by M. Todd Ratay
Before AT&T v. Concepcion, one effective, if perhaps sometimes over-utilized way consumers could keep corporations honest was through a class action lawsuit, or at least the threat of class action, to recover their damages. Take the Concepcions, for example. AT&T would not be concerned about losing a lawsuit from the Concepcions to recover the $30.22 they alleged they were defrauded in the sale of their “free” phone. But a class action, led by the Concepcions, to recover the sales taxes of thousands or hundreds of thousands of class members would be troubling, even to a company like AT&T. So much so, in fact, that AT&T and other companies would be careful to avoid activities that may cause them to defend a class action.
After Concepcion, however, companies are able to engage in these potentially questionable business practices with virtual impunity. While there is still the mechanism of arbitration for the Concepcions or any other AT&T customer to get their money back, as Justice Breyer succinctly stated in his dissent, “What rational lawyer would have signed on to represent the concepcions in litigation for the possibility of fees stemming from a $30.22 claim?” Most likely, requiring consumers to arbitrate cases on an individual basis could lead claimants to abandon small-money cases rather than litigate. There is no longer the deterrent threat of a class action to prevent them from incorrectly, improperly, or even fraudulently assessing fees on the consumer.
Consumer class actions are not the only area that will be affected by the decision. Many employers require potential employees to sign binding arbitration agreements as a condition of employment, or even be in effect without a worker’s signature when the employee begins the terms of employment. Because employment claims are typically based on federal laws, employers will likely be successful compelling individual arbitration, rather than face a class action on behalf of the entire category of employees.
Ultimately, it will be up to members of Congress to decide whether to pass legislation to limit companies’ ability to enforce binding arbitration clauses in consumer service agreements or employment contracts. Forms of this type of legislation, such as the Fairness in Arbitration Act, have been proposed in the past, and could very well be revisited in light of Concepcion. In the interim, companies will be advised to incorporate and enforce these individual arbitration clauses wherever possible. And consumers would be wise to check their phone bills.
M. Todd Ratay is an associate at Neil Dymott and concentrates his practice on the defense of healthcare professionals and general civil litigation defense. Mr. Ratay may be reached at (951) 303-3930 or tratay@neildymott.com.