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Entries in Supreme Court (4)


Class Dismissed?

The school year still has more than a month to go, but class actions in consumer cases may be near an end under yesterday’s U.S. Supreme Court ruling in AT&T Mobility LLC v. Concepcion.  The five member conservative majority of the Court struck down California’s law barring arbitration clauses that contained waivers of class action rights in consumer cases because it is preempted by the Federal Arbitration Act (FAA).  The four liberal justices dissented.  Consumer advocates claim this case will immunize corporations from liability to consumers for unfair trade practices because it is too expensive for individual consumers to pursue such cases alone, even in arbitration. 

But a closer look at the decision reveals that such immunity does not come without price.  In this case, AT&T Mobility’s cellular phone sale and servicing agreement provided that customers could initiate dispute proceedings by completing a one-page Notice of Dispute form available on AT&T’s Web site.  If the dispute is not resolved within 30 days, the customer can invoke arbitration by filing a separate Demand for Arbitration, also available on AT&T’s Web site.  In the event the parties proceed to arbitration, the agreement specifies that AT&T must pay all costs for nonfrivolous claims; that arbitration must take place in the county in which the customer is billed; that, for claims of $10,000 or less, the customer may choose whether the arbitration proceeds in person, by telephone, or based only on submissions; that either party may bring a claim in small claims court in lieu of arbitration; and that the arbitrator may award any form of individual relief, including injunctions and presumably punitive damages.  The agreement, moreover, denies AT&T any ability to seek reimbursement of its attorney’s fees, and, in the event that a customer receives an arbitration award greater than AT&T’s last written settlement offer, requires AT&T to pay a $7,500 minimum recovery and twice the amount of the claimant’s attorney’s fees.

It would have been nice if AT&T gave its customers a choice to opt in or out of the arbitration clause, but I suspect many if not most consumers would opt in.  In this case, the lead plaintiff’s claim was that AT&T improperly charged him about $30 sales tax for a free phone.  How many consumers in such a situation would not opt for a dispute resolution mechanism that is free (to the consumer) and relatively simple?  AT&T built into the agreement adequate incentive for it to pay or settle most claims.  Class action litigation, either in court or in arbitration, usually ends in a settlement, but only after the consumption of large amounts of attorney fees, costs and time.  The policy question that remains after the Supreme Court’s decision in this case is whether the additional deterrent effect of a possible class action is worth the expenditure of those fees, costs and time. 

I am not a fan of arbitration clauses imposed on unsophisticated parties in contracts of adhesion.  But the arbitration clause and class action waiver in this case were hardly one-sided.  They provide incentives and benefits, as well as detriments, to both parties.  Neither the parties nor the Court addressed this aspect of the unconscionability issue in this case, but it may still be possible to argue that some arbitration and class-action waiver clauses are so one-sided as to be unenforceable, even under the FAA.  So, as long as this decision is not used to validate every arbitration clause and class action waiver in all consumer contracts, it may not mean the end of consumer class actions in all cases. 


Uncivil unrest

During the past couple of months, when I have traveled outside of Wisconsin or talked to colleagues and friends outside of the state, I have been asked what is going on here. With protests in Madison, the Packers winning the Superbowl, True Grit in the movie theaters and Hair on stage, I think it is 1968 all over again. But a New York Times Op-ed piece yesterday reminded me that it might be more like 1954 when attorney Joseph Welch asked Senator Joe McCarthy “Have you no sense of decency, sir, at long last?” McCarthy, then the junior senator from Wisconsin, exhibited the same aggressiveness, self-certainty, and indifference to contrary views that Wisconsin’s new governor, Scott Walker, seems to be employing in his first few months in office. And with Walker’s public opionion poll support slipping while his fellow Republicans in the state senate are facing the possibility of recall elections, the final results may be similar.

Lawyers, through their bar associations, have been discussing ways to combat and reduce incivility in our profession for many years. The broader business community and society in general now seem to be looking for ways to do the same thing. The legal profession is built on an adversarial model, where aggressive investigation, prosecution, cross-examination and defense tactics are the norm. Even in alternative dispute resolution proceedings, we see attorneys zealously representing their clients’ interests to the exclusion of competing interests. But in the legal arena, there is some kind of referee—be it a mediator, arbitrator or judge—to oversee the combat and keep the parties in line. In the political arena, no one seems to be in charge. And the U.S. Supreme Court has recently held that the First Amendment protects people’s rights to be indecent and uncivil in their public discourse. In Snyder v. Phelps, the Court said that because religious picketers near military funerals expressed their views at a public place on a matter of public concern, their speech was entitled to “special protection” under the First Amendment. But that protection extends to legal action in the courts of law. In the court of public opinion, I suspect that the Westboro Baptist Church is making very few friends.

Likewise, in civil litigation and disputes, one must ask how successful incivility and indecent tactics are. Governor Walker succeeded in getting the legislature to pass his bill restricting public employee collective bargaining. But the legislation is now tied up in the courts and the Republican majority in the state legislature could be challenged at the polls much sooner than expected. If the legal or political challenges succeed, they might provide the kind of reality check that attorney Welch delivered in 1954. Proving once again that what goes around, comes around.


A New Year Wish

In his annual report on the judiciary, Chief Justice John Roberts expressed concern about the “economic downturn that has imposed budgetary constraints throughout the government, and the persistent problem of judicial vacancies in critically overworked districts.”  In most federal districts that I am familiar with, U.S. Magistrate Judges conduct settlement conferences in civil cases.  In state courts, if you want a neutral third-party to facilitate settlement discussions, you hire a mediator.  Why should the federal courts be different?  My wish for the new year is that the federal courts outsource or privatize the settlement function.  Want to save judges’ time and taxpayers’ money?  Let the judges (and magistrates) be judges.  Let mediators mediate.


Supreme judicial activism

Is it possible for a lawyer to resist commenting on a Supreme Court confirmation hearing?  I can’t. So here goes.

It is hard for me to quit shouting at the TV when I hear Senators from both parties and Judge Sotomayor proclaim that judges should merely apply the law and not make it.  They all know that the Constitution is “law” and when a legislative enactment runs afoul of a Constitutional provision, the courts must strike down the statute.  At the appellate court level, all decisions are precedent to some extent, so judges are always making law.  Why does everyone pretend otherwise?  In my last post (July 9), I suggested that “activist” judges were necessary for democracy to exist.  Am I the only one who believes that?   I still want to know what the definition of an activist judge is.  If it is one who “makes law,” aren’t they all “activists”?