Sunday, 1 May 2011

The Supreme Court Rules Out Class Actions

Last November I wrote how some unscrupulous companies – many of them quite large – had expropriated Apple's business model in a perverse way.

Apple charges a small amount, say $2, for an app but sells it to millions of users. Both the company and the app developer benefit.

In the perverse version of this business model, a company, say, a telecom or a bank, defrauds millions of customers out of a small sum, say, 99 cents. Even if you, as an individual customer, notice the fraud, what are your options – sue a telecom for 99 cents?

The only remedy for such fraud in the U.S. was a class action suit, a legal mechanism that dealt with cases when a company had set out to “deliberately cheat large numbers of consumers out of individually small amounts of money,” in the words of the California State Supreme Court.

This past Wednesday, in a 5-4 ruling, the Supreme Court banned consumers from coming together in a class action suit to fight such fraud. According to Brian T. Fitzpartick, a law professor at Vanderbilt University who was quoted in the New York Times:
“The decision basically lets companies escape class actions ... This is a game-changer for businesses. It's one of the most important and favorable cases for business in a very long time”.
The majority decision was written by Antonin Scalia, the justice who, in a formal legal meeting, opined that the fictional TV character Jack Bauer of “24” who tortured people should go free because he “saved Los Angeles”.

AT&T Mobility, the defendant in the case, said in the statement that the decision was “a victory for consumers”.

So it goes. If you read my earlier post, Functionaries Passed off as Revolutionaries, you would see that I was expecting the decision.

Someone like Antonin Scalia is nothing if not predictable.