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Supreme Court Imposes Limits On Class Actions

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Supreme Court Imposes Limits On Class Actions

Law

Supreme Court Imposes Limits On Class Actions

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RENEE MONTAGNE, host:

NPR's business news starts with a ruling against class action suits.

(Soundbite of music)

MONTAGNE: The U.S. Supreme Court has handed corporations a major victory. Yesterday the court ruled 5-4 that companies can enforce contracts that bar consumers from banding together and bringing class actions.

NPR legal affairs correspondent Nina Totenberg reports.

NINA TOTENBERG: Ever read that long cell phone contract you signed when you enrolled for service? Well, look again. It likely has a provision requiring all disputes to be resolved by a private arbitration and barring consumers from banding together in a class action. Your credit card agreement, your cable agreement, and maybe even your employment agreement have similar clauses.

Many states have ruled such contracts illegal and unenforceable, among them California. In yesterday's case, a California couple sued on behalf of themselves and others who were charged $30 in sales tax for the supposedly free phone they got when they signed up for service with AT&T Mobility. If they won, the class could potentially win millions of dollars versus the small amount -possibly only $30 - that each person would win in an individual arbitration.

But yesterday the U.S. Supreme Court ruled that the federal arbitration law, enacted to encourage arbitration, trumps the state law. Consumer and civil rights advocates blasted the decision as a sweeping shield for corporate America.

Here's Deepak Gupta of Public Citizen, who argued the case for the consumers.

Mr. DEEPAK GUPTA (Public Citizen): I think after today's decision, if you take a job at a fast food restaurant or a big box retailer, if you sign up for a credit card or a cell phone, chances are you're going to be signing away your right to bring a class action.

Alan Kaplinsky, who filed a brief for the American Bankers Association, agrees that corporations will now feel free to increase their use of arbitration contracts. But, he contends, that will be good for consumers.

Mr. ALAN KAPLINSKY (Attorney): Look at the data. You know, AAA has been conducting consumer arbitrations now for a decade and there is empirical data showing that consumers do very well in arbitration.

TOTENBERG: Nina Totenberg, NPR News, Washington.

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