Over the last decade, the Supreme Court rendered a number of decisions that significantly impacted the ability of individuals to have their claims heard by a jury, particularly in consumer and civil rights cases.
Among these decisions is the 2007 decision in the case known as Twombly and its 2009 elaboration in the Iqbal case, where the court granted to district court judges the discretion to dismiss cases, prior to discovery, where in the judge’s opinion, the claims were not “plausible,” even though documents and testimony necessary to establish plausibility resided with the defendants, thereby prematurely closing the courthouse door to many plaintiffs.
During the same period, the court limited attorney’s fees for successful plaintiffs’ counsel and increased scrutiny of plaintiffs’ experts. Many observers perceived a growing bias against individuals and in favor of corporations and the government.
If Twombly and Iqbal closed the courthouse door for some plaintiffs, the court’s recent decisions in AT&T Mobility LLC versus Concepcion and American Express Co. versus Italian Colors Restaurant turned the key in the lock. Both involved “class actions,” which combine individual claims into a viable case where the recovery would be too small for individuals to bring solo actions.
Hoping to avoid these class actions, businesses began including in their agreements language requiring that any dispute be arbitrated individually – rather than filed in court as a class action.
Many states refused to enforce these class waivers, finding them unconscionable. But, in 2011, the court in Concepcion held that the Federal Arbitration Act preempted state law that invalidated class action waiver provisions in arbitration contracts as unconscionable. The court directed that these cases be arbitrated individually, as specified in form contracts typically drafted entirely by the defendant.
This summer, the court took this concept a step further, holding in American Express that a contractual waiver of class arbitration was enforceable under the arbitration act even when a plaintiff’s cost of individually arbitrating a federal statutory claim exceeded the potential recovery.
Arbitrations are expensive because the plaintiff must pay private individuals to serve as their court, judge and jury. The plaintiffs urged that there could be no “effective vindication” of their rights absent a class action. But the court rejected that argument, holding that “the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims.”
For most claimants, the American Express ruling means that if their claims are subject to an arbitration agreement that contains a class action waiver, they will be relegated to an individual arbitration even if the cost of the arbitration and the amount of potential recovery make it economically unfeasible to proceed. In most cases, that means a suit will not be brought even if the wrong is widespread. Worse, private enforcement of the law in consumer and civil rights cases is often the only practical redress available, due to a lack of funding by government agencies. These cases essentially shield corporate wrongdoers from prosecution for violations of the law that affect many consumers, but do not inflict enough harm on any one individual to justify an arbitration.
To be sure, unregulated class action arbitrations with little judicial review may threaten to violate defendants’ due process rights. Yet foreclosing any access to the courts or any other meaningful relief in these cases cannot be the answer.
The social contract that binds us as citizens incorporates the principle inscribed above the door to the Supreme Court – “Equal Justice Under Law.” Individuals must not perceive that their access to justice is unnecessarily restrained in favor of corporations or the government. We must understand the cumulative impact of recent cases and find legislative or judicial solutions to counteract the incremental loss of the constitutional right to jury trials.
