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At Supreme Court, another ruling in favor of corporations, critics say

The Supreme Court's 5-to-4 decision is a victory for business groups that favor tough enforcement of arbitration agreements. Critics say it puts the rights of corporations over individuals.

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“The overarching purpose of the FAA…, is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings,” Justice Scalia wrote. “Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”

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Voting with Scalia in the majority were Chief Justice John Roberts, and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito.

In a dissent, Justice Stephen Breyer said he did not view the California rule as inconsistent with provisions of the federal arbitration law.

He said California courts had recognized that in a dispute between an individual and a corporation the two parties may not possess equivalent bargaining power. In such cases, strict enforcement of the arbitration agreement could disadvantage the individual.

“In general agreements that forbid the consolidation of claims can lead small-dollar claimants to abandon their claims rather than to litigate,” Justice Breyer wrote.

AT&T’s arbitration agreement with the Concepcions included a provision that if the customer received an arbitration award larger than AT&T’s last written settlement offer, the company would pay a $7,500 minimum recovery and twice the amount of the Concepcions’ attorney’s fees.

Scalia said this provision created an incentive for consumers to pursue arbitration.

Breyer disagreed. He said AT&T could avoid the $7,500 payout by paying the face value of the Concepcions’ claim – $30.22.

“What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?” Breyer asked.

The justice said it should be left up to the states to decide whether a collective arbitration ban rendered such agreements unenforceable.

Breyer’s dissent was joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan.

Reaction

In reaction to the decision, AT&T said the high court’s opinion was a “victory for consumers.”

“We value our customers, and AT&T’s arbitration program is free, fair, fast, easy to use, and consumer friendly,” the company said in a statement.

Some analysts said the high court struck a balance between the competing needs of consumers and corporations.

“Arbitration can be an efficient, low cost avenue for a consumer to bring a claim against a service provider, but if those claims could easily become sprawling class actions, what business would include an arbitration clause in its contracts,” said Jack Pace, a lawyer with White & Case in New York. “You would get none of the procedural protections of a court of law, but all of the risks of a class action.”

Critics saw the decision as a grant of immunity to major corporations.

“This is a death blow to Americans’ chances for justice when faced with forced arbitration clauses,” said consumer fraud attorney Gibson Vance.

“This devastating decision has the potential to result in virtually no consumer or employee cases involving small claims being heard anywhere,” he said in a statement. “Corporations will now be allowed to get away with sweeping wrongdoing, particularly where the damages would be too small to justify pursuing individual claims.”

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