WASHINGTON (Legal Newsline) - The U.S. Supreme Court on Tuesday heard arguments in a case that could determine the future of class action lawsuits.
In the case of AT&T Mobility v. Concepcion, Vincent and Liza Concepcion are attempting to sue AT&T over a 2002 cell phone purchase.
At the time, the cell phone company had advertised the phone as free, but then it charged customers for tax on the phone's normal price.
In response, the couple brought a class action on behalf of everyone who had taken advantage of the AT&T offer. However, the contract the couple signed said all disputes had to go to an arbitrator.
Parties may sometimes settle disputes through arbitration, rather than litigation. When the dispute involves numerous individuals in the same situation, a few individuals may conduct the arbitration on behalf of the larger groups, similar to a class-action suit.
The question before the nation's high court is whether the Federal Arbitration Act prohibits states from mandating that class arbitration be available as a part of every arbitration agreement.
The act, originally passed by Congress in 1925, said states must apply the same rules to arbitration as they do to normal court cases.
Mandatory arbitration clauses appear in most contracts consumers sign, so the case is expected to have very broad consequences, legal experts say.
Ted Frank, an adjunct fellow for the Manhattan Institute Center for Legal Policy and editor of PointofLaw.com, wrote on the blog Tuesday that the general argument against arbitration is that it forces consumers into "uneconomic proceedings."
However, he writes, no one can make that complaint about the AT&T contract, "where the company agrees to pay the cost of the arbitration, not to seek attorney's fees, and to pay a bounty if the arbitral award exceeds a written settlement offer."
A decision in the case is expected to be handed down in the spring.
From Legal Newsline: Reach Jessica Karmasek by e-mail at email@example.com.
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