National Arbitration Ruling Emerges from Nation's Highest Court
Thursday, April, 28, 2011
National arbitration has become more business friendly as of yesterday, when the US Supreme Court ruled that arbitration clauses in consumer contracts can prevent class action lawsuits from going forward. At issue was an arbitration clause in a contract between AT&T and a married couple, Vincent and Lize Concepcion. The couple had responded to an advertisement for a free cell phone, only to be told they must pay sales tax on the retail value of the phone. Their contention was that the advertisement was fraudulent and they attempted to form a class action lawsuit that would benefit all consumers who had experienced harm as a result of the "free" phones not being free of all costs.
National Arbitration Clauses: Lower Court Decisions
The issue of whether a class action could be formed had been the subject of lower court decisions at both the district and appeals court level. Both courts had found that the contract arbitration clause was an "unconscionable" contract and hence unenforceable when it came to class actions.
The Supreme Court overturned those rulings and made it possible for businesses to protect themselves against the prospect of class action lawsuits. An arbitration clause in contracts that consumers accept is now considered enforceable against both individual and mass lawsuits.