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Corporate America Wins Again With Supreme Court Ruling Against Class Action Small Claims

The Supreme Court didn’t hold a press conference, but they made a major contribution to the lives of Americans in a ruling today. And wonder of wonders, it benefits corporations at the expense of regular people.

The Supreme Court gave corporations a major win Wednesday, ruling in a 5-4 decision that companies can block their disgruntled customers from joining together in a class-action lawsuit. The ruling arose from a California lawsuit involving cellphones, but it will have a nationwide impact.

In the past, consumers who bought a product or a service had been free to join a class-action lawsuit if they were dissatisfied or felt they had been cheated. By combining these small claims, they could bring a major lawsuit against a corporation.

But in Wednesday’s decision, the high court said that under the Federal Arbitration Act companies can force these disgruntled customers to arbitrate their complaints individually, not as part of a group. Consumer-rights advocates said this rule would spell the end for small claims involving products or services.

This was a typical 5-4 special, with Kennedy swinging to the conservatives. John Roberts continues his unblemished record of siding with corporate interests.

Small claims suits help to hold corporations accountable for violations of law. Under this ruling, individuals would not be allowed to band together when they’ve been cheated. This means that corporations will only have to bribe and intimidate regulators, with the impunity of getting caught by a mass lawsuit. A lawyer won’t bother with an individual lawsuit for twenty bucks even if the fraud is clear. Multiply that by the thousands if not tens of thousands of cases like this and corporate America just got another windfall for their coffers.

The George W. Bush legacy continues unabated.

UPDATE: As Scarecrow notes, the real issue here is binding arbitration. Phone plans have arbitration clauses that the justices are basically using here to supersede small claims court. Sens. Al Franken and Richard Blumenthal, along with Rep. Hank Johnson, have legislation that would deal with this. From their release:

Their bill, called the Arbitration Fairness Act, would eliminate forced arbitration clauses in employment, consumer, and civil rights cases, and would allow consumers and workers to choose arbitration after a dispute occurred.

Many businesses rely on mandatory and binding pre-dispute arbitration agreements that force consumers and employees to settle any dispute with a company providing products or services without the benefit of legal recourse.

“This ruling is another example of the Supreme Court favoring corporations over consumers,” said Sen. Franken. “The Arbitration Fairness Act would help rectify the Court’s most recent wrong by restoring consumer rights. Consumers play an important role in holding corporations accountable, and this legislation will ensure that consumers in Minnesota and nationwide can continue to play this crucial role.”

This could be an issue that catches fire, even if it’s a little wonky. We’ll see if it gets a Senate vote.

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David Dayen

David Dayen