Supreme Court Rejects Class-Action Suit In DirecTV Case

Date: December 15, 2015

Decision Seen Reducing Liability For Businesses

The New York Times reported that the Supreme Court on Monday “ruled that dissatisfied customers of DirecTV in California could not band together in a class action and must instead pursue individual arbitrations.” The 6-3 decision “was the latest in a series of Supreme Court decisions that have made it harder for consumers to go to court to pursue claims of fraud and defective products.” Justice Ruth Bader Ginsburg “wrote in dissent that ‘these decisions have predictably resulted in the deprivation of consumers’ rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer protection laws.’”

The Washington Post reported that the court ruled “that its previous decisions on the subject mean that California consumers may not rely on a state law that would have allowed consumers the right to band together to sue.” Justice Stephen Breyer “was tasked by” Chief Justice John Roberts “with writing Monday’s decision, even though he dissented in the court’s 2011 decision in AT&T v. Concepcion,” which “said that the Federal Arbitration Act (FAA) preempts state rules that keep class-arbitration bans from being enforced. ‘The fact that Concepcion was a closely divided case, resulting in a decision from which four justices dissented,’ has no bearing on the obligation of lower courts to follow its holding, Breyer wrote,” and “that decision made California’s protection of class arbitration invalid.”

What This Means For Small Business

The National Federation of Independent Business has detailed the risks that frivolous lawsuits can pose to small business owners, observing that “in 2008 alone, small businesses shouldered a total tort liability price tag of $105.4 billion.” The American Tort Reform Association characterized the state of California as the “undisputed heavyweight champion of the consumer class action,” but this decision could potentially limit the risk that small business owners could face from frivolous lawsuits.

Additional Reading

A Wall Street Journal editorial discussed the ruling.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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