Consumer Law

Supreme Court Rules 5-4: Cell Phone Provider May Not Ban Class Actions By Consumers

By Deepak Gupta

by Deepak Gupta

In a 5-4 decision, the Supreme Court has ruled that a consumer class action against a cell phone company may proceed -- despite a contract that purports to require arbitration and ban class actions. 

This is a big victory for consumers. The opinions of the Justices are available here.  Here are some of the latest headlines:

• Contracts can't stop class actions, top court says 
• Supreme Court says . . . consumers can join class actions despite signed contracts
• Consumers can't sign away class-action right

Read on for more details...

If you click on any of those links, of course, you notice that the court in question is the Supreme Court of Canada, not the Supreme Court of the United States. On Friday, the red-robed Justices in Ottawa decided a case that offers an interesting parallel to AT&T Mobility v. Concepcion.  Unlike Concepcion, the Canadian case, known as Seidel v. Telus Communications, did not rest on a finding that the the arbitration agreement or class-action ban was unconscionable under the common law of contracts.  

Instead, the question in Seidel was was whether British Columbia's consumer-protection statute precluded enforcement of a cell phone company's arbitration agreement, including its class-action ban. In Canada, the provinces are free to exclude certain categories of cases, such as a consumer cases, from arbitration. The provincial legislatures of Ontario and Quebec have done just that -- enacting legislation that clearly and unambiguously preserves consumers' right to bring class actions despite arbitration agreements. The legal question in Seidel was whether the B.C. legislation, which didn't speak as directly on the question, had the same effect. State legislatures in the United States don't have that freedom, of course, because any legislation along those lines would be preempted by the Federal Arbitration Act.

Seidel's statutory interpretation thus doesn't have much legal significance on this side of the border. But it's encouraging to see that Canadian jurists and legislators have grappled with the same policy questions and come out in favor of making the class-action device available to consumers. And it's notable that the majority and the dissent referred to U.S. jurisprudence and scholarship on class-action bans in arbitration. We're unlikely to see similar citations in Concepcion. Finally, the opening lines of the court's analysis could just as easily be describing the debate in this country: "The underlying issue in this appeal is access to justice. Each of the disputants claims to be its supporter."

Full post as published by CL&P Blog on March 21, 2011 (boomark / email).