National and local media have picked up on an important set of cases out of the Washington Supreme Court yesterday (for example, here, here, here, and here). The cases, Dix v. ICT Group (the suit actually targets America Online) and Scott v. Cingular Wireless involve the question whether a company's service contract with consumers may contain provisions that effectively channel legal disputes with the company into individual, rather than class action, litigation claims. Elevating the right to class action over several other competing public policies, the court in both cases struck the challenged clauses.
In Cingular, the disputed clause was an "arbitration clause" requiring billing and service disputes with Cingular to go to arbitration, a faster, less formal, less expensive method of dispute resolution that doesn't add to the overburdened taxpayer-funded public courts system. In fact, Cingular's arbitration clause was so friendly to the consumer that the company, among other things, picked up the tab of arbitration, paid attorneys fees if it lost, traveled to the consumer's home county for arbitration, etc.
Alternative dispute resolution, like arbitration, is so important to the efficient operation of our courts system that AWB, alongside Microsoft, RealNetworks, Amazon.com, and Intel, filed a friend of the court brief in Cingular framing the issue this way:
In recent years, businesses and consumers throughout the United States have successfully turned to arbitration as a quick and economical method of resolving commercial disputes. AWB has been a leading proponent not only of arbitration as an important instrument of alternative dispute resolution, but also of public policies that will keep Washington an attractive place to do business. In this case, AWB sees the two policies dovetailed. On the one hand, it would be unsound legal and public policy for our state to turn its back on a longstanding and common-sensical practice of arbitrating consumer disputes. On the other hand, it would impair Washington’s competitiveness and the resulting ability to generate jobs for Washingtonians if our state’s legal climate signals to businesses that it differs from the vast majority of other states regarding the enforceability of consumer-friendly arbitration agreements.
AWB therefore argued four things: (1) the court should further our public policy supporting arbitration; (2) the court should not toss out ALL arbitration agreements merely because they limit class actions, (3) Cingular's clause, in fact, was so consumer friendly it certainly wasn't "unconscionable," and (4) any broad policy changes in arbitration should be accomplished in the Legislature, which makes the law, instead of the Judiciary, which is merely supposed to interpret it.
Well, these themes did come up yesterday, but unfortunately in the withering dissent by Justice Barbara Madsen, signed by Justices Bobbe Bridge and Jim Johnson. Justice Madsen accused the majority, correctly, of crafting out of nowhere a broad ruling that will basically strike down all arbitration agreements -- no matter how consumer friendly -- if they happen to require individual rather than class action resolution of claims. Justice Madsen also pointed out that if this were to be the direction for Washington's legal system, it should come from the Legislature, not 6 people making up a Supreme Court majority.
The Cingular case was brought by a group called the "Trial Lawyers for Public Justice". And in the biggest of big pictures, that's what this case is about. As it was put in this morning's Spokesman Review:
Kris Tefft, general counsel for the Association of Washington Business, saw it differently.
It's a mistake, he said, to favor massive class-action lawsuits over quick, efficient arbitration. In class-action cases, he said, attorneys often get millions while customers get little."
I think the trial lawyers really end up being the winners in both of [the] decisions," he said, "although both are dressed up as victories for consumers." Also, he said, courts are generally good about policing abusive contracts.
There's the rub. These cases are so important to trial lawyers because in aggregating small claims that could be quickly and efficiently resolved, class actions can devour years of judicial resources, resulting in enormous attorneys fees that handsomely enrich the plaintiffs' lawyer while the individual claimant may get a few bucks or a coupon back for their trouble.
The other problem is the court's unreflective sweeping away of our state and federal policy promoting arbitration of disputes. This has been a carefully balanced and legislatively crafted public policy. Trying as hard as they might to grant maximum leeway to class action lawyers in the name of consumers, the court took it upon itself to do what the Legislature is supposed to do -- create public policy. That's the epitome of judicial activism.
So on this one, it's Trial Lawyers 2, Judicial Restraint 0.
