Opinion ID: 2570132
Heading Depth: 4
Heading Rank: 3

Heading: The Class Action Device is Critical to Enforcement of Consumer Rights in New Mexico

Text: {12} The opportunity to seek class relief is of particular importance to the enforcement of consumer rights because it provides a mechanism for the spreading of costs. The class action device allows claimants with individually small claims the opportunity for relief that would otherwise be economically infeasible because they may collectively share the otherwise prohibitive costs of bringing and maintaining the claim. See, e.g., 1 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 1.6, at 26 (4th ed.2002). In many cases, the availability of class action relief is a sine qua non to permit the adequate vindication of consumer rights. State ex rel. Dunlap v. Berger, 211 W.Va. 549, 567 S.E.2d 265, 278 (2002). The class action is one of the few legal remedies the small claimant has against those who command the status quo. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 186, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) (Douglas, J., dissenting in part). {13} The opportunity for class relief and its importance to consumer rights is enshrined in the fundamental policy of New Mexico and evidenced by our statutory scheme. See, e.g., Rule 1-023 NMRA (setting forth the rules of civil procedure governing class actions). Notably, the UPA specifically references class actions as a private remedy available under the act. Section 57-12-10(E). Further, the New Mexico Uniform Arbitration Act declares that arbitration clauses that require consumers to decline participation in class actions are unenforceable and voidable. See NMSA 1978, §§ 44-7A-1(b)(4)(f), 44-7A-5 (2001). While this provision may be preempted by the FAA, see Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) (A state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with [the FAA].), it is clear evidence of the fundamental New Mexico policy of allowing consumers a means to redress their injuries via the class action device. {14} In New Mexico, we recognize that the class action was devised for vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all. Romero v. Phillip Morris, Inc., 2005-NMCA-035, ¶ 36, 137 N.M. 229, 109 P.3d 768 (quoted authority omitted). A purpose of the class action is to conserve party resources. Id. As the United States Supreme Court recognized, [t]he policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (quoted authority omitted). Where it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device. Deposit Guar. Nat'l Bank, Jackson, Miss. v. Roper, 445 U.S. 326, 339, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980). The Federal Rules Advisory Committee recognized the critical nature of the class action to individuals with small claims when it directed that one of the grounds on which class certification may be appropriate is where the amounts at stake for individuals [are] so small that separate suits would be impracticable. Fed.R.Civ.P. 23(b)(3), advisory committee note (1966 amendment). {15} Thus, beyond merely a procedural tool, the class action functions as a gatekeeper to relief when the cost of bringing a single claim is greater than the damages alleged. When viewed in this light, a contractual provision that purports to ban class actions for small claims implicates not just the opportunity for a class action but the more fundamental right to a meaningful remedy for one's claims. This Court has recognized that the right of access to the courts is part of the right to petition for redress of grievances guaranteed by both the United States and New Mexico constitutions. Jiron v. Mahlab, 99 N.M. 425, 426, 659 P.2d 311, 312 (1983); see also U.S. Const. amends. I, XIV; N.M. const., art. II, § 18. While the class action ban may or may not rise to the level of a constitutional violation, a prohibition on class relief where there is no meaningful alternative for redress of injury certainly does not provide for effective vindication of rights. See Mitsubishi Motors Corp., v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ([S]o long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum, [a] statute will continue to serve both its remedial and deterrent function.). {16} In view of the fact that Plaintiff's alleged damages are just ten to twenty dollars, by attempting to prevent him from seeking class relief, Defendant has essentially foreclosed the possibility that Plaintiff may obtain any relief. Thus, we conclude that Defendant's prohibition on class action relief, when applied to small claims plaintiffs, is contrary to New Mexico's fundamental public policy to provide a forum for relief for small consumer claims. The words of the California Supreme Court are apropos: By imposing this clause on its customers, [Defendant] has essentially granted itself a license to push the boundaries of good business practices to their furthest limits, fully aware that relatively few, if any, customers will seek legal remedies, and that any remedies obtained will only pertain to that single customer without collateral estoppel effect. The potential for millions of customers to be ... without an effective method of redress cannot be ignored. Discover Bank v. Super. Ct., 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100, 1108 (2005). {17} Defendant contends that Plaintiff has not met the evidentiary burden of proving that his damages are outweighed by the cost of bringing an individual claim. While we recognize that, in some cases, more extensive factfinding will be required, we emphasize that Plaintiff only alleges his damages to be between ten and twenty dollars. We do not find it necessary to engage in an exhaustive analysis regarding whether the economic and opportunity costs of bringing a ten to twenty dollar claim are prohibitive. In light of attorney's fees, the costs of gathering evidence and preparing the case, and the time spent educating himself on the issues and organizing and presenting the claim, the likelihood that Plaintiff's actual costs will exceed ten to twenty dollars is certain. The economic realities of the present case are clearly more tangible than the mere risk that Plaintiff will be faced with prohibitive costs. Cf. Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90-91, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (holding that arbitration agreement's failure to address how parties would allocate arbitration costs does not render it per se unenforceable on the grounds that the claimant may be subjected to steep costs where claimant did not present evidence that she would be subjected to such high costs). Suffice it to say that only a lunatic or a fanatic sues for [ten to twenty dollars.] Carnegie v. Household Int'l, Inc., 376 F.3d 656, 661 (7th Cir.2004). {18} For all of the foregoing reasons, New Mexico's fundamental public policy requires that consumers with small claims have a mechanism for dispute resolution via the class action. Therefore, application of Texas law, that would allow the class action ban, is contrary to New Mexico public policy. See AutoNation, 105 S.W.3d at 199-201. Accordingly, we invoke the public policy exception and apply New Mexico law rather than Texas law to analyze the validity of the class action ban.