Friday marks the anniversary of a Supreme Court decision that you are probably unaware of, but will be forced to live with if you end up in a dispute with a corporation.
One year after a U.S. Supreme Court decision gave corporations free rein to block class action lawsuits, judges have used the decision in blocking at least 76 potential class action suits from going forward, a new report by Public Citizen and the National Association of Consumer Advocates has found.
The report, Justice Denied, tracks the anti-consumer effects of AT&T Mobility v. Concepcion, in which the Supreme Court ruled that corporations could block consumers’ rights to sue collectively—even in the 19 states that have laws protecting such rights.
What began as a dispute over $30 between Vincent and Liza Concepcion and AT&T has turned into a legal monster worth millions of dollars to corporate bottom lines. The corporate lawyers and Court put profits before people, and a year later we are seeing the ripple effects, as people seeking fairness are losing their legal rights.
The report details three cases in which consumers have felt the direct impact of the ruling.
- Class Actions Against Career Education Corporation (CEC). Before Concepcion, thousands of students collectively sued Career Education Corp., a company that owns a chain of for-profit culinary schools, for misrepresenting the potential earning power its graduates. The misleading numbers enticed many students to enroll and thus take on debilitating student loans to finance their education. According to the lawsuits, students attending the schools typically emerged with debts in excess of $40,000 and were not able to obtain jobs that paid enough to provide a reasonable chance of repaying their loans. At the time of the lawsuits, CEC did not include a class action ban in its contracts with students. The collective cases proceeded in court and resulted in payments of up to $20,000 per student. While these cases, filed before Concepcion, achieved a meaningful settlement, other cases are still pending. In a post-Concepcion era, however, students with similar collective claims may not be able to pursue redress because it would be too difficult to overcome the class action ban the
company is now including in its contracts.
- Putative Class Action Against Nissan. Matthew Wolf, 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 Nissan 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 only pursue redress for himself, not on behalf of a class.
- Putative Class Action Against T-Mobile. Trent Alvarez’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 when Alvarez signed for the phone, but he said he never saw it and filed a class-action complaint against T-Mobile in 2009. The company convinced the judge to suspend the case until Concepcion was decided; the court then rejected Alvarez’s argument that the class-action ban in the arbitration agreement was unenforceable.
These examples are among the dozens of instances documented in the report by Public Citizen and the National Association of Consumer Advocates (NACA), revealing that the decision has already left consumers worse off. Other areas where class action suits have been restricted include cases against payday lenders, debt collectors and banking institutions.
Robert Weissman is president of Public Citizen.
The BP disaster taught us many things: Giant corporations cannot be trusted to behave responsibly, and have the ability to inflict massive damage on people and the environment. We need strong regulatory controls to curb corporate wrongdoing. We need tough penalties to punish corporate wrongdoers. There is no way to do deepwater oil drilling safely. And it is vital that citizens harmed by corporate wrongdoers maintain the right to sue to recover their losses.
Unfortunately, Congress and the Obama administration have refused to learn the lessons from the BP disaster:
1. BP’s reckless actions and inactions caused the Deepwater Horizon disaster — a reminder that corporations cannot be trusted to police their own activities.
BP made a conscious decision not to install a $500,000 safety device that could have prevented the blowout. BP pressured its contractors to skirt safety measures, and those contractors made multiple mistakes leading up to the disaster.
The lesson that corporations can’t be trusted to police themselves should be blindingly obvious. Yet the Obama administration is now proposing to take government inspectors out of poultry processing plants — and give Big Chicken responsibility for ensuring poultry safety.
2. Strong regulatory controls over corporate activity are necessary to ensure health, safety and planetary well-being.
To its credit, the Obama administration acknowledged that the pre-BP disaster oil drilling regulator — the Minerals Management Service, probably the most compromised regulatory agency in Washington — couldn’t be reformed, specifically because it had the duty both to collect oil royalties and regulate oil drilling. It split the agency apart, creating the new Bureau of Ocean Energy Management, Regulation and Enforcement (BOE) to regulate drilling. But Congress has failed to ratify the change in law, which means it could easily be undone by subsequent administrations.