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

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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Yesterday's decision by America’s highest court, which struck down a gender discrimination lawsuit brought against Walmart by 1.6 million female employees, was sadly no great surprise.  In fact, it’s right out of the big business handbook, where week after week Chief Justice Roberts zealously advocates for the rich against the poor; just as a young freshman Senator from Illinois predicted at Justice Roberts’ confirmation hearings.

“… when I examined Judge Roberts' record and history of public service, it is my personal estimation that he has far more often used his formidable skills on behalf of the strong in opposition to the weak.”

Coming out of TARP and the 2008 financial meltdown, the concept of “too big to fail” became popular.  No matter how reckless Citigroup or JPMorgan Chase behaved, the government would not allow them to fail.  Similarly, it seems, the high court will not allow lawsuits to proceed against the biggest and most powerful market participants.  When given the choice, it is the employee or consumer that is left without redress; meanwhile the more powerful market participants (Walmart, Citigroup, AIG, and General Motors, just to name a few) seem to get the benefit of the doubt.  “Heads I win, tails I win too.”

To be sure, the legal analysis by the Supreme Court in Dukes v. Walmart seems plausible and the case certainly had difficult legal and factual hurdles to surmount.  Significantly, how can there be “common issues” when the class includes thousands of stores throughout the country, each run by a manager with broad discretion?  But time and again the consumer or the employee seems to be handed the short end of the stick.

For the employer, the corporation, the strong—the Roberts Court time and again finds a way to rule in their favor.  The same is not true for consumers and your average Joe.  And the landscape ahead unfortunately remains bleak.  With the recent decision in Concepcion and now the Walmart holding, no doubt a lot of meritorious cases—with real victims—will be lost, and lawyers will think twice about investing millions of dollars in those tough cases just in the gray area of doubt.  But alas, the pendulum will swing back and “in the long run,” as John Maynard Keynes often said, we will find equilibrium.  But with Justices Roberts, Alito and Thomas in their fifties it may take a generation before the tide turns and the  Court again becomes an unbiased arbiter of fairness.

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Today the Corporate Observer welcomes guest co-author David Martin, Office Manager at Berk Law and Director of TCO. Please enjoy.

"Insanity: doing the same thing over and over again and expecting different results."
                                                                           - Albert Einstein

You reap what you sow.  Lazy farming yields poor crops.  Lax practices train an undisciplined basketball team.  A poor diet leads to health issues.  The failure to regulate will inevitably lead to even more dangerous market disruptions and crises.

That’s “crises,” plural, because we’re headed for another one if the Commodity Futures Trading Commission continues to delay regulations on over-the-counter derivatives trading.  Though the Commission’s ability to meet the July 16th Dodd-Frank rules deadline has long been doubted, yesterday the CFTC officially announced it will not meet the statutory deadline.  Merely a year after the passage of Dodd-Frank, the lobbyists have retaken the highest hill on the battlefield and the regulators are pinned down, unable to protect Main Street.  Main Street is left with nothing in its collective cookie jars to save a financial sector wired on greed and designed to maximize risk and profit over long term growth and stability.

Michael Lewis’ The Big Short superbly chronicles the role played by unregulated credit default swaps in fueling risk to a degree never contemplated by the regulators or markets and spurring a financial crisis that brought our economy to its knees.  Investor faith collapsed, financial institutions went from unassailable to insoluble in weeks; in some cases overnight.  Some of the most venerable names on Wall Street disappeared, others became irrelevant, and we saw exactly how quickly in the age of the Internet and instantaneous trading that not just a market, but an entire economy could be crippled.

As devastating as the crisis was—nationwide unemployment is still at 9.1 percent—we survived, barely, and had the opportunity to return from the brink stronger and smarter.  The proverbial “fool me once, shame on you” situation; instead, we are headed towards “fool me twice, shame on me” territory.  The lobbyists and future private-sector employers of the regulators have efficiently forced the CFTC to push back its estimated date of rule finalization.  Meanwhile, if I’m heading up a bank or financial institution today, my takeaway is, “Don’t take the regulators seriously.”

A year ago, the regulators had all the momentum and political capital in the world.  On the heels of a financial crisis that pitted every average American against the financial institutions that created the mess, rules were necessary and urgent.  Sadly, that momentum has evaporated quicker than the Miami Heat’s, and it continues to dissipate—pun intended.  Those creators of “synthetic derivatives” and other newfangled instruments that leverage the level of risk to extraordinary heights are back, and with this delay they will surely lap the field, leaving regulators in the dust.

The mission of the regulator is not to please the industry it regulates (that’s called a trade association).  It is to regulate, to be an irritant, to ask tough questions, to be obstinate at times, to trust in some cases, but to always verify. 

It may already be too late, but the CFTC must tighten their chin straps and take the field.

Post co-authored by David Martin and Steve Berk

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At best, I fear a muddled effort—this after main street spent trillions to bail out those interests.  At worst, we may see reforms that actually subtly favor these industries.

I was taught not to write using clichés.  But I couldn’t resist.  As the July 29, 2009 New York Times editorial, entitled The Financial Truth Commission cautioned: the important Financial Crisis Inquiry Commission set up by Congress to investigate last year’s near-complete meltdown of the financial system is being led by two veteran politicians who have received significant campaign contributions and have longstanding ties with – you guessed it – the “financial, insurance and real estate interests”.

Those are the interests that main street had to bail out in the first place.  They will now have considerable influence on everything the Commission decides.  At best, I fear a muddled effort—this after main street spent trillions to bail out those interests.  At worst, we may see reforms that actually subtly favor these industries.  There is definitely cause for concern and like the NYT, we will be watching.

Let’s hope that as with the Watergate Commission and the Church committee hearings of the 1970’s, this Commission can rise above politics and act professionally and diligently to create reforms that put our financial and banking system on firm ground.  Only then can folks on main street thrive again.

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