A little-covered Supreme Court case allows private firms to dictate the rules behind class-action suits.
A whole lot of Supreme Court decisions get little to no attention if no activist/special interest groups get involved. Such was the case last year, when the court allowed private firms to change the rules around class-action suits. You didn’t hear much about it at the time, but you can expect to hear a lot more in the future.
Thanks to that decision, Microsoft can bar you from bringing a class-action case against it. The company already changed its end user license agreement (EULA) for the Xbox last year, which was hit the hardest by class action suits a few years back. Now the company is expanding that to cover all of its products.
In a 5-to-4 decision that split along the usual ideological lines, the Court ruled in April 2011 that businesses may use standard-form contracts to bar consumers claiming fraud from teaming up for a class-action suit.
The decision concerned arbitrations, not suits, but that’s no problem. Companies now use their standard contract to use arbitration to settle disputes. This is bad because you can’t appeal the findings of a private arbitration hearing, nor is there an independent or public means of reviewing an arbitrator’s decisions. They are designed to be conducted in private, unlike court cases.
The decision “basically lets companies escape class actions, so long as they do so by means of arbitration agreements,” said Brian T. Fitzpatrick, a law professor at Vanderbilt University, in the New York Times.
GeekWire, the Seattle-based blog run by ex-newspaper reporters that follows Microsoft, noted that the four major U.S. wireless carriers have similar practices. This is only going to accelerate.
Armed with this case, Microsoft has changed the terms of its consumer EULA. You know, that contract no one reads. Last Friday, right before Memorial Day when no one noticed it, Tim Fielden, assistant general counsel for Microsoft, announced that Microsoft was changing its EULA.
“When a customer in the United States has a dispute about a Microsoft product or service, many of our new user agreements will require that, if we can’t informally resolve the dispute, the customer bring the claim in small claims court or arbitration, but not as part of a class action lawsuit,” he wrote.
“We think this is the right approach for both Microsoft and our U.S. customers,” he added. No, only Microsoft benefits.
Microsoft was hit with multiple class action suits over just the Xbox 360 alone for the Red Ring of Death issue and the optical disc scratching errors. But it was still hit with a bunch of lawsuits over the issue. Obviously, given the Xbox’s position in the marketplace, it didn’t suffer too much for it, but it looks like Microsoft is now the latest firm to take advantage of a really bad decision from the high court.
