Class Actions

Consumers May Lose Class Action Tool to Fight Back

What usually happens when hundreds or thousands of people are aren't satisfied with the same exact product or service? In many cases, instead of hundreds or thousands of individual lawsuits, there's only one class action. That may soon change, though.

AT&T Case

In November 2010, the US Supreme Court will listen to arguments over whether businesses can stop their customers from joining class action lawsuits. The case involves AT&T and its cell phone customers.

The Court will decide if AT&T - and practically any other business that sells goods and services through contracts with customers - can include language in those contracts where customers agree to arbitrate their disputes out of court, rather than joining class action lawsuits.

Pros & Cons

The law as it stands says that state-laws - like California's law in the AT&T case - against banning class action lawsuits aren't undermined by the Federal Arbitration Act (FAA). The FAA requires parties to settle their disputes out of court.

Many say class actions help consumers. They let consumers with small damage claims join with others and get paid for their damages without paying the high legal costs and fees of filing their own lawsuits. The suits also keep businesses honest - provide what you've promised or face hundreds of legal claims.

A Court ruling for AT&T takes all of that away and all consumers could lose in the process.

AT&T's Stance

AT&T claims its arbitration system treats jilted consumers fairly. Individuals may recover up to $5,000 damages and twice their attorneys' fees if the arbitrator awards the consumer more than AT&T offered to settle their claims. The company also pays all arbitration costs.

Limiting its liability in class actions lets it offer this attractive arbitration package and keep its prices low for consumers, the company argues.

Consumers and businesses alike should keep an eye on the Court as it listens to the parties' arguments. Expect a decision from the Court in the spring of 2011.

What You Can Do

No matter how the Court decides the case, you can impact how the law may actually work. Contact your state lawmakers and tell them your opinion on having a law in your state for or against class-action bans in consumer contracts.

Call your Representatives and Senators in Washington, too. It's not uncommon for Congress to respond to Supreme Court decisions. It has the power to change the FAA. For instance, it may be changed to state specifically that it doesn't trump state laws against class action bans in consumer contracts.

The Court often decides cases that impact our everyday lives. The AT&T case is a perfect example. The outcome will help define the relationships between consumers and businesses going forward.

Questions for Your Attorney

  • Is there any reason why I would opt-out of a class action lawsuit?
  • Can I hire you to start a class action and not be lead plaintiff?
  • Can any attorney start a class action? Can you start a class action if the company I want to sue has its headquarters in another state?
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