Supreme Court Decides Arbitration Is Appropriate in DirecTV Case

The Supreme Court this week ruled that California DirecTV customers cannot sue the company in a class action but must resolve disputes in arbitration. The ruling is considered a blow to consumers by some, including two of the Justices on the bench, reports The New York Times.

The case arose from a 2008 lawsuit brought by two customers who objected to DirecTV's early termination fees and sought to represent a class of similar customers. But in 2011, after the Supreme Court allowed companies to use their contracts to forbid class actions, DirecTV asked a state court judge in California to dismiss the lawsuit and require arbitration. This week, the Supreme Court confirmed that arbitration is appropriate. But some are unhappy about it, including some Supreme Court Justices.

Why Does This Matter?

On its face, this case does not seem obviously meaningful to everyone. Why does it matter if some dissatisfied DirectTV customers in California get to sue in a class action or are forced into arbitration?

According to the Justices who opposed the ruling today, it matters because it means consumers have fewer modes of redress when they are dissatisfied or have been harmed. If forced to arbitrate individually, a New York Times study found, most consumers will drop their claims. When they act as a class, they are more inclined to see cases through.

The reason for this is simple. Consumers need to be able to sue as groups because the vast majority of us are not going to fight a major company over a small harm. But when small harms are added up across a consumer base, they can add up to quite a lot in damages.

This is why companies prefer forcing individual arbitration. Class action lawsuits are unwieldy and difficult to defend. They exist to help similarly-situated plaintiffs act as one to seek justice.

A Blow to Consumers

"I would take no further step to disarm consumers, leaving them without effective access to justice," wrote Justice Ruth Bader Ginsburg in dissent. She called the Court's decision this week just one in a line of cases that have "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." Justice Sonia Sotomayor joined Ginsburg's dissent.

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