Last week, the U.S. Supreme Court overruled a California court that had said that corporations could not force consumers into resolving disputes in arbitration by using arbitration clauses in contracts. The Supreme Court said in a 5-4 decision that corporations could use the fine print in contracts to prevent consumers and employees from coming together to bring class action lawsuits.

What this means is that consumers with complaints about small amounts of money cannot join together to sue a company if there is an arbitration clause in their agreement.

In the case before the court, the original plaintiffs had sued a cellular phone company over a “free” cell phone that actually cost $30.22. In cases like these, said the Supreme Court, each consumer would be obligated to take their individual complaint to arbitration.

San Diego contract law attorneys noted that the U.S. Supreme Court majority ruled that the Federal Arbitration Act of 1925, originally aimed at disputes over maritime and rail shipments, overrides state laws and court rulings in California and about half the states that limit arbitration clauses deemed to be “unfair” to consumers.

Experts said the ruling will give corporations the ability to exempt themselves from the civil justice system. Arbitration clauses have become standard in contracts large and small.

In 2005, the California Supreme Court had ruled that allowing corporations to shield themselves from lawsuits by using arbitration clauses would let them “deliberately cheat large numbers of consumer out of small amounts of money.”

The U.S. Supreme Court has now said that the arbitration clauses should be enforced even if they are unfair.

Source: L.A. Times “Companies can block customers’ class-action lawsuits, Supreme Court rules” 4/28/2011