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How Class Action Lawsuits Help All Americans

November 5, 2014

In the past, this blog has covered the issue of forced arbitration (through contracts of adhesion), a practice that enables corporations and other businesses to avoid lawsuits from consumers in favor of mediation with a company-appointed arbitrator. The consumer has no idea that he/she is bound to litigate any dispute by arbitration due the inclusion of the arbitration in the “fine print.”

Arbitration clauses obviously work in favor of businesses–including every major telecommunications corporation, most banks, credit card providers, and even Sony, Dell, Toshiba, Starbucks, and Ticketmaster–as they are able to stack the deck against individuals and prevent class action lawsuits, in which wronged consumers may stand together against corporate wrongdoing.

As civil justice blog ThePopTort reported last month, the Center for Justice and Democracy at New York Law School recently published a study called “First Class Relief: How Class Actions Benefit Those Who Are Injured, Defrauded and Violated,” that details exactly what its title suggests. The authors of this report, motivated by the fact that big business lobbyists are pushing Congress to limit class action lawsuits across the country, aim to point out ways in which these cases are important on a number of fronts: discriminatory and predatory lending and insurance, invasion of privacy, racial and gender discrimination, and mortgage loan hikes, among others.

The document’s introduction explains the passage of the 2005 Class Action Fairness Act (CAFA), which “lets defendants ‘remove’ or transfer state class actions into the smaller, already clogged federal court system,” a system that also suffers from tremendous underfunding and understaffing. Since this legislation passed, “federal court judges have been unable to deal with the flood of new state cases, and as a result, have begun throwing out meritorious class action cases.” This is a risky direction to be heading in, as these types of suits are important not just to make victims whole, but also “for the deterrence function of the tort system to work. Without the class action tool, corporations and businesses can ignore the law far more easily and operate with impunity.” Moreover, these cases often uncover what regulators do not, which makes them crucial in enforcing oversight measures against “corporate law-breakers.”

While the Center for Justice and Democracy’s 77-page report is far too extensive to cover in a brief blog post, it is worth noting that its findings span from corporate finance to auto defects to discrimination in the workplace to tainted pet food to contaminated water. These are but a few of the areas in which class action lawsuits have helped to protect not only plaintiffs, but all American consumers. And, as the authors of the study rightly point out, each of the hundreds of cases detailed therein represents hours and hours of work from attorneys and their clients, not to mention the high financial costs of litigation in the first place.

As the conclusion to this study suggests, without class actions, many citizens and small businesses “would be unable to recover stolen money, stop discrimination, hold large corporations accountable for wrongdoing or deter future misconduct.” As lobbyists continue to push to increase the practice of forced arbitration and limit individuals’ access to class action lawsuits, it would seem that such cases are “in some areas […] headed for extinction.” As the report concludes, “It is up to Congress and federal regulatory agencies to prevent this from happening. Let’s hope they do.”

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