You might want to start reading the fine print when you open a bank account, buy a car or a refrigerator, or sign up for cellphone or cable TV service.
If you have a dispute with the company, the U.S. Supreme Court just made it near impossible for you to join up with other aggrieved consumers to get relief.
In a 5-4 ruling Wednesday in a California case, the high court said that clauses in contracts in which consumers agree to arbitration block them from later joining class-action lawsuits.
These are claims, often over relatively small amounts of money, that many individuals won't bother to pursue, but that when spread out over thousands or millions of customers in the same situation can add up to big bucks.
The decision, continuing the corporate bent of the court majority led by Chief Justice John Roberts, said that federal arbitration law supersedes laws or rulings in California and other states that limit arbitration clauses.
In the case before the court, a Southern California couple sued AT&T over a cellphone that was advertised as free, but came with $30.22 in hidden charges. AT&T tried to quash the suit by pointing to an arbitration clause in the contract. Lower federal courts allowed the suit to proceed, citing a 2005 California Supreme Court ruling that companies should not be allowed to "deliberately cheat large numbers of consumers out of small amounts of money." The nation's highest court overruled that decision.
This is a time for Congress to step in and make clear that the federal arbitration law, passed in 1925 to deal with disputes over rail and maritime shipments, should not cover the wide range of individual transactions in the 21st century economy. A bill to eliminate forced arbitration in consumer, employment and civil rights cases is to be introduced next week. Its prospects do not appear good, however, with the Republican majority in the House in the pocket of Big Business.
Many employers include a similar clause for new hires, so some fear this ruling will be used to block class-action suits in discrimination and wage disputes.
It is clearly a significant victory for corporations and a defeat for consumers. "This decision means it will be open season on consumers," Harvey Rosenfield, founder of Consumer Watchdog, a California advocacy group, said in a statement.
"It slams the courtroom doors shut on Americans who are nickeled and dimed by big corporations." Consumer Attorneys of California says the ruling will almost certainly wipe out cases involving exorbitant fees and deceptive ads by wireless phone companies, as well as overdraft fees and other cases involving banks, lenders and credit card companies.
There's good reason to be wary about wholeheartedly supporting trial lawyers. Too often, plaintiffs' attorneys take too big a cut of awards, or compensation for consumers is a worthless coupon or is too cumbersome to claim, or the lawsuit is all too frivolous.
But this time, they're right.
The threat of a class-action lawsuit is sometimes a needed deterrent to bad behavior by corporations. This ruling, if uncorrected by Congress, will tip the balance too far in favor of businesses that want no check on how they operate.
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