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Is banning class action lawsuits unconstitutional?

U.S. Supreme Court members (first row L-R) Associate Justice Clarence Thomas, Associate Justice Antonin Scalia, Chief Justice John Roberts, Associate Justice Anthony Kennedy, Associate Justice Ruth Bader Ginsburg, (back row L-R) Associate Justice Sonia Sotomayor, Associate Justice Stephen Breyer, Associate Justice Samuel Alito and Associate Justice Elena Kagan pose for photographs in the East Conference Room at the Supreme Court building.

TEXT OF INTERVIEW

JEREMY HOBSON: When you buy a cell phone or anything else that requires you to sign a contract with a bunch of fine print, do you read it? I know I don't. But often in that fine print companies tell you that if you have any problem with the product, you can't file a class action lawsuit. Well that is the subject of a case that made it all the way to the supreme court this week.

And here to talk to us about it is LA Times Consumer Columnist David Lazarus. Welcome back to Marketplace.

DAVID LAZARUS: Thank you.

HOBSON: So tell us first about this case that's before the Supreme Court.

LAZARUS: The case is AT&T Mobility versus Concepcion and in a nutshell, the Concepcion sued AT&T in 2006 because they got cell phones from the company that were ostensibly free, but in fact came with a lot of charges. They said that's fraud. They started a class action lawsuit. AT&T subsequently went to a court in Southern California and said, "Let's throw out the case because our contract says you cannot join a class action lawsuit." And the district court said, "Well that's unconscionable." And so it went up to a Federal Appeals court. The Appeals court also upheld the Concepcion side and said, "It's unconscionable to bar people from joining a class action lawsuit." So, AT&T has petitioned to the U.S. Supreme Court which is hearing the case this week.

HOBSON: And this has everything to do with these contracts that we sign, not just with cellphones but with all kinds of other products. What are the potential ramifications for consumers?

LAZARUS: The ramifications are really broad because as you say these are these take it or leave it contracts that a credit card company or a cell phone company or a cable TV company issues and if there's an arbitration cause in there that says, "You cannot join a class action lawsuit," BOOM you have just lost your right to sue. That's a very big deal and high courts in California and elsewhere have said that's unconscionable. Basically what's at stake here is the Federal Arbitration Act of 1925 and whether that's going to trump state ruling that strike down class action bans.

HOBSON: Why are class action law suits such a big deal for these companies? Are they that common?

LAZARUS: They are very common, but there also a lot of abuses in the system. Typically the lawyers walk away with the lion's share of the money. But this is one of the most powerful tools available to the little guy. Especially in cases involving small amounts of money where you really wouldn't litigate on your own. And also, this is a key way that big businesses can be held accountable for any sorts of misdeeds.

HOBSON: OK, we'll be watching what happens in the Supreme Court. David Lazarus, Consumer Columnist at the LA Times, thanks again.

LAZARUS: A pleasure.

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