EDITORIAL BOARD/COLUMNIST ALERT

Oct. 28, 2010 Contact: Angela Bradbery (202) 588-7741

Dorry Samuels (202) 588-7742

Will the U.S. Supreme Court Allow Corporations to Rub Out

Consumer and Employee Class Actions?
We may be facing the death of class actions. The U.S. Supreme Court will soon hear a case that could
allow companies to eradicate consumer and employee class actions simply by inserting a provision in
the fine print of their take-it-or-leave-it contracts. The case, AT&T Mobility v. Concepcion, could allow
corporations to bar individuals from banding together in class actions to pursue claims against them. If
the court agrees with AT&T, then corporations effectively will be immune from accountability in court
for a wide range of illegal or unfair practices they commit against customers and employees.

The case, which is scheduled for oral argument on Tuesday, Nov. 9, has broad implications for civil
rights, employment practices and consumer protection. The plaintiffs’ side is supported by 15 amicus
briefs representing 24 consumer, employment rights and civil rights groups, several state attorneys
general and groups of leading law professors. The briefs are available at
http://pubcit.typepad.com/clpblog/concepcion/.

Vincent and Liza Concepcion sued AT&T in 2006, alleging that the wireless carrier defrauded millions
of customers in California by advertising phones as “free,” then tacking on an undisclosed $30 charge
for the phone. If multiplied across millions of AT&T California customers, the $30 charge would
amount to tens or hundreds of millions of dollars in allegedly wrongful gains. The vast majority of
consumers will not initiate a formal legal action to recover $30. If AT&T can block class actions over
this type of conduct, it can pocket hundreds of millions each year in unlawful gains from its customers
nationwide.

The Concepcions sought to bring a class action on behalf of consumers affected by AT&T’s practice.
AT&T sought to dismiss the case by invoking an arbitration clause and class-action ban that it had
placed in the Concepcions’ contract. The court rejected AT&T’s request, holding that the class-action
ban was unconscionable under California law because it would exculpate the company from
accountability for wrongdoing. Courts applying the contract law of 20 states have struck down class-
action bans for the same reason – because they would function as a “get out of jail free” card for
corporate wrongdoing.

The Federal Arbitration Act (FAA) overrides state contract law that is hostile to or discriminatory
toward arbitration. Seeking to evade state contract law, AT&T inserts its class-action ban in a clause
that requires disputes to be resolved in binding arbitration. In this way, AT&T attempts to launder its
otherwise unenforceable class-action bans. The company wants the Supreme Court to break with all of
the lower courts and hold that the class-action bans are protected by the FAA.

We urge you to editorialize against AT&T’s effort to eliminate class actions. Class actions must be
preserved, especially for consumers and employees with claims too small to pursue individually.

Consumers and Employees Need Class Actions to Remedy Corporate Wrongdoing

Class actions often provide the only way for groups of people with similar, small-dollar claims to hold
corporations accountable for wrongdoing.

● Many consumers and employees suffer losses from business misconduct that are smaller than the
cost of litigating the claims, making it impractical or impossible to pursue the cases individually. Class
actions enable consumers to pursue their small claims by sharing resources and spreading the costs of
litigation.

● Class actions give consumers notice of corporate wrongdoing that many never would have
discovered. Class actions then vindicate the rights of consumers and employees.

● Class actions reduce retaliation and intimidation against individuals because most class members can
benefit from the litigation without each individual having to openly challenge her employer or another
corporate entity.

● Class proceedings can expose wrongful institutional practices and remedy them for all individuals
rather than a single one. Class actions have uncovered and forced an end to instances of widespread
discrimination in employment, fair housing, mortgage lending, automobile financing, insurance and
other areas. Class actions also have compensated workers deprived of statutory rights such as overtime
pay required by wage and hour laws.

● Class actions supplement government efforts to protect consumers and employees from fraud,
deceptive practices, and violations of their employment and civil rights. Government agencies lack the
resources to police all corporate misconduct adequately. Class actions help fill the enforcement gap,
providing a benefit to the public and reducing the strain on federal and state budgets.

AT&T Incorrectly Claims Its Arbitration Clause and Class-Action Ban are Consumer Friendly

Despite its efforts to block customers from taking it to court,1 AT&T claims that its arbitration process
is “consumer friendly.” The company’s arbitration clause offers attorneys’ fees and a “premium”
payment of $7,500 to a consumer who wins more in arbitration than AT&T offers as a settlement. This
argument is a sham for two reasons:

(1) Very few consumers pursue claims in arbitration. One court found that of AT&T’s 70
million-plus customers, only an “infinitesimal” number nationwide had pursued the company in
arbitration or small claims court. In a five-year period, 2003-2007, fewer than 200 consumers brought

1
See, e.g. Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003).
arbitrations and 265 brought small claims. 2 AT&T knows that most consumers cannot or will not
initiate a complicated legal process to recover a small amount of money. Class actions are the only
“consumer-friendly” means of pursuing justice for many harms. If companies can block class actions,
they will be immune from accountability for a wide range of bad practices.

(2) AT&T has never paid the $7,500 premium,3 and it likely never will. If any consumer
invokes the arbitration process, AT&T can simply pay that consumer the amount owed, and the
company will never face the prospect of paying an amount due to a higher award from an arbitrator.

Corporations Should Not Be Permitted to Use Contracts to Stamp Out Class Actions

Businesses increasingly insert arbitration clauses with class-action bans into consumer and
employment contracts, presenting them on a take-it-or-leave-it basis. Class actions are instrumental for
securing systemic positive change for consumers and employees, and for preventing the unequal
treatment of groups. If arbitration clauses with class-action bans in contracts are enforceable,
corporations will use the fine print of contracts even more to eradicate consumers’ and employees’
legal remedies. The court should reject this end-run around justice and democracy.

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Public Citizen is a national, nonprofit public interest organization based in Washington, D.C. For more
information, please visit www.citizen.org.

2
Coneff v. AT &T Corp., 620 F.Supp.2d 1248, 1258-1259 (W.D. Wash. 2009).
3
Brief of Amici Curiae Marygrace Coneff, Et Al. in support of respondents, citing the transcript of the oral argument in
Coneff v. AT&T Corp. http://pubcit.typepad.com/files/09-893-bsac-marygrace-coneff-et-al..pdf.