April 28, 2011

The Latest SCOTUS Assault: Lochner’s Back (AT&T vs. Concepcion)

Filed under: American Revolution, Corporatism, Law, Sovereignty and Constitution — Tags: — Russ @ 10:06 am


Just over a month ago I wrote

We’ll soon find out what’s the latest from the SCOTUS on unconscionable contracts of adhesion, extortionate ”contracts” forced upon us through the coercion of monopoly and artificially created economic hardship. These strong-arm contracts are increasingly popular, and are imposed anywhere the corporations attain the position of dominance which enables them. In theory such contracts, just like gambling, are supposed to be unenforceable, uncontracts. But here too the SCOTUS has usually served as the corporate goon. The Lochner era was based upon the legalization of “contract” extortion, and although the court nominally abandoned this doctrine in 1937, in practice courts almost always still find such contracts valid. In the case of AT&T vs. Concepcion, AT&T’s thefts were so outrageous that the lower courts found the contracts it imposed, forestalling its victims to combine to sue as a class, to be unconscionable. But this will be the SCOTUS’ big chance to restore Lochner as official court doctrine. 

And so it has been. The corporatist SCOTUS released its decision in AT&T vs. Concepcion on Wednesday, finding that mandatory arbitration clauses forbidding class action suits on behalf of vast numbers of consumers each defrauded for small amounts are valid contracts. (Decision PDF here.) This reverses lower court rulings which correctly found that these are unconscionable contracts of adhesion, meaning that they are coerced upon a weak party by a much stronger party, and are therefore invalid.
Earlier I wrote a longer post on this case. Here’s an excerpt, to give the basics of the issue. 

The gist of the case, AT&T Mobility vs. Concepcion, is that AT&T systematically committed flat out fraud and theft by tacking bogus charges onto bills. The goal was to cover up for these by slathering the contracts in fine print boilerplate jargon, forcing the customer, as a condition of the contract, to agree to “arbitration” in any dispute, and make the thefts small enough that the customer either wouldn’t notice or would consider it too much of a hassle to pursue a refund. And by keeping the victims informationally isolated from one another, AT&T hoped the thefts would all look like mistakes which at worst warranted crediting the customer’s account, not felonies which warrant punitive damages as well as prison sentences for company cadres.

There’s a lot here which shouldn’t be able to happen, according to the capitalist textbooks. According to capitalist ideology, a competitor should come along and take all of AT&T’s business by offering better service. This competitor will allegedly offer clear contracts, no fine print, which don’t require the customer to surrender his constitutional rights as the condition of the contract. (The contract should always be absolutely clear, as a matter of market efficiency. Anyone who makes the contract opaque is simply hindering the market, not behaving as a legitimate capitalist, and will hurt himself in the competitive marketplace. The ideology says so.) This hypothetical competitor will also be so good as to not, um, steal. The contracts which surrender the right to sue are clearly invalid, as they are unconscionable contracts of adhesion. Meanwhile a conscientious government, conscientiously enforcing a conscientious law, will see that the victim gets his day in court and will vigorously prosecute the wrongdoer. The system will be vindicated!

Of course, in reality the opposite happens. In reality the telecom sector matured, congealed, and calcified. It concentrated into a stagnant oligopoly with full government assistance. All the oligopolists collude to impose the same opaque, unconstitutional adhesion contracts upon the prostrate customer. The government encourages them to do this. No competitor is likely to arise. The government helps set up the insurmountable barriers to entry. There is no competition. “Competition” is just another Marie Antoinette “let them eat cake” term – “You don’t like the contract? Go to the competition!”

There is no competition. In almost every sector, a few oligopolists have a stranglehold, and they collude to impose this grip with no escape, no alternative. The government does all it can to help them attain this death grip. Capitalism is a failure and a fraud. 

The telecom sector, like almost all others, is by now an oligopoly where a handful of corporations completely dominate the market. They then present a united front in forcing these contracts upon customers. This has become standard practice over the last ten years. So it’s absurd to claim that the customer has any market recourse. The arbitration clause, coercing him into surrendering his constitutional rights, is forced upon him. Nor is there much of a non-participation option. It’s increasingly difficult to function in this country, at work and socially, without a cell phone. The telecoms have done all they can to craft government policy to bring about this condition.
So the telecoms have done all they can to force us to use cell phones in the first place, and then they directly force us to sign mandatory arbitration clauses. This is doubly a coercion, and it’s doubly a lie to claim the customer has any choice. So the arbitration clause is obviously unconscionable, if that legal term is to have any meaning at all.
This meaninglessness is exactly what the activist corporatists* on the SCOTUS want. Writing for the majority, Scalia says

“The dissent claims that class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system,” Scalia wrote. “But states cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.”

“The overarching purpose of the FAA,” Scalia wrote, “is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” 

This is an historical lie. The Federal Arbitration Act (FAA) was originally intended to apply only to agreements between sophisticated market players. Even leaving aside the unconscionable adhesion fact, the FAA was never intended to work between powerful sophisticated players and individual citizens. Once again we see the fraudulence of Scalia’s alleged “originalism” principle, how it applies only where it would bring about the results he wants. Elsewhere he happily drops it and decides directly counter to it.
Also, how depraved is the notion that if the law as allegedly constituted would bring about a result outrageous to human decency (as this decision certainly is), the court must nevertheless comply. Yet that’s what Scalia says in that quote.
This is doubly a lie. By law courts aren’t supposed to be slaves to the alleged letter of the law where the result would outrage the conscience. Courts have broad leeway to take equity and human decency into account. And this doctrine of compliance with outrage also contradicts the American Revolution’s fundamental principle of constitution, that the forms of the law are valid only insofar as they uphold basic the verities of human community like life, liberty, and justice. Arbitration coercion, not to mention the initial vast systematic fraud, assaults these. Therefore even if the FAA demanded the upholding of this coercion, which it does not, that would simply mean the FAA is unconstitutional.
Scalia lies about the goal of the act, and about the goal of the decision. The decision simply wants to help facilitate organized crime. Nothing more, nothing less.
In this case the crime, very common among telecoms, is the systematic theft of small amounts from vast numbers of victims. But as I said in the excerpt above, the broad goal is to reinstate the Lochner regime, where no one has any protection at all from coercion in the form of unconscionable “contracts” which impose every kind of extortion, penalty, humiliation, and stripping of all of our Constitutional rights. The corporatists hate the Constitution, and have long dreamed of destroying it. Through mechanisms like this, they’re making steady progress. An entity like the SCOTUS is nothing but their factotum.
The people need to realize that the SCOTUS has abdicated and is completely illegitimate. No citizen owes it reverence or obedience. On the contrary we have a citizen responsibility to reject and resist it.
Of course AT&T is spewing the standard Orwellian lies about how arbitration is “good for consumers”. But as the author of the business piece linked above, certainly no bomb-throwing radical, says, if that’s true, then why does it have to be forced upon them? Why isn’t it just an option? We know the answer.
*We must reject all the nonsense we’ll be seeing about this being a bad decision by the 5-4 “majority”. The entire court is corporatist, and these 5-4 decisions (Citizens United was another) do not pit corporatists against citizen advocates, but only the judicial activists against the more passive corporatists. It’s only a technical squabble among anti-democratic ideologues who broadly agree on the corporate assault.


  1. A disgusting and corrupt decision!

    There’s little choice… either abandon reason… pretend that this unreal mentality could ever lead to a fair and just society… and willingly choose slavery under a Corporate dictatorship,

    Or look reality in the face, become a free, thinking human being… and search for ways to break the stranglehold of this Social Darwinist/Ayn Randian stupidity.

    Light a fire in the belly of the beast:

    Leveling The Transaction Landscape: Technology and the Campfire

    Comment by Tom Crowl — April 28, 2011 @ 11:27 am

    • That’s right, the first step toward freedom is looking at reality head-on and acknowledging it for what it is, and if necessary recalibrating one’s beliefs and actions accordingly.

      Comment by Russ — April 28, 2011 @ 6:17 pm

  2. I am not a tin foil hatter, but I believe there is a macro plot afoot to widen the already cavernous gap between the richest of the rich and the vast, vast majority of the rest of the US population. The major execs and partners of the six largest Wall Street holding banks, banks that are estimated to own assets worth approximately 63% of the US GDP, have been forced since TARP, due to public outcry, to take much of their bonus compensation in the form of corporate stock. in many cases, this stock must be held for three years before the stock shares can be transformed into cash. Therefore, nothing is more important to these execs than increasing the value of their stock shares. They are doing this by deflating the value of the US dollar. This inflates the prices of those things most other Americans must purchase just in order to survive.

    The big six Wall Street holding banks never lose. They had perfect trading quarters while much of the rest of the country was on SNAP food cards, suffered from massive waves of foreclosures, was unemployed or underemployed, or was living from paycheck to paycheck . How did this elite group succeed, against all odds, while most Americans fell deeper and deeper into economic ruin? By using free money from the Fed and the Taxpayers, and employing huge leverage and lightning fast computers, they were able to rig the market and swing it in any direction they chose. The average stock is held for only 22 seconds, because a handful of quant traders controls an over whelming percentage of the whole market. They always have inside information, because they are the insiders. We are not.

    The six large Wall Street banks have assets, valued at mark to model, that equal over 60% of the US GDP. A stock share is worth what they say it is worth. Additionally, these banks, along with the other Primary Dealers, control the Fed, and the Fed controls the dollar. The value of the dollar against the euro dictates the strength and weakness of the market.

    On almost all days that the dollar gains value against the euro, the US stock market goes down. On almost all days the dollar loses value against the euro, the US stock market goes up. The market is easily moved in one direction or another by agreements between the Fed and the EU central bank. If you don’t believe this is true, just click on the link below for a chart that compares the S&P 500 with the USD/EUR. Here is proof that when the dollar goes down against the euro, the US stock market goes up.

    Stocks cost more in weaker dollars, so the share prices rise as the dollar falls. It is inflation (dollar deflation) that increases share prices. It is as simple as that. The Wall Street banks that control the Fed, control the market, and this chart gives you the proof:


    Comment by black swan — April 29, 2011 @ 8:38 pm

    • You shouldn’t feel any need to say “I’m not a tin foil hatter”. Kleptocracy dominated by the finance sector is an observed fact.

      On the contrary, one would need a whole aluminum mine to fashion the hat which he’d need to be wearing in order to come up with an alternative theory which fits the facts of forty years. (He’d also have to explain how all that lobbying and bribery by Wall Street didn’t actually work.)

      Comment by Russ — April 30, 2011 @ 2:26 am

  3. If only we spent as much time taking to the streets and protesting this kleptocracy as we do bitching and moaning about how we always get screwed over, who knows, we might actually force a change in this fascists paradigm. The sheep will continue to be led to the slaughter until there is enough resistance from within to force the robber barons to rethink their tactics. Liberty comes at a price and unfortunately our society is no longer willing to pay that price. We must sacrifice our comforts and dispel our fears or quietely accept the corporate shackles we’ve allowed to bind our personal freedoms.

    Comment by Edward Mitchell — April 30, 2011 @ 10:40 am

    • Hi Edward. You understand perfectly, except for the part about the criminals changing. That’ll never happen; we have to be rid of them completely.

      But as you say, liberty comes at a price. Will people make temporary sacrifices to get back everything in return, or continue to cling to the little they have left and therefore lose it all? The answer’s up to us.

      Comment by Russ — April 30, 2011 @ 3:16 pm

      • You are correct….A world absent of greed given the current structure of the power hierarchy is impossible. Even if you were to cut down the current power brokers of the world, the roots of this system would soon regenerate a new breed of kleptocrats even more sophisticated than the previous. You can think of it along the same lines as organized crime mafias and drug cartels. Bosses come and bosses go, but the entity itself remains forever in tact. Lower ranking thieves move up the ranks and eager to fill the voids left at the top. Lets face it, the only way to rid this pestilence from the world is to completely upend the system in which it thrives. And the only way to upend that system is to collapse it completely….The economic pain and suffering that will be required to accomplish such a feat is unimaginable to most people in our society. Its simply too great a price to pay. Of course this collapse will eventually come anyway, the only difference is that the majority of us will be sitting on our hands when it happens and the owners will be safely stored in an underground vault somewhere.

        Comment by Edward Mitchell — April 30, 2011 @ 8:16 pm

      • Yes, the criminals will try to maximize pain and suffering for anyone who resists and counterattacks them. This is daunting for many people.

        People have to understand that the criminals are going to inflict this suffering regardless, and that the suffering of struggle will in the long run be far less than that of permanent enslavement, which will be the lot of those too lazy and cowardly to fight.

        The collapse will come anyway. It’s our choice whether it leaves the seeds of democratic renewal, or only forces the elites to transform into neo-feudal warlords. The latter is what they’ve been preparing for, for forty years now. It’s endgame.

        Comment by Russ — May 1, 2011 @ 3:47 am

  4. I don’t think corporate buy backs of shares are adjusted for in management stock option grants. So if the stock price increases due to fewer shares outstanding, the option values are greater.

    Comment by tawal — April 30, 2011 @ 12:01 pm

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