Thursday, April 28, 2011

The Fine Print

It’s hardly a secret that Chamber of Commerce types have co-opted a bare majority of the Supreme Court as their proxy in their war against business litigation, and that the most potent categorical weapons are arbitration as a forced substitute for lawsuits and the effective elimination of class actions.

In a manipulative, far-reaching opinion that the Court issued Monday, the five corporate proxies killed both birds with one stone.

The stone was thrown in a lawsuit by a California AT&T cell-phone service customer who signed a service contract with the company and received what the company said was a free phone but for which the customer later was billed $30 in sales tax—the sales tax on the regular retail price of the phone.

The contract, like virtually all consumer contracts and many other types of non-negotiable standard contracts between a business and a customer or client, or between an employer and employee, includes an arbitration provision. The provision waives the right to sue, and provides that any disputes be resolved instead in arbitration, a setup in which the business pays the arbitrator and, as a wink-and-nod practical matter, will use that arbitrator again in other arbitrations, or not, depending on, well … you know. The blindfolded lady holding the evenly-balanced scales of justice isn’t around.

The arbitration provision in AT&T’s form contract, like the form contracts of many other large corporations or firms, doesn’t just require a waiver of the right to sue. It also bars class arbitrations. It requires, in other words, that each customer who claims to have been defrauded out of a small amount of money proceed through arbitration independently of every other victim of the alleged scam—and, as a practical matter, because the amount is so small, without an attorney.

The Federal Arbitration Act of 1925 requires courts to honor arbitration clauses—that is, to dismiss lawsuits when the business defendant asks the court to do that on the basis of the arbitration clause. But the FAA includes a provision that allows courts to invalidate the arbitration clause under “generally applicable contract defenses.” Such as that the contract was signed under duress, or that one of its provisions is unconscionable as a matter of public policy (usually because one party had no bargaining power and could play no role in deciding the terms of the contract, and the provision is unfair to that party). Normally, contract law, including these defenses to enforcement of contracts, is a matter of state law, not federal law. So usually it is state law that determines the circumstances under which a court can invalidate an arbitration clause and allow the customer, the securities-firm client, the employee, to sue in a real court.

Or was.

At the center of the Supreme Court case was a 2005 California Supreme Court opinion that interpreted two state statutes. The California court construed those statutes as providing that if three conditions are met, the unconscionability defense can be used to void the part of an arbitration provision that waives the right to arbitrate as a class in California.

The three conditions are that the agreement be a standard-form contract without negotiation (known as a contract of adhesion), that the disputes probably will involve small amounts of money, and that the party who wants the contract provision voided is alleging a scheme to defraud. In its opinion Monday, Scalia, writing for the majority, said this conflicts with the purpose of the FAA, which—he said—was to encourage arbitration agreements and to ensure a quick, easy process. Breyer, though, writing for the four dissenters, pointed out that Congress’s actual stated purpose was to require courts to treat arbitration agreements as contracts, for the purposes of enforcing them and, when required under contract law, voiding them—and that that is what the text of the FAA says.

Scalia also said that class arbitration defeats the purpose of arbitration. Which I suppose is true if the purpose of arbitration, or at least arbitration as the only option under law, is to undermine any real threat of meaningful penalty for corporate wrongdoing.

But Scalia claims a different for purpose for arbitration: to provide a simplified, quick process. He complains that class arbitration complicates the process. Which, as Breyer notes, it does, but says, “So what?” The purpose of arbitration is to provide a quicker, simpler process than full litigation. Which class arbitration does, since it replaces not individual litigation but class litigation.

Breyer doesn’t take the next step, though. But someone should, soon. The Court’s majority interprets the FAA as allowing contracts of adhesion to remove the right to litigate as a class although class litigation otherwise would be appropriate. And the majority interprets the FAA as allowing those contracts to remove the right to arbitrate as a class when class litigation would be appropriate. This seems, I think, to raise questions about the constitutionality of this statute, now that the Court has said the purpose of it was not simply to require courts to treat arbitration provisions as contracts under normal contract law but rather to allow a party to a contract of adhesion to strip courts of their authority to void those provisions, contract law notwithstanding.

If Congress’s purpose was not to allow parties of relatively equal bargaining power to negotiate a contract that provided for arbitration, but was instead to remove access to the court system, independent of contractual rights—and if that is now the statute’s effect—it would seem that the statute itself violates basic constitutional precepts of due process of law. The Court’s majority’s new conflation of arbitration law and class action law, and their imposition of their own surprisingly-undisguised policy preferences as law, appears designed to do exactly that.


Cross-posted at The Angry Bear.

Tuesday, April 5, 2011

Justice Kennedy’s Hard-Right Turn After (and Because Of?) Citizens United

Anyone who watches the Supreme Court closely surely recognizes that Justice Kennedy last year took a hard-right turn, effectively removing himself from the role of swing voter and siding nearly always with the Court’s four-member rightwing bloc in ideologically determined cases. This term, he’s nailing any loose ends left over from last year in order to kill, kill, kill that annoying perception that his vote may be in play on ideological issues. The coffin holding the dead body of Kennedy-as-swing-vote is nailed and lies six feet under.

So the question is why. And pardon me for thinking it has less to do with the specifics of the cases last term and this one than it does with the virulent ongoing criticism of the opinion he wrote last year for the five-member majority in Citizens United v. Federal Election Commission, the infamous opinion that held that corporations are people, too, for First Amendment speech-protection purposes, and since campaign contributions are, in Supreme Court land, speech, legislative attempts to regulate corporate campaign contributions are unconstitutional.

Citizens United was decided on January 21, 2010 and was one of the earliest cases the Court decided in its 2009-2010 term. The Court’s term didn’t end until the last few days of June.

If I’m right that the reason Kennedy’s vote is no longer in play in cases in which political ideologically plays a role is that he’s reacting, whether consciously or subconsciously, to the criticism of Citizens United, we now have three justices whose votes in a large swath of cases the Court is asked to hear are decided largely or entirely by personal grudge. Thomas fairly openly operates based partly on bitterness about his Senate Judiciary Committee confirmation hearing (and slim-margin Senate vote), and Alito—inexplicably, in my view—has said he’s so bitter about his own confirmation hearing that he crosses the street rather than walk the Capitol on the same side of the street as the building. He now does something he apparently did not do as a longtime lower-court federal appellate judge: openly support far-right fund-raising efforts. Or at least he attended one such function.

So one-third of our Supreme Court appears to be using the Court as payback.


Cross-posted at Angry Bear.

Monday, April 4, 2011

I Wonder What John Yoo Thinks of All This

Most of you, I’m sure, know of the controversy concerning Freedom of Information requests by Wisconsin Republican officials to University of Wisconsin professor history and environmental studies professor William Cronon, in retaliation for certain postings on his new blog and for a New York Times op-ed piece critical of his state’s high-profile Tea Party governor. The requests demand copies of all the professor’s email exchanges using his university email account that include certain search words.

Cronon’s blog posts reported on a secretive rightwing state-legislation-drafting mill called the American Legislative Exchange Council, the Chamber of Commerce’s (not to mention the Koch brothers’) private Make A Wish Foundation, which drafts “model” legislation directed against unions, litigation plaintiffs and other usual-suspect Chamber/Koch targets, and then forwards the drafts to state legislators for introduction as legislative bills.

Actually, although this group’s membership is secret, the forwarding probably doesn’t require middleman lobbyists, because apparently some Republican state legislators are members. The group’s “model” legislation almost certainly is the source of a veritable slew of extremis sometimes really weird, sometimes clearly unconstitutional legislative bills proposed in state legislatures around the country in recent years, including more than a few that have been enacted.

The immediate purpose of FIOA requests to Cronon is to find emails that include political discussion or planning, although of course the larger goal is retaliation and intimidation.

But Cronon, not surprisingly, didn’t remain the only victim of this FIOA-request-as-a-political-weapon tactic against state university professors for long. After all, all states have Freedom of Information laws, and most have liberal professors at state universities. The folks at the far-right Mackinac Center in Michigan have made a request to see e-mails from people in the labor studies departments at the University of Michigan and Wayne State University. And, undoubtedly, other such requests are in the works elsewhere.

As well they should be. It occurred to me that John Yoo is a professor at a public university, U-C, Berkeley. And I’d bet that his university email trove would make for some interesting reading. So, I’m sure, would the university email-account exchanges of, say, certain law professors at George Mason University a state university in Virginia that is a longtime Federalist Society hotbed. As is the venerable law school at the Univerity of Virginia.

Ahhh, yes. Turnabout is fair play. And it’s time that the Democrats start playing fair.


Cross-posted at Angry Bear.