David G. Savage
December 14, 2015
California consumers who are angry about being hit with unexpected fees can be forced to air their complaints individually before an arbitrator rather than in a class-action lawsuit, under a decision handed down Monday by the U.S. Supreme Court.
The justices by a 6-3 vote overturned a state ruling and threw out a class-action lawsuit against DirecTV over its termination fees for customers who canceled its service.
The high court said the Federal Arbitration Act calls for honoring arbitration agreements that are written into company contracts, regardless of whether there are more consumer-friendly protections set by states such as California.
In dissent, Justice Ruth Bader Ginsburg said the ruling acts to “disarm consumers, leaving them without effective access to justice.”
The decision is consistent with a series of rulings in recent years that have given corporations a legal way to bypass the courts. Company lawyers say arbitration can be a faster, less expensive and fairer way to resolve disputes.
Consumer-rights advocates and plaintiffs lawyers mostly disagree. They say that many consumer complaints, including over unexpected charges and fees, are too small to justify someone going through an arbitration hearing. The DirecTV fee, for example, could be as high as $480. If consumers cannot join a class-action suit, such complaints will go unheard, advocates say.
“This is another troubling day for American consumers who are ripped off by corporate greed and malfeasance, whether it’s a satellite TV system that doesn’t work, unlawful credit card fees or a defective vehicle,” said Harvey Rosenfield, founder of Consumer Watchdog, and one of the lawyers who represented consumers in the litigation. “The Supreme Court has taken away Americans’ only right to obtain justice: their day in court.”
Cory Andrews, a lawyer for the pro-business Washington Legal Foundation, called the decision a rebuke to the California courts.
“The Supreme Court has once again reiterated its refusal to tolerate state-court hostility to arbitration,” Andrews said. “Perhaps with this reversal, California courts will finally receive that message once and for all.”
To read expanded article, click here.