Consumer Law

Supreme Court Refuses to Hear Class-Action Ban Issue

By Deepak Gupta

by Deepak Gupta

  A cutting-edge issue in the world of consumer law--and one that this blog has discussed many times before (see, e.g., here, here, and here)--is the extent to which corporations can enforce class-action bans placed in consumer adhesion contracts. Class-action bans are clauses that purport to strip consumers of the right to seek any classwide relief, whether through class-action litigation or classwide arbitration. 

The question matters because class actions are often the only thing stopping companies like cell phone or cable providers from getting away with practices that cheat large numbers of consumers out of small amounts of money. As Judge Posner has put it, "[t]he realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30." 

This morning, the U.S. Supreme Court rebuffed an attempt by one of corporate America's leading Supreme Court litigators, Carter Phillips, to get the Court to weigh in on the battle over class-action bans. Public Citizen filed the brief in opposition, and we're thrilled at the result.  The Court's decision not to hear the issue is a good sign that, at least as far as class-action bans are concerned, the Supreme Court is going to allow the law to continue to develop in a way that vindicates the rights of consumers and employees to access the courts.  (You can read an Associated Press story about the case here.)

As we explain in our brief, the state and federal courts have increasingly been holding that class-action bans in arbitration clauses are unconscionable under state contract law.  These courts have also uniformly rejected industry arguments that the Federal Arbitration Act--which demands neutrality as to arbitration--preempts state law on this issue.  The reason for that is pretty simple: The Federal Arbitration Act expressly saves generally-applicable state contract law of unconscionability from preemption.

In T-Mobile v. Laster, 07-976, the petition denied today, T-Mobile asked the Court to take a case from the Ninth Circuit, arguing that a recent Third Circuit decision (Gay v. Creditinform) created a conflict among the lower courts.  T-Mobile also filed several other petitions on the same issue, asking the Court to hold all of those cases for Laster.  Today, the Court denied Laster and two of the tag-along cases--T-Mobile v. Gatton and T-Mobile v. Ford.

You can read Public Citizen's brief in opposition to the petition here, and the petition and the rest of the briefs here.

Full post as published by CL&P Blog on May 27, 2008 (boomark / email).