Jeff Gelles: 'Mass,' not class, action

KRT 2000
KRT 2000

A Web-based voice for David against Goliath.

Posted: December 24, 2012

If you've ever struggled through a small dispute with a company - say, over a defective product, undeserved late fees, or a mistaken billing - you'll probably identify with Nate Friedman and his fight with Comcast over a missing set-top box.

Friedman, 24, moved over the summer from grad school in Charlottesville, Va., to a job in Washington. He shipped the cable box back per Comcast's instructions, but something went wrong. Comcast said he owed $432, and put his account in collection - a delinquency that showed up on his Equifax credit report.

Most consumers have been there, one way or another. Maybe we believe we're owed a refund, don't owe money a company is demanding, or suffered some other small injustice. But when the amounts are relatively small and companies hold so many cards, it's a rare consumer who doesn't eventually give up. "You can't fight city hall" applies to business bureaucracies, too.

Friedman, as it turns out, was one of those rare consumers - largely because his father, Philip Friedman, is a Washington consumer lawyer who knows how to fight back. After the Friedmans demanded arbitration, a process with its own long set of Byzantine twists, Nate Friedman and Comcast recently agreed to an undisclosed settlement.

Comcast's Jenni Moyer won't discuss details of the case, but calls it an isolated incident. "Our goal is to get things right for the customer the first time. We do sometimes make mistakes, and when that happens, we want to resolve that as quickly as possible for the customer."

The problems the Friedmans encountered in arbitration - and what they say about the whole idea of "alternative dispute resolution" for consumers - are a story in themselves, which I'll get to in a future column. For now, let me explain why the elder Friedman believes it's essential to counter corporate legal strategies that limit customers' rights when something goes wrong.

Those rights took a big hit last year, when the Supreme Court ruled, 5-4, that no matter what state laws say, 1925's Federal Arbitration Act ensures that companies can require any disputes to be settled in arbitration and can bar their customers from joining class actions against them.

If you listen to their critics, class actions often sound like abuse of the legal system. It's fairer to say that, though an occasional case seems to benefit lawyers more than clients, class actions are an essential tool for resolving disputes between parties with widely disparate resources, such as consumers with a legal beef about corporate practices.

For some sorts of small-dollar wrongs, they're really the only way to fight back - as illustrated by last year's Supreme Court ruling. That case began when a California couple, Vincent and Liza Concepción, objected to being charged $30.22 in sales tax for a phone AT&T Mobility promoted as free.

Without the potential to join a class action, people like the Concepcións really have no alternative to just saying, "You win," a point raised by the dissenting justices.

"The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30," Justice Stephen G. Breyer wrote, quoting an earlier appeals court decision.

The Concepción case has prompted some, including Sen. Al Franken (D., Minn.), to push for passage of the proposed Arbitration Fairness Act. That bill would amend the 1925 law by barring mandatory-arbitration clauses for consumer, employment, or civil rights disputes.

But with corporations calling so many shots on Capitol Hill, some lawyers are seeking other strategies. This fall, Philip Friedman co-founded a nonprofit, Consumers Count, aimed at tilting the playing field just a little bit back in consumers' direction.

The group's goal is to use the Internet to replace class actions with what Friedman calls "mass actions." The idea is that if enough people sign on to a proposed case, a lawyer should be willing to take up the cause and steer them through the process of individual arbitrations or small-claims cases.

More to the point, he says, is that a critical mass of consumers would provide economic leverage. Companies would realize they face substantial liability if they don't change an objectionable practice.

"The whole rationale behind arbitration clauses is to limit disputes to one consumer versus one giant corporation," Friedman says.

A dispute with Nissan Motors listed on the group's website, www.consumerscount.org, illustrates the concept.  It involves military personnel who say they were denied proper treatment under the Servicemembers Civil Relief Act when they terminated car leases after being ordered overseas.

Friedman says Nissan was ending the leases, as the law requires, but refusing to refund a pro-rated portion of the down payments collected at the outset. The class action contended such charges were advance payment of monthly costs, an assertion Nissan disputed before using the Concepción ruling to bar the courthouse door.

I can't judge who's right here, but I can say this much: A dispute like this shows the importance of class actions. Each soldier or sailor would likely be entitled to only a few hundred dollars - enough to make a difference to them but not enough to hire a lawyer.

Maybe Nissan has great arguments or case law on its side. Making that call is what our courts and judges are for.


Contact Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.

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