Legal News

Are Consumer Class-Actions Bans Going the Way of the Dodo?

By Dan Slater

While consumers, according to reports, continue to get hammered in arbitration, they’re making some significant headway on the class-action front. In today’s WSJ, Nathan Koppel writes that efforts by companies to prevent consumers from pursuing class-actions are increasingly get tossed by state courts.

The dodo (Raphus cucullatus) was a flightless bird endemic to the Indian Ocean island of Mauritius. The dodo has been extinct since the mid-to-late 17th century. (Credit: Squidoo)

Over the past 10 years, companies in industries such as credit cards, technology, automotive and telecom have increasingly required customers to agree to pursue claims through arbitration and to waive their right to join class actions. But state supreme courts in New Mexico, Illinois, New Jersey, North Carolina and Washington have struck down such bans. Lawyers say these and similar rulings apply only to smaller-dollar claims in which consumers would, in effect, have no means of redress if they could not join class actions.

Last week, the New Mexico Supreme Court held that a consumer agreement prohibiting class-action suits violates that state’s public policy and is “unconscionable.” The case concerned Dell’s requirement that its customers pursue claims through arbitration, and on an individual basis only.

Companies argues that plaintiffs’ lawyers, in search of big paydays, routinely file spurious class actions that yield at most negligible awards for their clients — even though defendants often settle because of the risk of a huge verdict. Alan Kaplinsky, a Philly lawyer who assists companies in drafting arbitration clauses, says that in many state courts, “unfortunately, there is an orientation towards doing things to protect the plaintiffs’ trial bar, including ruling that consumers, in effect, have an unwaivable right to bring a class action.”

LB’ers, please weigh in: Is this a good trend in the law, or not?

Full post as published by Law Blog - WSJ.com on July 03, 2008 (boomark / email).