Supreme Court backs AT&T, limits class-action suits

The Supreme Court ruled that consumers can be bound by an arbitration clause in a cellphone deal or other contract even when state law permits a class-action lawsuit for claims arising from the deal.

In a 5-4 vote, the justices divided along familiar ideological lines, with conservatives in control. Dissenting liberal justices said the ruling would make it harder for consumers with small-dollar grievances to band together and sue corporations. California law bars class-action waivers when a contract is particularly one-sided. The law applies when there are unequal bargaining power between the two sides in the deal and the dispute involves a small amount of money and complaint of a deliberate scheme to defraud. Justice Antonin Scalia, writing for the majority, noted that the Federal Arbitration Act, which bars states from discriminating against arbitration, was passed in 1925 in response to judges' "hostility" to such agreements. Scalia said the California law "stands as an obstacle to the accomplishment of the purposes and objectives to the FAA." If a state could block an agreement because it appeared one-sided, Judge Scalia said as he read portions of his opinion from the bench, "Nothing would stop states from declaring that all agreements for dispute resolution … are 'unconscionable'" in many circumstances. Judge Scalia also disputed the contention of dissenting justices that people with small-dollar grievances would end up dropping them. "The claim here was most unlikely to go unresolved," Judge Scalia wrote. "The arbitration agreement provides that AT&T will pay claimants a minimum of $7,500 and twice their attorney's fees if they obtain an arbitration award greater than AT&T's last settlement offer."