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AT&T Arbitration Clause Ruled Unconscionable
Tech.Luver writes to tell us the Consumerist is reporting that a small clause in AT&T contracts has been ruled "unconscionable" by the 9th circuit court of appeals. The clause in question stated that if you use AT&T service you surrender your right to class action lawsuits and instead have to participate in mandatory binding arbitration.
this is an important victory for my rights online!!!
Can we have an article or link? Or should we write directly to tech.luver?
Well, this is nothing new. Most "contracts" are just waiving the consumer's rights. On the other hand, I'm glad somebody finally called them on it, since this is so blatantly obvious.
"unconscionable" basically means that no person of sound mind could have been expected to accept the contract at the time the contract was signed.
Seem to me like that should apply to all EULAS, click-through terms of service, notice of terms after the fact, etc. No person should be expected to wade through such a contract for such trifling matters as purchasing a telephone, installing some software, etc.
Isn't this in most or all credit card agreements?
Isn't this in most or all credit card agreements?
Some of them, depends on what jurisdiction you live in. It would be interesting if these clauses get tossed as well.
I am glad this got struck down. We are seeing more and more of corporate America using these so called "to smart for the normal guy" contracts that really are never read,signed, or agreed to in a "normal" manner. Hell, recently I got a postcard from Sprint saying that my monthly web service was going to rise a few dollars a month and that by paying my next bill I agree to their service and conditions and the raise. What the f&*k? Of course I am going to have to pay my bill or else they would shut my service off, give me a bad credit mark, and then go to collections on me. A no-win situation.
I keep asking myself, what the f$*k is going on in America lately?
This won't change until campaign contributions are limited to registered voters.
I just got the same notice in my most recent Comcast bill.
has been ruled "unconscionable" by the 9th circuit court of appeals
Is that like double unconstitutional?
Michael Geist recently wrote on his website about this topic and how it applies in Canada. Unfortunately, the Supreme Court of Canada concluded that the arbitration clause was enforceable and that the use of a hyperlink was sufficient.
I think it means that it's so unfair that it shocks the conscience of the court. It has a lot to do with the essential nature of the subject matter of the contract and the relative bargaining power (or lack thereof) between the parties.
More and more, I'm seeing arbitration agreements put into contracts everywhere. These are a direct danger to every one of us as it removes our right to seek action in the civil courtroom amongst our peers. For those not in the know, an arbitration is exactly like a court trial, except not in the courtroom. An arbitrator acts as the judge AND the jury. This arbitrator is simply going to be a lawyer or ex-Judge. It is simply not the same as a court trial.
- Cyrus
It's really no surprise. The 9th circuit's one of the most liberal courts in the country and so people looking for them to assert the right to liberal activities usually try and sue through them, and class action lawsuits are about as liberal as you can get.
Regardless of the 9th CC's viewpoint; a class action lawsuit is neither liberal or conservative; rather it adds a level of certainty to the legal landscape. Rather than face potentially hundreds of expensive lawsuits all around the country; class actions allow corporations to resolve liability issues once and in a final manner; while allowing individuals to sue when it would be too expensive to try to sue individually. I would expect the business community to prefer class actions suits to the alternative of defending themselves everywhere over small amounts; even though the likelihood of such cases is much smaller since the payouts probably
wouldn't cover the lawyers fees. Still the certainty of class actions is better than uncertainty of individual actions since you at least have some control over teh cost of defense and ultimate liability.
I'm a consultant - I convert gibberish into cash-flow.
I noticed it on mine, knew I was getting screwed by signing it, but didn't have any other option.
Perhaps this is in connection with unequal power consumer level contracts. But then I would suggest that some PUC isn't doing it's job. And if it isn't because the Legislature hasn't seen fit to include DSL as a regulated service, then I'm not sure the courts can or should interfere.
Please note I'm not criticisning the 9th's decision. They might well be correct: it is the height of absurdity for a court to respect any contested provisions to bypass it. Courts are to resolve disputes fairly. Provisions otherwise are contemptuous.
I actually saw a credit card agreement that gave you a chance to opt out of that provision. The only problem is that everyone has to opt out of it in order to gain any real advantage. I do disagree with the blurb's choice of terminology. This is not a "small" clause. It's the clause that lets the company get away with screwing each customer over for a few dollars a year.
(Do people actually still use AT&T for anything other than iPhones?)
Village idiot in some extremely smart villages.
Well, where software is concerned, EULAs are moot. You see the EULA after you make the purchase and open the package. Open the package, the store will refuse to accept it. Your right of first sale (it's a commodity good, NOT a work for hire) allows you to use it for its intended purpose without restriction. You are still of course bound by patents and copyrights, but not to use the package for its advertised purpose, or even to resell it to someone else when you're finished with it.
Not that I disagree that's how it ought to be, but last I checked/heard/read the US Appeals courts were still thoroughly confused on the point of whether the First Sale Doctrine applies to software licensed for purchase. Any lawyers in the house who know one way or the other? Have there been any definitive rulings, esp. Supreme court rulings on the issue?
All the techniques ever used to make men moral have been themselves thoroughly immoral... (Nietzsche)
I see it as a sign of the wins consumers have had in court against spurious pactices by companies. Rather than try to produce a better service or product, a number of companies have started to try to protect themselves from their customers. It also shows up in attempts through influence peddling at a legislative level to slant things in the direction of business and away from the consumer. Why is the department of homeland security involved in file-sharing at all? The companies all know that all consumers have to do is stop buying from them, so they are trying to make contracts like this standard (as someone has pointed out that comcast is also doing this for example) across industries or in a block through government.
If you consider that some of the wins against manufacturers have lead to some collossal settlements, it is no wonder they are trying anything they can, including trying to force consumers to waive their rights. I expect this to get worse, not better.
Troll? Seriously? Oh come on, mods. That was, at worst, FUNNY. Wish I had mod points to help rectify the injustice. ;)
All the techniques ever used to make men moral have been themselves thoroughly immoral... (Nietzsche)
If you talk to the arbitrators of the world, they would say that litigation leads to more harm than arbitration. In litigation, there is always a winner and loser. In more cases than not the primary loser of litigation is the public at large.
/. post are really ruling that litigation lawyers should have a monopoly on class actions.
Arbitration seeks to redress contract disputes in ways that are beneficial to both members of a dispute.
The ruling like the one not cited in this
While I do not like corporations sneaking things into agreements, the result of choosing arbitration over litigation as a means of handling disputes is probably reflected in the price of the product.
Personally, I wish the arbitration community could find a way to break the litigation monopoly as arbitration generally leads to a better result than litigation which generally leads to inequitable results with one winner and vanquished losers.
A linux user getting some action?
Now I know why you got modded flamebait.
The 9th Circuit is the largest circuit, so you would expect more appeals from the 9th Circuit. However, the Supreme Court hears a disproportionately large fraction of appeals from the 9th Circuit. Since the Supreme Court doesn't hear appeals unless a number of Justices believe the decision may have been decided improperly, this is evidence that the Supreme Court has greater difficulty with the decisions of the 9th Circuit than any other. In the last term, 90% of appeals from the 9th Circuit were upheld (19 of 21), i.e., the 9th Circuit was reversed. The 9th Circuit is reversed 9-0 more than any other circuit when not a single Justice agrees with the 9th Circuit.
The only credit card agreement I saw that let you opt out of a provision did so by letting you close the account and then agreeing to pay off the card.
Any sect, cult, or religion will legislate its creed into law if it acquires the political power to do so.
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Problem is that every time consumers win something like this they hire teams of lawyers to write a new contract that get's around those damned pesky legal rights that the consumers have.
Honestly Corperations need to be attacked constantly on this stuff because they go out of their way to write "contracts" that are completely designed to screw the customer. There should not be any contracts. If you cant afford that new $950.00 stulish phone then you dont get it. Sign up for service, buy the phone outright and switch every month if you want to, this allowing the Cellphone companies to act the way they do is ridiculously nasty to the consumer.
but this is america, where your laws are bought by the highest bidder, as a consumer you have no chance.
Do not look at laser with remaining good eye.
Finally, the Federal Arbitration Act doesn't preempt California law because the flaw is a broad contractual one--it unfairly benefits one party. The Act prevents states from limiting arbitration specifically, but subjects arbitration clauses to the state's contract laws.
"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws." Amendment XIV, US Constitution
IANAL, but doesn't enforcing a contract requiring binding arbitration and barring use of the courts mean "without due process of the law"?
http://www.accountkiller.com/removal-requested
Does this mean,
A) That part of it is void.
B) None of the document is binding, because part of it is void.
I got bored and read some WaMu junk mail a few weeks back, and they had a legitimate opt-out provision. But still, it's worthless if you are the only one who opts out, and since nobody even knows about the arbitration clause there's certainly nobody looking for the opt-out clause. I'm sure that you also have to opt out by means of telegram, carrier pigeon, or in-person visit between the hours of 1 and 2 on February the 29 any year that it has fallen on a Tuesday for more than three consecutive years. But they did have one.
If they allow for an opt-out, it's because enough people care. Just because you don't, doesn't mean nobody does.
My worst enemy gave me a copy of Windows for Christmas.
....if any sane court had made the ruling. The 9th Circus can hardly be considered a sane court.That's what I was thinking too, but you know even a stopped clock is right twice a day.
#naabhaprzrag, #sverubfr-000, #agi-fcbafberq, negvpyr[pynff*=' negvpyr-ary-'] { qvfcynl: abar !vzcbegnag; }
The key to this is that California law applies. "Under California law, a contract provision is unenforceable due to unconscionability only if it is both procedurally and substantively unconscionable." The "Discover Bank test" applies: "Under this three-part inquiry, courts are required to determine: (1) whether the agreement is " 'a consumer contract of adhesion' " drafted by a party that has superior bargaining power; (2) whether the agreement occurs " 'in a setting in which disputes between the contracting parties predictably involve small amounts of damages' "; and (3) whether " 'it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.' (quoting Discover Bank, 36 Cal. 4th at 162-63)"
Arbitration clauses aren't being disallowed generally. But when, as the court puts it, "the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money", the courts can allow class action suits.
This is a routine decision based on California law; there are about a half dozen cases so far based on Discover Bank. Read the decision.
1 the ability to basically include a standard set of definitions ( define you and the company)
2 standard blocks in the contracts with a hash before them (this means that a block in the contract with a given hash means the same as any block with that hash)
3 Total banning of the practice of hiding funny clauses in deep or obscure parts of the contract (ie you agree to sell your first born in paragraph 13 section b)
4 the whole contract must be A printed on the box (or attached to the outside) B smaller than 2 pages of 18 point type (single space US letter pages)
5 if the contract is modified via changing a notice on a website then A all persons effected must be notified B All persons effected must be allowed to cancel or obtaine a CASH refund
Any person using FTFY or editing my postings agrees to a US$50.00 charge
Especially since the damages are usually "repaid" in the form of discount coupons for their own products. This even saves them the cost of having to buy ads in magazines to distribute their promotional discounts.
If we're talking about what ought to be, believe me when I say that I have no love for EULAs.
:(
But even more than I hate EULAs, I hate sweeping and incorrect legal analysis by armchair lawyers.
"Software EULAs have no legal weight" is demonstrably false: there are cases where they have been upheld. The question is more complex than that. That's the only statement I was trying to make.
As an aside, I see several other cases described on this page that apparently have also upheld the enforceability of EULAs. I can't find the texts of the rulings online or more information about the exact circumstances, but a world where EULAs have no teeth seems to be getting more remote.
If they really had made such enormous damages so that hundreds of people would find it reasonable to spend time and money on lawyers to lead their own personal case, then you're in an extreme amount of do-do alreeady. In most of these cases, the "damages" are limited to what you actually paid or close to it. You're not going to get thousands of dollars because your $39/mo service or the $15 CD gave you grief. They might screw a million people out of $10, and the arbitration costs would be easily covered by the people who don't realize they've been screwed or are too lazy or find their time too valueable to deal with it. Class actions only make the class action lawyers rich, but they most certainly cost the company money.
Live today, because you never know what tomorrow brings
Exactly. This is just another step towards letting defenseless multinational corporations be bullied around by individual consumers. Who's next - the members of the RIAA? Someone has to think of the multinationals!
This space available.
From what I can tell, the fundamental question was whether the contract was fair - in particular whether the two parties to the contract had equal bargaining power.
Since conservatives are supposedly all about the free market. I would think that conservatives would be extremely concerned about situations where the market was not free. I would also think that conservatives would realize that a free market is not simply the absence of government intervention - that without government intervention the free market rapidly becomes unfree with all kinds of monopolistic and anti-competitive behaviors.
If I want to buy a phone from ATT, can I show up with a contract that I've written that is of similar length to ATT's standard contract. Would ATT seriously consider the terms of the contract that I brought to the table? Could I even modify the terms of ATT's own contract? If not, what does that say about my bargaining power? I mean, you'd think that if ATT and I were negotiating as equals then either of us could bring a contract to the table.
The problem here is that large organizations inherently have more power than single individuals. Libertarians always go on about how it's a battle between the government and the non-government but they're missing the fundamental point - it's actually a battle between the individual and the organization. The government happens to be the most powerful organization but it's not the only game in town either.
I really don't consider myself to be a liberal but when caring about the rights of the individual gets me dismissed as a liberal then I sure don't feel like a conservative.
Got a lot of bites with this one.
+++ATH0
I've pointed this out before in similar clauses - the courts would never allow this because it reduces their powers.
If you mod me down, I will become more powerful than you can imagine....
now how about taking a closer look at the rest of AT&T's business practices?
The higher the technology, the sharper that two-edged sword.
And as you go on to elucidate so well, consumers have nowhere NEAR equal bargaining power.
For the free-market advocates who drone on and on about Adam Smith and the invisible hand and what have you, they always miss that Smith's economics only apply in an economy where the seller and the buyer have approximately equal influence over the price and item in question, be it a physical item or a service.
When one party has significantly more power than the other, you've got a market primed to pound the little guy into the ground - and that's exactly what is happening in the US (elsewhere too, but as I am American I concern myself primarily with where corporate law in the US is heading).
We are the fire that lights our world.. and we are the fire that consumes it.
What's your problem with the 9th circuit? They aren't particular whack-jobby, they just happen to have a lot of traffic.
"We returned the General to El Salvador, or maybe Guatemala, it's difficult to tell from 10,000 feet"
Yes, it is true that if you look at a single case, a particular corporation would suffer as much damage from litigation as they would from mediation.
If you look at the market as a whole, I think you would find a completely different situation.
Litigation often hurts, but it rarely destroys a mega corporation. In the worst case scenario, the current owners of a corporation might get wiped out. The assets of that corporation would generally be sucked into an even larger corporation that affectively passes the cost of the litigation on to consumers. A particular litigation might hurt one group of investors, but it really doesn't hurt the soulless corporation.
I would like you to look beyond the Marxist training you had in school for a moment and answer the following question: Lets say a piece of litigation all but wipes out a company, and that company is forced to merge with a larger corporation as a result of the litigation. What do you have as the result of the litigation?
The answer is "an even larger corporation."
We have lived in a litigation happy society for the last thirty years. During those years, has our litigation happy society reduced the influence of the corporations actually gotten larger.
Personally, I have seen a large number of small firms wiped out by litigation. Very few mega firms have been destroyed by litigations. Those that have have all consolidated into even larger firms.
In many cases, I've seen small firms forced into consolidating simply because the liability risks of the litigious society was too high.
When you look at industries as a whole you will find that small companies are systematically wiped out by litigation. The liability and risk exposure of litigation is often sufficient in itself to force small companies to merge with larger companies.
If mediation were to become the norm, you would reduce liability risks to medium size and you would see a reduction in the forces that lead to consolidation.
How to put this another way. We have been a litigation happy society for the last thirty or so years. During all of these litigation happy years, have we seen the size of corporations drop or have they gotten even bigger?
Our litigation happy courts have created a climate where megacorporations thrive and small firms are forced to consolidate. So, while a big class action suit might hurt the investors of one corporation, it does not hurt corporate world as a whole. All of the cost of the litigation get passed on to consumers and the megacorporations as a whole get larger.
IANAL either, but there are all sorts of other contracts which may do things like prevent or compel speech (indemnification clauses, or example),
"YOu agree not to sue us" certainly pushes it. "NO WARRANTY EXPRESSED OR IMPLIED" is probably less of a problem in most jurisdictions.
A lot of this is contextual. Not all rights can be waived in contract, but I would say that most rights could be.
LedgerSMB: Open source Accounting/ERP
Just wait for the day when you buy your groceries and sign a receipt stating that you have license to eat them, but not resell them.
But think of the people reselling boxes of Krispy Kremes out of their pickup trucks on the street corner!
But you should also consider that the same principles that make it cheaper for the corporations to use arbitration also make it possible for them to offer their products and services at a low cost on the mass market.
This is something that people always forget when they complain about being a lone consumer against a huge organization. If you are not satisfied in being the customer of a big corporation, you always have the option of being the customer of a small business. Of course, then you will not get the economy of scale you can get in the mass market.
Pay less for cheap services, or pay extra for the quality of personal attention, it's your choice.
IANAL, but from tfa, this was ruled unconscionable under California state law, by the 9th circuit. Even if it were federal law, it is being interpreted by the most overturned court in the country. We would be hoping for the current Supreme Court to either vote pro-consumer/anti-corporation, or to take no interest in the case. Let's also hope for them to buy us ice cream!
I just received a credit card offer with a similar arbitration clause, but it gave the opportunity to reject the clause if it was received in writing within 30 days of accepting the card. Is this still enforceable? It was in very small print so I assume that it would have been overlooked just as the clause without the opt-out is missed in all other cases.
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I thought I'd mention that years ago I had a run in with US Cellular. I was given an ultimatum by the local store manager saying I had to, more or less, a) except dropped calls more than twice a week or b) drop the service and pay the early disconnect fee. When I mentioned the binding arbitration he laughed and said, "That's so you can't sue us. These are your only two options." He even put the two options in writing and refused to acknowledge the binding arbitration. Kind of interesting how they can pick-and-choose which part of a contract is enforceable.
When I lease my flat, I lose my money but gain a home. When I agree to individual arbitration, what am I getting in return? Nothing. So there's no value proposition.
A flat that allows pets should be more expensive than one that doesn't allow it, unless there's some alternative benefit in the restriction being given up.
Yes, the courts haven't been able to figure out that an EULA can't be a valid contract because there's no consideration offered to one side. That should be enough to defeat "shrinkwrap" or "clickwrap" agreements, as even if breaking the seal or clicking past the on-screen box could be considered an "agreement", at that point the user _already has_ (under 17 USC 117) the right to use the software, and the so-called agreement thus merely restricts his rights while offering nothing in return.
I don't expect this to change... all the little "gotchas" in law like the invalidity of contracts without consideration only apply to the little guy. If I try to use those technicalities in my favor by opening the envelope without breaking the seal and changing the text on the clickwrap "OK" box to indicate "I disagree", the courts will still consider me to have "agreed".
So what? What are you going to do when you want a cellular phone (here in the US)? You're going to go to any one of the service providers. You're going to talk with some minimum-wage worker who could honestly care less. If you don't sign the "contract" waiving all your rights and your first born son, then you don't get the phone. You can complain right then and there, but the minimum-wage worker doesn't care about AT&T beyond his paycheck. You are dealing with, and complaining to, the person with the absolute least power to change the status quo. AND you still need a cell phone, because they're a practical necessity for modern life.
Does this go for employee agreements with similar clauses as well?
Is that an option in any of these cases, where an existing contract exists?
As This posts mentions (and the child post asks), what if I send in a document with my bill payment stating that I do not accept the new terms, but wish to continue with the old?
IMHO, Opt-out contract changes should not be allowed in cases wherein they remove rights or assess unreasonable additional costs to the consumer.
I've pointed this out before in similar clauses - the courts would never allow this because it reduces their powers.
Courts overwhelmingly favor arbitration clauses, and will go to great lengths to find them valid, as long as they think they'll be reasonably fair proceedings. It doesn't have much to do with giving up or retaining powers.
The Bush-appointed U.S. Supreme Court of Chief Justice Roberts will overturn the ruling. And when they do, they'll prattle on about "consumer choice" and "freedom to contract." As if there is a "choice" or any "freedom" for an individual up against AT&T.
AT&T lost my business several years ago and can rot in hell for all I care. Too bad they treat their customers so poorly. Yes, I know many big companies do, but only AT&T has earned MY scorn.
IMHO, IANAL, TINLA, etc...
Heck, most contracts-of-adhesion of any kind have them these days.
That's where the usual advice of "vote with your feet (or dollars)" falls short - if a practice is money-saving enough, basic economics forces all the players in the market to adopt it, regardless of its evilness. Then there is no place for your feet / dollars to go.