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PUBLIC CITIZEN AND NATIONAL ASSOCIATION OF CONSUMER ADVOCATES

April 25, 2012  

Report: In Wake of Supreme Court’s AT&T v. Concepcion Decision, Consumers Are Worse Off

Report Highlights Cases in Which the Ruling Infringed on Consumers’ Ability to Pursue Class-Action Claims

Note: Public Citizen argued before the U.S. Supreme Court on behalf of the plaintiffs in AT&T Mobility v. Concepcion. Friday marks the first anniversary of the decision.

WASHINGTON, D.C. – In the year since the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion, consumers regularly have been blocked from pursuing class-action cases, a report issued today by Public Citizen and the National Association of Consumer Advocates (NACA) reveals.

For a quarter-century, the court has held that corporations could force their customers to settle any disputes in private arbitration tribunals instead of court by inserting such language into their boilerplate contracts. In Concepcion, the court vastly expanded the reach of arbitration by ruling that corporations could block the consumers they force into arbitration from pursuing cases as a class. The ruling nullified 19 state laws that protected consumers’ ability to vindicate their rights in class actions.

Since Concepcion, judges have cited the case in decisions that stopped at least 76 potential class-action lawsuits from going forward, according to the report, “Justice Denied.” Several judges have expressed frustration that the decision has forced them to stop consumer actions that are best suited to proceed as class actions.

“Class actions are indispensable for allowing consumers to seek redress when a company’s practices harm thousands of consumers, particularly when the harm results in a small-dollar loss for each consumer,” said Christine Hines, consumer and civil justice counsel with Public Citizen and co-author of the report. “Under Concepcion, those cases can’t go forward, leaving millions of consumers without a remedy for corporate wrongdoing.”

The report describes several cases that previously could have proceeded as class actions that either have been blocked or put into jeopardy by Concepcion, including:

  • Thousands of students sued a for-profit culinary school before Concepcion for misleading students about the school’s prestige and the potential earning power they would enjoy upon graduation. There were able to achieve a meaningful settlement, including payments of up to $20,000 per student. Other cases initiated before Concepcion now are proceeding in court. Attendees of the company’s schools around the country have made allegations echoing those of plaintiffs in the ongoing and settled cases. But they may not be able to pursue redress because of Concepcion’s precedent.
  • A member of the Army reserves returned an automobile before the expiration of his lease because he was deployed overseas. The Servicemembers Civil Relief Act (SCRA) clearly permits service members to terminate car leases without penalty and to recoup the pro-rated share of payments they have made in advance. But the auto company refused to reimburse the prepaid amount to the reservist. He sought a class-action lawsuit on behalf of an estimated 1,000 service members in similar situations. But, citing Concepcion, a judge ruled that he could pursue redress only for himself, not on behalf of a class.
  • A cell phone user’s frequent use of his so-called “unlimited” data plan triggered T-Mobile to slow down his service. T-Mobile had inserted a forced arbitration agreement into the contract it required the user to sign when he bought the phone, but he said he never saw it and sued T-Mobile in 2009. The company convinced the judge to suspend the case until Concepcion was decided; the court then rejected the user’s argument that the class-action ban in the arbitration agreement was unenforceable.

“On a daily basis, NACA attorneys witness the damaging impact Concepcion has on the consumers they represent; they are increasingly unable to obtain justice in a court of law,” said Delicia Reynolds, legislative director with the National Association of Consumer Advocates (NACA). “Good class actions, which might have provided needed injunctive relief and curbed bad behavior, are not moving forward.”

Class-action lawsuits historically have provided a means to combat illegal payday lending practices, contest poor business practices and confront discriminatory auto lending. But since Concepcion, consumers often are left without a viable way to challenge such misconduct.

Congress and some federal agencies have the authority to ban forced arbitration in consumer contracts. The Consumer Financial Protection Bureau (CFPB), for example, can eliminate forced arbitration in financial services contracts. The CFPB announced Tuesday that it is beginning to study the practice. The study is a prerequisite to the CFPB writing rules on the issue. The Arbitration Fairness Act pending in Congress would eliminate forced arbitration in consumer and non-union employment contracts.

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