Recent Supreme Court Ruling Limits Class Actions

A recent case involving AT&T and a Californian couple over a $30 cell phone charge resulted in the Supreme Court ruling that arbitration clauses commonly found in consumer contracts do take precedence over any class action lawsuits.  This has profound implications for businesses nationwide as arbitration, or the use of a third part to settle disputes, is far more efficient and cost effective than a lawsuit.  The consumer generally prefers a lawsuit because of the open forum a courtroom provides, and thus typically a more favorable outcome for the individual with a legitimate complaint.  The decision comes from a 5-4 split, the more liberal justices presiding over the case feel it is up to the individual state to determine whether an arbitration agreement nulls the ability to file a class action lawsuit.

In this particular case, AT&T lawyers argued that the consumer does not lose out in arbitration, that it is a fair and efficient process for both parties.  Class actions often take more time and resources than a consumer might want to invest for most claims.

Critics of the ruling cite that class actions are an efficient way to guarantee consumer protection against fraudulent companies.  Losing the ability to hold organizations accountable on a large scale is detrimental to consumer rights and tips the scales of justice in favor of business owners.