In a series of decisions over the last ten years or
so, the Supreme Court has addressed these questions.
And it has addressed these questions in a way that
severely limits the ability of plaintiffs to bring class action proceedings.
And in particular, it gives defendants and the people who draft contracts, mostly
corporate actors who provide services or perhaps even who employ a lot of people.
It gives a lot of tools to those types of defendants to
shield themselves from certain types of class or, or mass adjudication.
In particular, let's talk about two cases that the supreme court has decided,
that addressed this question of the ability of defendants, and
in particular corporate actors, to use arbitration clauses to
shield themselves from certain kinds of class actions or mass disputes.
One of them is called AT&T Mobility versus Concepcion and it was decided in 2011.
And the second is called American Express versus Italian Colors Restaurant,
which was decided in 2013.
Both of these were cases in which the corporate defendant had
drafted a contract.
In the case of AT&T Mobility, it was a contract for
cell phone services that was drafted for the company's customers.
In the case of American Express, it was a merchant agreement that
American Express entered into with certain merchants, like restaurants for
example, that specified the terms on which those restaurants could
accept American Express cards by way of payment.
And in both of these contracts, the company included an arbitration clause,
that said that this lawsuit had to be litigated if at all,
as an arbitration rather than as a lawsuit.
And, both of these contracts were also designed
to explicitly prevent class actions.
And the arbitration clause not only said, this case has to be arbitrated, but
the arbitration clause also said, no class-wide arbitration.
And in the case of At&T Mobility versus Concepcion,
there were some provisions in the contract that sought to make it easier for
individuals to bring individual arbitrations.
But that made it clear that class-wide arbitrations were not permitted.
In Italian Colors, there were provisions that not only made it clear
that a class action wouldn't be possible, but there were also provisions that
prevented merchants from banding together on a more individual basis, and
seeking to pool their resources, and make it more affordable for
them collectively to bring a lawsuit asserting what was, in that case,
anti-trust claims, federal anti-trust claims against American Express.
Both of these lawsuits went up to the Supreme Court,
on the question of whether these arbitration clauses could be enforced.
And in both cases, the argument was not just a sort of
abstract question about the enforceability of the arbitration clause, but
they were questions specifically about what the practical impact of
the arbitration clause would be, on the ability of people to assert their claims.
So in AT&T versus Concepcion,
the question was whether in the absence of a class action, there was going to be any
real enforcement under state law against what the plaintiffs asserted was
an improper billing practice on the part of AT&T Mobility.
And in the Italian Colors case,
the question was whether there would be any affordable mechanism at all for
these individual merchants to assert their anti-trust claims.
To assert that American Express was misusing its market power in some way,
in defining the terms that it extracted from merchants,
this was the allegation in their, in their payment relationships.
And there were very good arguments to the effect, in both of these cases,
that if the arbitration clause was enforced on its terms,
that the practical consequence would be that there either would be very few
claims brought, in the AT&T case, or there might be no claims at all brought,
in the Italian Colors case, because it simply would not be affordable for
individuals to assert these claims on their own.
And in both cases, the Supreme Court held that under this very powerful statute, or
the statute at least that it's interpreted in very powerful ways,
the Federal Arbitration Act, that the arbitration clauses had to be enforced.
That the corporate defendants could draft these clauses,
which it would offer to people as what's often called a contract of adhesion.
That is to say,
these are the terms on which we're willing to do business with you.
We're not going to negotiate these contract terms.
And you've probably signed half a dozen contracts of adhesion in
the past couple of weeks,
if you've made reservations online, if you've signed up for a gym membership.
All of these everyday activities that we engage in,
that involve clicking online or checking a box or signing a contract, have many,
many terms in them that we would never think about trying to negotiate, and
that indeed, might not be subject to any negotiation.
That's often described as a contract of adhesion.
And defendants have the ability now, corporate actors have the ability now,
to write these arbitration clauses that shield them from some of the very
powerful procedural mechanisms by which people who think they've been injured,
might otherwise be able to seek to pursue their claims.
And the question that was before the court in the Concepcion case and
in the Italian colors case was, are there any limits on the ability of
a corporate defendant to succeed, to enforce those arbitration clauses,
even if what it means is that the plaintiff is going to be
deprived of any practical opportunity to enforce their claims.
And in both cases, the Supreme Court said, yes.
And in, in the Concepcion case, which was a state law case,
the court focused a lot on the ways in which federal law trumps state law.
Federal law in this case being the Federal Arbitration Act.
And the court said, specifically, that even if the enforcement of an arbitration
clause under this federal statute might mean that certain claims might quote,
unquote, fall through the cracks.
But that's not a basis for arguing around the mandate of
this federal statute as the Supreme Court interpreted it.
The Italian Colors case was a case in which the claims at
issue were federal claims, and so
you had two federal statutes potentially squaring off against each other.
The Anti-Trust Statute on the one hand,
the Federal Arbitration Act on the other hand.
And so the plaintiffs in the Italian Colors case said,
well our case is different, there has to be some kind of
accommodation between these two competing federal statutes.
The Supreme Court wasn't buying it and they said once again,
as in Concepcion, that the mandate, what the court viewed as the mandate of
the Federal Arbitration Act, require this arbitration clause to be enforced.
And the court said, in the Italian Colors case,
that the mere fact that a plaintiff has a claim under a statute like
the Anti-Trust Statute, doesn't guarantee that the plaintiff will
have an affordable procedural path towards the vindication of that claim.
And so even if the arbitration clause is structured in such a way that,
as a practical matter, it becomes impossible for
a plaintiff to pursue her claim, the mere fact that,
as a practical procedural matter, the claim becomes unaffordable,
doesn't mean that, that other federal statute, that competing federal statute,
has somehow been improperly treated or improperly served.