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Consumers Lose Right to File Class Actions?

AT&T will be presenting arguments before the Supreme Court that could have a sweeping effect on a consumer's ability to file class action lawsuits. The potential victory would not be limited to cell phones but would also rope in any business that issues contracts to customers, including cable television and credit cards.

The case is AT&T Mobility Services v. Concepcion. Lisa and Vincent Concepcion, on behalf of a class of consumers, sued AT&T alleging deceptive business practices. Specifically, the Concepcions argue that they were mislead by a promotion that offered discounted cell phones but charged sales tax on the full retail price of the phone. The cell phone contract, however, required that the dispute go to arbitration and not the courtroom. The problem with arbitration is that it does not lend itself to class-action style claims. Although a California federal district court and the Ninth circuit struck down the contract as a violation of public policy, a ruling the other way is not out of the question.

"If the court goes down AT&T's oath, the consequences could be staggering. It could be the end of class action litigation ... virtually all class actions today occur between parties who are in transactional relationships with one another: shareholders and corporations, consumers and merchants, employees and employers. Because they are in transactional relationships, they are able to enter into arbitration agreements with class action waivers," Brian Fitzpatrick told the Wall Street Journal.

A victory for AT&T would not extinguish the ability to resolve a dispute, but it would serve to take away the most powerful legal tool a consumer has against a large company -- joining together with other similarly interested consumers and strengthening their case. The beauty of a consumer class action also lies in its ability to bring smaller claims that would otherwise be a waste of time and resources.

For their part in the AT&T class action, the telecom giant argues that the Federal Arbitration Act pre-empts any state contract law when the prohibition against class actions is coupled with arbitration.

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