Plutocracy Is Back at Work in the U.S. Supreme Court — When Little Guys Agree to a “Take-It or Leave-It” Contract Arbitration Clause that Prohibits Class Actions, They Cannot Class Arbitrate to Recover Small Fees that Corporations Have Stolen from Them — even when State Contract Law Permits  

© 2011 Peter Free

 

16 May 2011

 

 

Under painfully pretended logic, the Citizen United’s oh-so-Fat-Cat Supreme Court justices are back at it in AT&T Mobility LLC v. Concepcion— sucking up the plutocratic cream floating in their bowls of money-milk

 

Remember Citizens United v. Federal Elections Commission (January 2010)?

 

That is the case in which the U.S. Supreme Court ignored its own precedents and said that:

 

(a) corporations can spend however much money they want to influence American political elections

 

 and

 

(b) Congress is essentially not allowed to try to restrain the corporate money flow,

 

(c) even in the interest of preserving a more level democratic playing field between corporate and citizen political influence.

 

According to these law-deciding plutocrats, Congress and the American People exist to serve corporations, not democratic principles.

 

A necessary aside

 

On a philosophical and policy basis, the decision is flawed because it so clearly aids in the destruction of the democracy that the Court is constitutionally obligated to protect.

 

What the opinion’s supporters overlook is that (deliberately obtuse legal arguments aside) a corporation is not a human being, not a person, not a citizen, and therefore not conceptually entitled to the same rights that mandate citizens’ ability to vote and influence the direction of government.

 

Similarly, democracy is based on the idea that massive flows of financial and political power to an entity within the state — combined with a corresponding disproportionate exercise of power by that entity to influence the state — is anti-democratic and fundamentally anti-Constitutional.

 

Balancing these conceptions with the admitted quasi-right to acquire money-amplified free speech “megaphones” is difficult.  But that does not mean that Court should wash its hands of permitting Congress to struggle with maintaining an appropriate balance between money and power, on the one hand, and the individual voices of the citizenry, on the other.

 

The majority decision in Citizens United was so clearly an intellectually and legally stupid one that it can only be explained by the plutocratically oriented, anti-democratic sentiments that the majority favors.

 

 

AT&T Mobility LLC v. Concepcion (27 April 2011) now joins Citizens United in elevating the Great American Corpocracy to regal status

 

With Concepcion, the Supreme Court:

 

(i) disempowers a California legal process that citizens had previously used to challenge corporations from deceptive pickpocketing

 

and

 

(ii) defeats states’ rights federalist principles at the same time.

 

For its lack of democracy/citizen-rights acuity, the Court’s right wing extremist majority ranks with the abominated pre-Civil War Roger B. Taney Court.  That’s the court that reached the notorious slavery-preserving Dred Scott v. Sandford (1857) decision.

 

“Concepcion,” incidentally, has a memorable ring.

 

In this instance, the Court majority immaculately conceives a legal principle for which there is virtually no rational support.

 

 

AT&T Mobility v. Concepcion — the factual and procedural background

 

The legal question

 

This case asks a simple question:

 

“Does the Federal Arbitration Act prevent the state of California (according to long-established California “unconscionability” law) from:

 

(i) prohibiting the one-sided application of corporate power against individual consumers —

 

(ii) by using state judicial precedents

 

(iii) that force contractual arbitration clauses to escalate from individual (single consumer plaintiff) arbitrations to class arbitrations

 

(iv) when the consumer wishes to —

 

(v) in regard to disputes that are for such small amounts that

 

(vi) no lawyer could financially afford to touch the case on a single plaintiff basis?”

 

In other words, when a politically and financially powerful corporation provides a product or service, can it contractually force a humble and essentially powerless consumer to fight alleged injustices and corporate wrong-doing by himself?

 

Or can state law permit consumers to get together to make the battle over small, but deceptive and annoying charges, a fairer one?

 

The facts

 

The summary/headnote/syllabus of the decision (prepared by the Reporter of Decisions) is not part of the opinion, but it accurately gives the background of the case:

 

The cellular telephone contract between respondents (Concepcions) and petitioner (AT&T) provided for arbitration of all disputes, but did not permit classwide arbitration.

 

After the Concepcions were charged sales tax on the retail value of phones provided free under their service contract, they sued AT&T in a California Federal District Court.

 

Their suit was consolidated with a class action alleging, inter alia, that AT&T had engaged in false advertising and fraud by charging sales tax on “free” phones.

 

The District Court denied AT&T’s motion to compel arbitration under the Concepcions’ contract. Relying on the California Supreme Court’s Discover Bank decision, it found the arbitration provision unconscionable because it disallowed classwide proceedings.

 

The Ninth Circuit agreed that the provision was unconscionable under California law and held that the Federal Arbitration Act (FAA), which makes arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,” 9 U. S. C. §2, did not preempt its ruling.

 

Reporter of Decisions, AT&T Mobility LLC v. Concepcion, at syllabus (27 April 2011) (paragraph split)

 

 

AT&T Mobility v. Concepcion — what the majority said in overturning the Ninth Circuit

 

Justice Scalia’s majority decision combined policy arguments (which are not explicitly contained in the Federal Arbitration Act) with chasms in logical reasoning to reject the applicability of consumer-protecting California state law:

 

Extracts from Justice Scalia’s opinion include:

 

First, the switch from bilateral to class arbitration sacrifices the principal advantage of arbitration—its informality—and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.

 

Second, class arbitration requires procedural formality.

 

We find it unlikely that in passing the FAA Congress meant to leave the disposition of these procedural requirements to an arbitrator. Indeed, class arbitration was not even envisioned by Congress when it passed the FAA in 1925 . . . .

 

Third, class arbitration greatly increases risks to defendants. Informal procedures do of course have a cost: The absence of multilayered review makes it more likely that errors will go uncorrected.

 

Defendants are willing to accept the costs of these errors in arbitration, since their impact is limited to the size of individual disputes, and presumably outweighed by savings from avoiding the courts.

 

But when damages allegedly owed to tens of thousands of potential claimants are aggregated and decided at once, the risk of an error will often become unacceptable. Faced with even a small chance of a devastating loss, defendants will be pressured into settling questionable claims.

 

Arbitration is poorly suited to the higher stakes of class litigation.

 

In litigation, a defendant may appeal a certification decision on an interlocutory basis and, if unsuccessful, may appeal from a final judgment as well. Questions of law are reviewed de novo and questions of fact for clear error.

 

In contrast, 9 U. S. C. §10 allows a court to vacate an arbitral award only where the award “was procured by corruption, fraud, or undue means”; “there was evident partiality or corruption in the arbitrators”; “the arbitrators were guilty of misconduct in refusing to postpone the hearing . . . or in refusing to hear evidence pertinent and material to the controversy[,] or of any other misbehavior by which the rights of any party have been prejudiced”; or if the “arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award . . . was not made.”

 

The AAA rules do authorize judicial review of certification decisions, but this review is unlikely to have much effect given these limitations; review under §10 focuses on misconduct rather than mistake. And parties may not contractually expand the grounds or nature of judicial review.

 

We find it hard to believe that defendants would bet the company with no effective means of review, and even harder to believe that Congress would have intended to allow state courts to force such a decision.

 

Because it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” Hines v. Davidowitz, 312 U. S. 52, 67 (1941), California’s Discover Bank rule is preempted by the FAA.

 

AT&T Mobility LLC v. Concepcion, Scalia majority opinion, pages 14-18 (27 April 2011) (paragraphs split)

 

 

Scalia’s opinion tries to trick readers into thinking his arguments are logically sound

 

Justice Scalia is notorious for using the ordered roll of his semantics to conceal chasm-bridging tricks in his incomplete and often illogical arguments.

 

In Concepcion, he uses the plutocratic rationale that class arbitration is bad for corporate defendants because it is time-consuming, potentially expensive, and judicially unreviewable, to say that this necessarily means that:

 

(a) AT&T would not have signed a contract that required them to class arbitrate

 

and

 

(b) that Congress — in view of its desire to speed up the resolution of contractual disputes — did not intend to permit class arbitration in arbitration cases.

 

Scalia explicitly invites the reader to agree that Congress (in 1925) did not foresee class actions as arbitral procedure.  Yet he implicitly presumes, in seeming historical contradiction, that Congress did foresee the overwhelming contractual weight that corporations today bring to the table.

 

Justice Scalia’s argument seeks to persuade us that Congress did not care if ordinary citizens were screwed by arbitration, just so long as the process sped along.

 

None of Scalia’s reasoning makes legal, historical, or logical sense.

 

Sense and fair-minded inquiry are professional traits that this particular justice and his plutocratic-buddying colleagues are often short of.

 

 

AT&T Mobility v. Concepcion — what Justice Breyer’s (four justices) dissent focused on

 

Extracts from Justice Breyer’s dissent expose holes in the majority’s reasoning:

 

California law sets forth certain circumstances in which “class action waivers” in any contract are unenforceable.

 

Unlike the majority’s examples, class arbitration is consistent with the use of arbitration. It is a form of arbitration that is well known in California and followed elsewhere.

 

Where does the majority get its contrary idea—that individual, rather than class, arbitration is a “fundamental attribute” of arbitration?

 

The majority does not explain. And it is unlikely to be able to trace its present view to the history of the arbitration statute itself.

 

When Congress enacted the Act, arbitration procedures had not yet been fully developed. Insofar as Congress considered detailed forms of arbitration at all, it may well have thought that arbitration would be used primarily where merchants sought to resolve disputes of fact, not law, under the customs of their industries, where the parties possessed roughly equivalent bargaining power.

 

Regardless, if neither the history nor present practice suggests that class arbitration is fundamentally incompatible with arbitration itself, then on what basis can the majority hold California’s law pre-empted?

 

For another thing, the majority’s argument that the Discover Bank rule will discourage arbitration rests critically upon the wrong comparison.

 

The majority compares the complexity of class arbitration with that of bilateral arbitration.  And it finds the former more complex.

 

But, if incentives are at issue, the relevant comparison is not “arbitration with arbitration” but a comparison between class arbitration and judicial class actions.

 

Why would a typical defendant (say, a business) prefer a judicial class action to class arbitration?

 

AAA statistics “suggest that class arbitration proceedings take more time than the average commercial arbitration, but may take less time than the average class action in court.”

 

Because California applies the same legal principles to address the unconscionability of class arbitration waivers as it does to address the unconscionability of any other contractual provision, the merits of class proceedings should not factor into our decision.

 

If California had applied its law of duress to void an arbitration agreement, would it matter if the procedures in the coerced agreement were efficient?

 

Finally, the majority can find no meaningful support for its views in this Court’s precedent. The federal Act has been in force for nearly a century. We have decided dozens of cases about its requirements. We have reached results that authorize complex arbitration procedures.

 

AT&T Mobility LLC v. Concepcion, Breyer dissent, pages 2-10 (27 April 2011) (paragraphs split)

 

 

Breyer commented on the real core of this case ­— legalized plutocratic theft

 

California’s experience has been that corporations use their contractual power, and the lack of citizens’ options to signing them, as a way of legalizing stealing:

 

What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?

 

In California’s perfectly rational view, nonclass arbitration over such sums will also sometimes have the effect of depriving claimants of their claims (say, for example, where claiming the $30.22were to involve filling out many forms that require technical legal knowledge or waiting at great length while a call is placed on hold).

 

Discover Bank sets forth circumstances in which the California courts believe that the terms of consumer contracts can be manipulated to insulate an agreement’s author from liability for its own frauds by “deliberately cheat[ing] large numbers of consumers out of individually small sums of money.”

 

Why is this kind of decision—weighing the pros and cons of all class proceedings alike—not California’s to make?

 

Finally, the majority can find no meaningful support for its views in this Court’s precedent. The federal Act has been in force for nearly a century. We have decided dozens of cases about its requirements. We have reached results that authorize complex arbitration procedures.

 

AT&T Mobility LLC v. Concepcion, Breyer dissent, pages 9-10 (27 April 2011) (paragraphs split)

 

 

The disparity in power between corporations and citizens was the real issue in Citizens United and Concepcion — our Fat Cat Court squashed ordinary people in both

 

You worried yet about the direction the United States is headed?

 

These decisions have the force of ultimate law.  They ensure Pudgy Feline Money-Rolling supremacy.

 

 

What to do?

 

Start concerning yourself with who is buying our politicians in order to slant our laws, steal our institutions, and pack the Supreme Court with anti-democratic legal monarchs.

 

Right now, financial and political serfdom is our grandchildren’s most likely future.

 

It’s time to start taking the responsibilities of freedom seriously.