The U.S. Supreme Court dealt a crushing blow to American consumers and employees, ruling that companies can ban class actions in the fine print of contracts.
Whenever you sign a contract to get a cell phone, open a bank account or take a job, you may be giving up your right to hold companies accountable for fraud, discrimination or other illegal practices.
In a 5-4 decision, the justices said Wednesday the Federal Arbitration Act of 1925, originally aimed at disputes over maritime and rail shipments, trumps state laws and court rulings in California and about half the states that limit arbitration clauses deemed to be “unfair” to consumers.
The ruling was “the biggest ever” on class actions, said Vanderbilt University law professor Brian Fitzpatrick, an expert on such litigation. “It gives companies a green light to exempt themselves from all class actions from their customers or from their employees,” Fitzpatrick said. “Companies can basically escape from the civil justice system. And why wouldn’t a company take advantage of that?”
It has become routine now that when someone opens a bank account, subscribes to a cable TV service, buys a cell phone, a computer or a new car or makes a purchase online, he or she agrees to let disputes go to arbitration. Many employers include the same kind of fine print for new hires, blocking class-action suits for employees with discrimination or wage complaints. These arbitration clauses typically require individuals to bring claims on their own, not as a group.
Nonetheless, the California Supreme Court in 2005 said companies should not be allowed to “deliberately cheat large numbers of consumer out of small amounts of money” by shielding themselves from being sued. But on Wednesday, the court’s conservative majority overruled those state judges and said arbitration clauses must be enforced even if they may be unfair. Justice Antonin Scalia said, “companies like the “streamlined” arbitration proceedings because they are faster and cheaper.”
Deepak Gupta, the Public Citizen lawyer who represented a California couple who sued over what was purported to be a free cell phone but cost about $30.22, agreed that the ruling in their case would have a broad effect. It allows companies to use “the fine print of take-it-or-leave it contracts” as a “shield against corporate accountability,” he said.
This decision makes it all the more essential for Congress to take up legislation ending forced arbitration in consumer and employment contracts.
Class actions are an essential tool for justice in our society. Brown v. Board of Education was a class action. The fate of class actions should not be decided through the fine print of take-it-or-leave-it contracts.