The End of Class Action Litigation in MLM?

This is an enormous Supreme Court decision for MLM companies. In a 5-4 decision, the Supreme Court held that consumers (distributors) can waive their right to participate in a class action lawsuit. The full article can be found here. The lawsuit was a case between AT&T and Concepcion. In the original lawsuit, Concepcion served as a class representative for consumers against AT&T over a nominal sum of money per consumer: $30. Clearly, $30 is not worth suing over; hence, the purpose behind the class action. But in the fine print in AT&T’s agreement there was a clause where the consumers waived their right to participate in a class action lawsuit and instead were required to arbitrate their disputes. Clever. And apparently enforceable.

This is nothing entirely new for MLM companies. However, it bolsters the argument that all disputes should occur in arbitration instead of aggregating mass numbers and filing a class action lawsuit. There’s a little bit of healthy criticism over the fairness of arbitration proceedings. As stated in the article, “Modern arbitration practices have been the target of watchdog group
Public Citizen for several years. Bills to create an Arbitration Fairness Act were filed in Congress in 2007 and 2010. In a release supporting the 2007 bill, organization president Joan Claybrook blasted the “take it or leave it” forced nature of the clause, the lack of oversight of the process, and supposed bias: ‘…(A)rbitration companies are beholden to big corporate players for repeat business, which creates a bias. They do not bite the hand that feeds them. For example, public data show that in the portfolio of one California arbitrator who ruled in 532 cases, 526 were in favor of business – a mere 1.14 percent for the ordinary consumer.’”

Brian Fitzpatrick, law professor from Vanderbilt, said if the ruling went in favor of AT&T, it would “end class-action litigation in America as we know it.” Given this recent ruling, it just got a lot easier for companies to skim a little here and there from consumers without much threat of consequences aside from a PR backlash. There’s not going to be single agreement now where there’s no class action waiver, which really takes power out of the hands of an aggrieved community, also referred to as a “class.” I have mixed thoughts on this one. What are your thoughts?

  • Anonymous

    I doubt this affects the Pokorny/Amway case, as the judge in California has deemed the Amway arbitration process “unconscionable and illusory” for reasons that go far beyond problems identified with AT&T’s process, and it can be argued winning only 6 out of over 500 cases is indicative of a problem that extends FAR beyond Amway, so your point on not wanting to bite the hand that feeds the arbitration companies deserves further investigation. The AT&T arbitration process appears to be much less one-sided than Amway, and does not have the well deserved negative reputation of Amway’s arbitration process or the 99% winning record you cited. It appears to me Congress needs to get involved to ensure the arbitration process used is fair.