As the guy wrote four years ago that consumer arbitration was effectively dead in Wisconsin, you'd expect me to be on the side of the people challenging forced arbitration clauses in cell phone contracts in the recently-heard-but-not-yet-decided case of Concepcion v. AT&T, a 9th Circuit case that his the US Supreme Court for oral argument not long ago, and a case in which it it looks likely that the pro-business Supreme Court is going to say that California cannot invalidate arbitration provisions in contracts -- overruling the objections of the Concepcions and their class of consumers.
But I'm okay with that. I like having arbitration as an option to use for my clients, and I'm not sure invalidating it wholesale does any good. And I think that even if it means that my predictions of the death of arbitration were premature. (Or that the arbitration clauses, zombie-like, have risen from the dead. We have zombie debt, so why not zombie contract clauses?)
In the case considered by the Court, the Concepcions signed up for wireless service in 2002 and were told they'd get a free phone. They looked at their bill -- how many of you do that?-- and noticed that they were charged $30.32 in sales tax for a phone they'd been given free.
This being America, they sued, filing a class action suit against AT&T Mobility LLC. AT&T Mobility, though, pointed to a clause in the cell phone contract that required arbitration and forbid class actions. (The clause also had a novel wrinkle, offering a "premium payment" to winning arbitration claimants, a payment designed to get around an earlier ruling that had invalidated class action/litigation waiver clauses.)
The district court and the 9th Circuit Court of Appeals held the arbitration clause unconscionable, and AT&T appealed to the US Supreme Court, which heard arguments in the case last week; this Slate article suggests that most of the questions dealt with whether the Federal Arbitration Act pre-empts California law.
I'll have to wait to see what the U.S. Supreme Court comes up with on this one; I'm assuming that 70 years of courts shunting litigants off to private fora will continue (Courts not wanting to decide cases is one reason I'm doing this.)
But should it? That's not a policy question that the Courts should answer: Courts ought not be setting social policy. But it's a question that lawyers and consumers need to ask themselves, because every action has an equal and opposite reaction, in physics and in law. When the new rules for credit card companies went into effect this past summer, consumers who were supposed to be benefitted by them found in some cases that they were hurt -- as companies closed cards that hadn't been used in a while, reducing the credit available to consumers. (Full disclosure: that happened to me, on a credit card that I'd paid off about a year before and hadn't used since then. Shortly after those rules went into effect, I was notified that my credit card account was being closed due to "inactivity.")
In effect, the credit card rule penalized me, as a consumer -- for not consuming more.
In asking whether eliminating forced arbitration is a good thing, here's something to consider: In the past year, I've filed for arbitration in at least three different cases on behalf of clients. In each case, I was vigorously opposed by the creditor (one lawyer representing a creditor trying to avoid arbitration quoted my own article back to me in argument.)
Creditors have been putting arbitration clauses into contracts for years -- but when asked to actually arbitrate them, three of them have tried to get around that and argued that there was no right to arbitrate.
And in those arbitrations, I've found, things are often easier. The rules of evidence are relaxed. Filings are done informally, through email. There's no need for all the formal replies. Each case is handled differently and with individual attention.
Added to that is this: sometimes, class actions don't help consumers, and companies often don't fear class actions at all. Some class actions are settled by giving the company more business -- consider the settlement with Microsoft in 2009 that involved giving affected consumers money to be used to buy more Microsoft products. If I got sued, and the plaintiffs were willing to settle with me by using my services more, I'd sign off on that before they were finished with the offer.
On the other hand, picture a company facing not one massive class action suit with one set of lawyers, but one million small arbitrations, each of which requires the personal attention of a lawyer, with individualized facts and individualized awards and different deadlines and different procedures. If you were AT&T, would you rather have your lawyers have one court case with one judge and one trial, or would you like your corporate counsel to have to coordinate 1,000,000 different responses? Better get out those robo-signers; you'll need them.
Consumer advocates worry that lawyers won't take on cases involving $30.32 -- but if state law allows for fee-shifting to represent consumers (as Wisconsin does) then lawyers can take those cases and get reimbursed by the defendants under those fee-shifting provisions; and if class action lawyers are willing to take on the cases, you can bet there's a fee-shifting statute or contract somewhere, or the class action lawyers wouldn't take them.
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