AT&T Mobility LLC v. Concepcion: How Class Actions Got Castrated by Contracts


Have you ever looked at the terms and conditions of your phone contract?  I know I didn’t before law school.  What you might not have realized, though, is that you may have signed away your ability to sue the phone company.  Even more so, when a company has practiced deceptively across all of their customers, your chance to sue en mass may also have been signed away.  It all stems from a case called AT&T v. Concepcion.

The facts of the case are that the Concepcions saw AT&T offering a deal for a free phone when you signed up with them.  They signed up, but were surprised to find out that they still owed $30 in sales tax based on the phone’s value.  They found out that others had encountered the same issue across the country.  For one person to sue a company for $30 is foolish as they will spend exponentially more.  But in a class action suit, the cost is spread among the people and the accumulated $30 of thousands of people come make the case worthwhile.  The bigger incentive of class actions is to keep companies in check and keep them from shady practices.

Unfortunately, AT&T had written a mandatory arbitration clause into the contract.  They believed that each person had to go to arbitration individually, which would be pointless for each person.  In a controversial decision, the Supreme Court agreed with AT&T that the clause was binding and held that such clauses were enforceable, regardless of class actions.

While the ability to come to an agreement via contract is essential to a free market, the class action suit serves as a necessary check to unscrupulous businesses and harmful tactics.  Even worse is that the contracts are usually non-negotiable.  While the Court says you can always go elsewhere, this ruling all but guarantees that every phone company will have an arbitration clause.

An interesting footnote to this case is the new attempt by companies to stretch this holding to your likes on Facebook and follows on Instagram.  As the New York Times discusses, large food companies are adding legal terms to its pages in the hopes of having you agree to giving up your right to sue.  It is a fascinating side effect of $30 bill.

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