Wouldn’t it be great if we could live our lives according to the platitudes we hear every day? “Live each day as though it were your last.” Yeah, if I did that, I wouldn’t show up to work, and I’d spend the day doing whatever I felt like doing. Who wants to work on their last day, right? How many times could I get away with that before I lost my job? Another favorite is “The best things in life are free.” Well, that one may be true in some cases, but I think it’s more prudent to adhere to, “There’s no such thing as a free lunch.” That’s what one couple in California found out when they signed up for AT&T wireless service, and received a free phone. Or did they? Liza and Vincent Concepcion claimed fraud when AT&T promised them a free phone as part of their new wireless agreement, then charged them $30 tax for said phone. The Concepcion’s argument is, how can they be charged tax on something that’s free? They got a lawyer, took their complaint to court, and the case made it all the way to the Supreme Court. While the case started out pertaining to the $30 charge, it quickly progressed to a question of whether the couple had the right to take the case to court in the first place, and that is what the nation’s court will rule on. AT&T argued that the contract the Concepcions signed states that if any dispute arises, it must be settled via arbitration. Businesses prefer the arbitration process because it’s not public, it’s handled one-on-one between the two parties involved, and it usually results in much lower monetary settlements, if they even come into play at all. The case made its way through the California court system, with every court determining the arbitration clause is unenforceable. AT&T has pursued the case all the way to the Supreme Court, which heard arguments from both sides on Tuesday. Several companies such as utilities, banks, and other service-related businesses agreed with AT&T, and have been lending their support. Meanwhile, organizations such as the NAACP Legal Defense and Educational Fund, and other consumer groups are backing the Concepcions. The Court’s decision won’t be released until next year, but apparently, it looks like it will favor the Concepcions. But not over the tax charge. The Supreme Court is simply loath to overturn a decision by the California Supreme Court. To do so could be construed as interfering with state legislation, and states must be able to govern themselves, especially in matters related to consumer protection. This would also be a good thing for consumers everywhere who turn to class action suits when they are wronged in some way by a corporation. All the wireless carriers, for example, have been hit with class action suits for overcharging their customers, and other infractions that amounted to millions of dollars in losses for large groups of people. Consumers who are taken advantage of in such ways need to have recourse. But let’s back up and look at the original complaint for a moment. First of all, we’re talking about a state-imposed sales tax, not an arbitrary fee concocted by AT&T just to pad their bottom line. Second, although the phone was free, it’s standard practice for the recipient to have to pay taxes on anything they receive at no charge. People who win non-cash prizes on game shows, reality shows or in other contests are responsible for all taxes levied on the value of those winnings. Sure, we could argue all day about whether that’s fair, or whether taxes are fair in general, but for right now, that’s the way it is. And the Concepcions didn’t take the state of California to court claiming the tax was unconstitutional. They sued AT&T for fraud. For enforcing a sales tax. Imposed by the state. It really seems to me that the Concepcions, either through ignorance or in hopes of a big payday, filed a frivolous lawsuit that is now taking up time in the Supreme Court, which I’m pretty sure has more important things to rule on than whether a California couple should have been made to pay 30 bucks’ tax for a free phone. In addition, the Concepcions opened the door for AT&T, and through precedent, any other corporation, to do away with the class action lawsuits that sometimes are the only thing keeping them in line, and preventing them from really taking advantage of customers. It probably won’t go that way, but what if it does? What if the Supreme Court sides with AT&T? Then, the next time they decide to raise their early termination fee, and unfairly gouge their customers, each and every customer will have to deal with AT&T directly, on their own, with no support from a class action and the attorneys that come with it. So thanks, Liza and Vincent Concepcion. Because you didn’t think you should have to pay a $30 sales tax, and targeted the wrong entity for it, every other consumer in the United States may have to pay. Literally.
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Excellent summary. Scary as hell, but in a post-Twombly USA it is to be expected. Let’s hope the Court comes out the right way.