Wednesday may go down in (obscure, legal) history as the Supreme Court today decided a case that will probably make it into 1L contract books for next year.
The case was a class action suit against AT&T by a class alleging it was overcharged, forced to pay sales tax on a phone AT&T claimed was free. AT&T, however, challenged the class action by claiming the contract signed with AT&T by customers contained a clause that required arbitration, and prohibited proceeding through the process as a class. So, basically, if AT&T’s contract was allowed to stand, you couldn’t sue them as a class of consumers. Which would mean that every company would copy the contract structure, and essentially end consumer class actions.
And no surprises here: The Supreme Court, led by Scalia, refused to follow the lower court’s choice to toss the contract clause as unconscionable, and ended consumer class actions for all of us. It was close, 5-4, but just not enough Obama appointees to push the major public policy implications this ruling would have.
The real problem here is with contracts of adhesion/click-wrap/all the other forms of contract one party spends money to make and the other party reviews in less than 2 seconds. We can’t cut back on those sorts of contracts too far: they do, indeed, allow our favorite companies to release themselves from all sorts of liability while getting us cool products, and you can’t ask AT&T to negotiate an individual contract with every subscriber. But courts need to look at contract clauses COMPLETELY differently if they are in a contract where one party spent zero seconds reading it and the other spend millions preparing it. It has to matter that one party is inoculating itself from all sorts of lawsuits, and the other party really doesn’t have any choice but to accept (can’t exactly find a phone company that DOES negotiate an individual contract with you, and if you dont have an iphone, you dont have an iphone). And it just HAS to matter that nobody who signed AT&T’s contract would have known they just forfeited their chance to sue AT&T.
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