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Supreme Court imposes limits on class actions in case over 'free' call phone

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Wednesday, April 27, 2011

WASHINGTON — The Supreme Court on Wednesday limited the ability of people to combine forces and fight corporations together when they want to dispute contracts for cell phones, cable television and other services, a move consumer advocates called a crushing blow.

In a 5-4 ideological split, the high court’s conservatives said businesses can block their customers from using class actions. The court said the federal arbitration law trumps state laws that invalidate contracts banning class actions.

The decision came in a dispute between AT&T Mobility and a California couple who objected to being charged around $30 in sales tax for what they were told was a free cell phone.

Businesses commonly require arbitration clauses in consumer contracts to protect them from facing their customers in court. The Supreme Court’s decision means that corporations now won’t need to worry about consumers, shareholders or even employees banding together and fighting them using lawsuits or arbitration, consumer groups said.

“Now, whenever you sign a contract to get a cell phone, open a bank account or take a job, you may be giving up your right to hold companies accountable for fraud, discrimination or other illegal practices,” said Deepak Gupta, a Public Citizen lawyer who argued the case.

Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee, said the decision would hamper the rights of consumers to be protected by state laws.

The ruling could greatly restrict the use of class actions, in which a party represents a much larger group, in disputes over contracts. AT&T was backed by an array of business interests, while consumer groups and the NAACP Legal Defense and Educational Fund were among supporters of the Concepcions.

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