By Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) — What rational lawyer would represent a consumer for the possibility of fees stemming from a $30 claim?
That’s essentially the question Associate Justice Stephen Breyer asked Wednesday in the dissenting opinion of a Supreme Court ruling that is expected to significantly reinforce the ability of businesses to prevent consumers and workers from bringing class-action claims, and could substantially undercut consumer advocates’ calls for states to adopt rules that encourage class-wide claims.
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In AT&T Mobility LLC v. Concepcion, the majority decided that the Federal Arbitration Act preempts a California rule that would have enabled consumers to argue that the class-action ban in an arbitration agreement was unenforceable. Read the Supreme Court ruling.
While the case dealt with arbitration, which entails a private dispute-resolution forum, claims in court could also be affected because the Supreme Court’s ruling gives companies and employers added incentive to adopt arbitration clauses, said Anthony Oncidi, head of the labor and employment law group in the Proskauer Rose’s Los Angeles office.
“What probably will happen now is more companies and employers will ask parties, individuals that they do business with, to sign arbitration agreements, with the advantage of eliminating a runaway jury,” Oncidi said.
Businesses already frequently include clauses in agreements that workers sign upon employment, or that consumers sign when buying products, to require arbitration, and specify that claims must be brought separately rather than as a class.
Breyer’s question points to a concern among consumer advocates following the Supreme Court decision: Consumers and employees involved with relatively small disputes may let them drop because it’s not worth the time or effort to press the matter. The ruling is a “crushing blow” for consumers and employees, said Deepak Gupta, who represented the Concepcion side before the Supreme Court.
“Companies can ban class actions in the fine print of their contracts with consumers and employees,” Gupta said. “For all sorts of claims that may be widespread across millions of people, but the dollar amounts are not that big, lawyers won’t take those cases and those cases won’t be brought. We have class actions to incentive lawyers to take on these cases.”
Thomas Goldstein, a lawyer who teaches Supreme Court litigation at Harvard Law School, said that class actions “give plaintiffs more leverage, and it makes it more efficient for the plaintiff’s side.”
The Supreme Court’s ruling is likely to grab the attention of U.S. lawmakers who may question whether the decision is sound policy. In the past, Congress has considered arbitration-fairness legislation that aimed to protect consumers and employees from giving up legal rights.
Employers have already taken notice of the ruling, said Gerald Maatman Jr., a partner at employment law firm Seyfarth Shaw.
“I have already gotten a couple of phone calls from clients who are trying to manage their risk of litigation,” Maatman said Wednesday.
Separately, Maatman wrote in a blog post: “In light of AT&T Mobility v. Concepcion, it behooves employers with pre-dispute arbitration agreements in employment contracts to consider inserting class-action waivers if their agreements do not already contain them.
“Employers without arbitration programs are likely to consider adopting them as a means to manage the risk of wage and hour and employment discrimination class actions,” he wrote.
Ruth Mantell is a MarketWatch reporter based in Washington.
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