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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.
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?
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.
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.
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.
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.
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)
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.
Comment removed based on user account deletion
Second Life Arbitration Clause Unenforceable
> http://games.slashdot.org/article.pl?sid=07/06/08
I see a trend here. On the other hand, if those contracts were permitted then I'd be having my own that read as follows:
Nature journal lied in Britannica vs Wikipedia Ask to retrac
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.
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.
I assume we're talking about the situation only in the US here. This problems has been addressed, reasonably successfully, in various other jurisdictions.
For example, in the UK we have a legal requirement that a shop advertising a typical returns policy also has to state clearly that shoppers' statutory rights are not affected. That and things like the Sale of Goods Act and Distance Selling Regulations guarantee shoppers some basic protections regardless of anything a vendor might like to say at sale time.
From a different angle, we have the Unfair Contract Terms Act, which basically says that certain types of contractual clause (things like disclaiming liability even in the case of obvious negligence) are not enforceable.
As a third approach, there is also the point that you have to go into a contract with both sides understanding what's happening and getting something out of it. If you have a contract that is basically a standard issue piece of legalese prepared by the legal department of the big guy, and not effectively negotiable by the little guy, then the courts can strike parts of it if they determine that the imbalance in bargaining power meant the basic properties of a binding contract weren't met.
So through a combination of requiring that those being given information about Ts and Cs also be told that they have other rights, and statute law that renders certain kinds of gross disclaimer explicitly impotent, and the ability for courts to cancel out parts of a contract that weren't negotiated on an equal basis, we have a reasonable degree of protection against the sort of thing you're talking about.
I don't know what the situation is here regarding binding arbitration, though. I've heard of it being used, but from an ethical perspective I tend to think that such terms should automatically be considered unfair in law. We have a legal system to resolve our differences, and allowing a contract to specify that one party may not avail themselves of that system without jumping through hoops is just undermining the legal system. The only reason someone could possibly have for that is if they wanted to pull a fast one that the legal system would not let them get away with. I do appreciate that for two large organisations with effectively equal bargaining power this might not be the case, but I think with things like this it's always best to err on the side of caution.
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.