Business v. Class Action

  • Sumo

 

A contract signature.  Photo by Frank McMains, of www.lemonsandbeans.com, licensed via Creative Commons.
How much are you signing away to get that sweet, sweet 1994 Toyota Tercel?

An article in the New York Times caught my attention today.  It’s about the fallout from the 2011 Supreme Court decision in AT&T v. Concepcion, which stated that corporations can write clauses into contracts to prevent class action lawsuits.  To do this, the clauses require customers to settle disputes through arbitration (instead of in an actual court of law) and to relinquish their right to litigate as a class.  In effect, the contracts waive the customers’ right to due process.  Since that decision, the legal world has changed.  For the better or for worse?

Keep reading the full post to see what’s up with these clauses and to learn a tip on how to get around them.

On one hand, class actions lawsuits are generally more worthwhile for the lawyers involved than the actual class of litigants.  Lets say a class of 30,000 people wins a $5 million settlement.  The lawyers take 30%, leaving $3.5 million to be split among the class, or $115 each.  Considering cases sometimes take years and usually only concern matters of a few hundred dollars, the litigation is often more motivated by lawyers who stand to gain millions (see this recent settlement in Libertyville, Iliinois, which details a law firm sifting through public records of car accidents to find potential clients.  See also “ambulance chasing”).  The arbitration and collective action clauses prevent frivolous and costly cases from ballooning in scope, allowing individual complaints to be settled quickly and amicably outside of the courtroom.  No lawyers and no $1.5 million fee involved — just you and your claim.

On the other hand, the clauses also usually state that the arbitrators are both chosen and paid for by the mammoth corporation that wrote the contract.  Though they claim to be independent and fair, it’s an inherent conflict of interest — to judge against the corporation is, in a way, biting the feeding hand.  As a result, the arbitrators tend to be more pro-business than pro-justice.  Some people see this as stacking the odds against the little guy.  A person has a $200 claim.  They can’t bring it to a truly neutral judge.  They can’t assemble a group of people with the same claim and bargain en masse.  Instead they have to argue their case alone to a private council with moneyed interest in the outcome.  The arbitration committee may offer $100 — that’s it, and if you don’t like it: hard cheese, it’s in your contract.  This effectively demolishes a person’s 6th Amendment (to due process, or the presence of a neutral judge and fair trial) and 1st Amendment (specifically, to assemble) rights.  Further, it isn’t fair or just, two principles that the court system is supposedly founded on.

So the question remains: which is more valuable?  Easy and swift arbitration, or the guarantee of individual rights?  So long as the arbitration is truly neutral and fair and honest, I’d say I agree with the Concepcion decision.  But the evidence shows, by the source and size of the arbitrators’ coffers, that it isn’t.

Until then, use this tip to skirt the issue entirely: distributors of said contracts don’t care as much about the clauses than the parent corporation does.  When signing a contract for a car or a cell phone or whatever, find the arbitration and collective action clauses.  Usually you have to sign these separately from the rest of the document, seeing as how they, you know, negate your constitutional rights and all.  Then, tell your car / cell phone / whatever company that you agree with everything except those clauses and that you will not sign them.  Cross them out.  Sign the rest of the document.  Your salesperson will go to their supervisor, and they’ll come back and say “ok”.  Why?  The individual car salesperson cares more about selling you that car than protecting their parent company’s liability, especially after getting you as far as a contract.

I did this with my car.  So watch out, Toyota: if you’re liable for some dangerous defect, I’m coming for you and I’m bringing friends.