The Corporate Observer Blog : Consumer Protection, Corporate Abuse : Class Action Lawyer & Attorney : Steven Berk Law Firm

Imagine this: a credit card company advertises its services to low income families and individuals offering a $300 upfront credit line.  Okay, not a pot of gold at the end of the rainbow, but it’s something that may help ends meet at the end of the week.  Ahha!  Gotcha!  But when the consumer accepts the card, smack, “You owe us $257 in fees,” leaving only $43 in available credit.  A scam to be sure, perpetrated on those most vulnerable.  But this is America, we have the best legal system in the world, surely someone can take my case and put an end to this exploitation and evil.  Right?

Nope.  The courthouse doors are locked shut.  Sorry folks but those wealthy guys on the Supreme Court do not feel your pain.  As we’ve blogged before, the Supreme Court held in ATT v. Concepcion that “take it or leave it” contracts mandating arbitration and prohibiting class actions – even where damages are small and only remedied by class actions – are acceptable despite years of contradictory state practice.  As a result, arbitration clauses have been added to innumerable consumer contracts.

The Court’s January 10^th opinion in CompuCredit Corp. v. Greenwood reinforced the Court’s deference to the whims of corporate desires.  Eight justices agreed (only Justice Ginsburg dissented) that the Credit Repair Organizations Act, because its clause providing a “right to sue” is silent on arbitration, allows corporations like CompuCredit to mandate arbitration.  This firmly establishes the preference for arbitration even in the face of glaring injustice.

So, ladies and gentlemen, that means the low income families targeted by this venal practice have no right to go to court to seek judicial redress for the fraud foisted on them by CompuCredit.  According to the Supreme Court, the “right to sue” means only the right to submit to binding arbitration (which not only often favors corporations but is just a non-starter for working and poor people alike).  But, as a practical matter, the only way these low income families or just about anyone can move forward and protect their rights is by joining a class and proceeding in court.  And that road is closed until further notice.  For another reading, Michelle Singletary’s piece in WAPO summarizes the current state of affairs quite nicely. 

Simply put, change is needed.  Without congressional or judicial action, consumers will soon find themselves without recourse for a majority of corporate grifting.  Rulings like Concepcion and CompuCredit are unacceptable for the low income family tricked into $257 of fees and just $43 of credit.  It will be nearly impossible to fight a major corporation for just $257 without the help of an attorney or the cost sharing of a class suit.  When class actions are stymied, consumers lose and corporations win – big – or so they think.  Eventually everyone loses when the system is devoid of fairness.

Assisted by Zachary A. Kady

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A big shout out to the CEO and great protector of  Corporate America — oops, I mean Chief Justice of the United States  — John Roberts.  Yep.  Along with his floor mates, these fellas have crushed the rights of consumers this season (or term as they call it) going undefeated.  At Roberts side is  Antonin “Call me Nino” Scalia; Clarence “I never ask a question during oral argument” Thomas; the kid out of Hamilton Township, New Jersey, “I love big business more than Roberts and Scalia ever will,” swinging Sam Alito; and finally, Anthony “I play away from the basket because I’m afraid I’ll get smacked in the face” Kennedy.

In a huge blow out of consumer rights, the 2010 Supreme Court term saw these guys take away any meaningful right you have to file a lawsuit against your cell phone provider no matter how many drop calls you pay for or simply endure.  It is gone.  Poof.  April 27, 2011, was the last day.  It’s now open season, “Pillage me, oh Goddess of Verizon.  Make me Sprint through a trail of hot coals and burning embers.  You’re AT&T out of luck."

Here’s how this sinister game plan was put up on the chalkboard.  It starts with the cell phone providers.  We all get those little envelopes from our carriers, it’s now often in an email too.  Most of the time, it’s a bill with about a dozen mysterious taxes, fees and charges that add up to real money every month.  And sometimes, it’s not even a bill.  It’s just four or five single-spaced pages of indecipherable small print, known euphemistically as a “disclosure.”  It starts out friendly and all — “Dear Valued Customer,” or something — then deep in the fine print, they’ve added some new provisions to your agreement.

“Wait, don’t I have to sign something?”  Nope, Justice Scalia and his boys took care of that several seasons ago.  By using your phone, in fact, often by merely unwrapping the package it comes in, you’ve agreed to just about anything they add to your contract.  (“Say it ain’t so, Catherine Zeta-Jones!”)

What has been added?  Well it’s actually something that's been taken away: your right to file a dispute in court.  ("Cell phone owners, take the courthouse key off your key ring.  You won’t be needing it any longer").  Like many employers and security broker-dealers, the cell phone companies now require that you bring your claims in a private arbitration proceeding.

So what?  So what?  Lawsuits are the great equalizer.  In a court of law, consumers have a chance to identify, scrutinize and if skilled eliminate and curb bad corporate practices.  Time and again over the past one hundred years, aided by the courts,  consumers and employees have protected and strengthened their rights by availing themselves to the judiciary and the promise of justice.

Relegated to the more narrow constraints of a private (often confidential) arbitration proceeding, consumers rights are limited and getting more limited.  Two critical concerns come to light.  First, forcing arbitration eliminates a threat of a lawsuit, which is often more powerful than a suit itself.  Main Streeters need all the help they can get against the multi-billion dollar conglomerates. Guess what?  The threat is gone.  Heck the next thing you know they will force you to stay in your contract despite awful service based on a termination fee that equals a month’s salary.  (Oh, they already do that.)

Second, in April the Supreme Court, put on a full court press.  In a case called AT&T vs. Concepcion, the Roberts 5  ruled that even within this limited forum of private arbitration you cannot bring your claim as part of class.  In other words, trying to leverage the power of millions of consumers (indeed anymore than 2) is gone, history.

Is that a fair fight?  In this corner we have AT&T, multi-billion dollar telecommunications giant; in the other corner, we have Natasha, one lone cell phone owner.  Well, the Supreme Court has said it is fair; it is the law.

So back to those dropped calls.  Those more than annoying daily occurrences.  What can consumers do when the promises of Catherine Zeta Jones, the Verizon network, and AT&T's slick new spinning globe don't pan out?  Instead you can't get through a business call or birthday wishes with your Mom without a shut down.  

First, a disclaimer: we are spoiled.  We have more technology at our fingertips than ever in history, than ever imaginable.  Do we recognize that cell phones do not perform perfectly?  Of course they don’t.  We do not expect Jack Bauer-esque smart phone service, downloading the bomb diffusing key in the baggage compartment of a jet at 30,000 feet.  Of course not.  As consumers, we expect to receive what has been promised and what is reasonable service. A dropped call here or there, no problem.  A bad day, OK it happens.  But to have every call you make “drop” once, twice, maybe even three times, is unacceptable.

A hypothetical: Let’s assume that AT&T has lousy, and I mean lousy, service in the Washington DC area (think every call you are on drops).  Your neighbor, a former AT&T engineer, tells you this poor service is a result of AT&T lacking the network infrastructure to provide the service. And significantly, they know they have the confidential engineering and network studies in-hand.  The report says it will take five more years to build out an adequate network.  Do they disclose this inadequacy?  Do they issue rebates?  Hardly.  They bury this information (a material omission) and to the contrary they keep on selling and keep on lying.

Try to file a lawsuit?  Nope, remember, you agreed you would not. Not only will your lawsuit be dismissed; AT&T might seek sanctions against you.  “Fine, I will file for arbitration, I can still do that right?”  Well yes, but only individually.  No class actions.  Good luck getting a lawyer.  AT&T owes you a couple hundred dollars for months where your service beyond awful, but you can’t find a lawyer to take on one of the world’s largest corporations for a $100 fee, particularly when the AT&T will be spending hundreds of thousands of dollars to defend itself.

And I'm here to report, we ain't seen nothing yet.  Get ready for a wave of new arbitration provisions blocking the courthouse steps for a wide array of consumer claims.  This subtle yet often dispositive form of power will keep corporate profits and CEO salaries high at the cost of who else -- the average consumer.  It's is just the way it was drawn up on the chalkboard.  

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