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Class Action Ruling

Photo of Randy Sorrels

This past week, the United States Supreme Court dealt a blow to consumers who had relatively small claims and attempted to band together to bring a class-action against a major corporation accused of wrongdoing. In a 5 to 4 decision, the Court ruled against a group of AT&T cell phone customers who were promised free phones in a promotion, but were charged $30.22 in sales tax based on the phone's retail value. Multiple suits were consolidated into the class action alleging that AT&T committed fraud and falsely advertised a "free "phone when there was actually a cost associated with it.

AT&T filed a motion with the trial court to require the plaintiffs to individually arbitrate each claim, and to dismiss the class action lawsuit. While the lower courts sided with the claimants, the United States Supreme Court reversed the lower courts' opinions, and held that the Federal Arbitration Act was controlling law. As a result, the arbitration clause in the cell phone contract controlled, and each person making a complaint against AT&T would have to participate in an individual arbitration proceeding that they wish to pursue their clients.

The practical effect of this ruling cannot be overstated. Consumers should expect a very similar arbitration clause in every purchase agreement that it could possibly be placed in. This, in effect, will immunize potential defendants from being held accountable for their wrongful acts. Businesses and industries throughout this country should celebrate the Court's ruling, while consumers should expect hidden traps around every consumer contract corner.

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