On April 27, 2011, the U.S. Supreme Court, in a 5-4 decision penned by Justice Antonin Scalia, determined that an arbitration provision in millions of AT&T's subscriber contracts prohibits the filing of class action lawsuits by consumers of AT&T's products. The long-pending case, AT&T Mobility LLC v. Concepcion, turned on whether a California law disallowing arbitration provisions that waived consumers' rights to bring class claims was contrary to a federal law which favors private arbitrations over lawsuits. The court held that California's law was invalid. Justices Breyer, Ginsburg, Sotomayor and Kagan dissented.
The practical impact of this decision on consumer rights is not yet known; however, it is likely to make the successful prosecution of consumer class actions more difficult and more uncommon. When dollar amounts at issue in individual cases are small–such as the Concepcions' claim against AT&T that it overcharged them and other consumers $30 in sales tax on a telephone marketed as “free”–it can be difficult or impossible for consumers to find an attorney willing to take the case. Class actions sometimes make it possible for consumers to hold large companies accountable for unfair or illegal conduct while also compensating the attorneys who prosecute the case. In Concepcion, the AT&T arbitration provision contained in the wireless service agreement provided that the consumer's only means of resolving a dispute with AT&T was private, individual arbitration; lawsuits, including class action lawsuits, were not allowed. The consumer is required to sign the service agreement before he or she can receive service.
Unless some action is taken by Congress to amend the Federal Arbitration Act and overturn the court's decision, consumers can expect that some or all of the contracts companies present them with will include similar provisions to AT&T's arbitration clause well into the future, and that consumers in many cases give up their right to sue in court or bring class claims.