally charged them $30.11," Public Citizen said in a media advisory.
"Multiplied by the number of AT&T's California customers alone, the allegations implicate ill-gotten gains in the millions of dollars. But if consumers can litigate the claims only one by one, no one will do so, and AT&T will keep the proceeds of its illegal activity," the group added.
Amicus briefs supporting the Concepcions have been filed by a number of legal and civil rights organizations and states including Illinois, Maryland, Minnesota, Montana, New Mexico, Tennessee and Vermont. Amicus briefs supporting AT&T have been filed by various business groups, companies DirectTV and Dell, and the states of South Carolina and Utah.
Attorneys for the Concepcions and AT&T made their oral arguments before the Supreme Court on Nov. 9. According to a roundup of day-after coverage on the Public Citizen Consumer Law & Policy blog, court watchers say the Concepcions have a chance to win.
A decision is expected anytime through June 2011.
Consumer Class-Actions at Risk in AT&T Case Before Supreme Court