California Supreme Courts Holds That It Is Illegal for Corporations to Ban Customers from Bringing Class Actions

TLPJ Hails Decision as Victory for Access to Justice

The California Supreme Court sits in San Francisco's Earl Warren Building.

The California Supreme Court held today in Discover Bank v. Boehr that corporations cannot use clauses in their form contracts to bar customers from bringing or participating in class actions against them under California law. The Court also held that the Federal Arbitration Act does not preempt or override California’s prohibition of class action bans, even if the contract provision banning class actions is included within a binding mandatory arbitration clause. The Court remanded the case to the California Court of Appeals for further proceedings to determine if California law or Delaware law applies to the specific claims in the case. The case was argued before the California Supreme Court in Los Angeles on April 7, 2005 by F. Paul Bland, Jr., a Staff Attorney with Trial Lawyers for Public Justice, a national public interest law firm with headquarters in Washington, D.C. and a West Coast office in Oakland, and by Brian R. Strange of Strange & Carpenter in Los Angeles.
     “This is a landmark victory for consumers because it secures customers’ right to use class action lawsuits, one of the most effective tools for holding corporations accountable,” said Bland. “When consumers are cheated out of small sums of money, a class action lawsuit is often their only chance of securing access to justice. The Court recognized that it is unfair and illegal for a bank to strip this powerful tool from customers raising small claims under California law. The Court rightly held that nothing in the Federal Arbitration Act immunizes corporations from state consumer protection laws.”            
     Strange added, “The Court clearly understood that if corporations can bar their customers from taking part in class actions, they can make it impossible for their customers to vindicate their rights. In many cases, a class action offers the only meaningful way that consumers can hold corporations accountable.” 
     In addition to Bland and Strange, TLPJ’s legal team in Discover Bank includes TLPJ’s Michael J. Quirk, Arthur H. Bryant, Leslie A. Bailey, and Kate Gordon; Gretchen Carpenter of Strange & Carpenter; and Barry L. Kramer of the Law Offices of Barry Kramer in Los Angeles.
      TLPJ’s key legal brief in Discover Bank v. Boehr is posted on TLPJ’s website, www.tlpj.org. The California Supreme Court’s decision is posted at http://www.courtinfo.ca.gov/opinions/documents/S113725.DOC.