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.

Comments

all fine print

[seanadams.com]

"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.

Re:all fine print

[Anonymous Coward]

No, binding arbitration is NOT of benefit to both sides of this particular contract, nor of many similar contracts.

For most consumer services, such as those offered by AT&T, the amount of any dispute is likely to be too small to make it worth anybody's while to go to arbitration. Yes, it would cost even more to go to court, but the fact is that the consumer isn't going to recover enough to cover the costs of arbitration, any more than she would recover the costs of litigation.

Therefore, even if a consumer can afford it, the only way she is going to bring up such a dispute is as a matter of principle... and there's not even any incentive to do THAT, because the point of bringing up a matter of principle is to punish somebody for wrongdoing, and the amount recovered by arbitrating a single dispute would mean nothing to a huge player like AT&T unless many, many people went to arbitration, which everybody knows they won't... especially since AT&T's costs for arbitrating thousands of nearly identical cases are far lower than consumers' costs for arbitrating those same cases one-by-one.

Forcing everything to be arbitrated on a case-by-case basis would mean that the cost to consumers of recovering whatever they've been screwed out of was hundreds or thousands of times the amount recovered. Which means that nobody would actually get compensated, nor would AT&T (or whoever) ever suffer enough costs to deter bad behavior.

That's why there are class actions... they're there so that the larger party in this sort of situation can't just change the rules at will, ignore the other terms of the contract, screw over the other parties, and suffer no consequences whatsoever.

So, basically, to be opposed in principle to class actions is to say that people screwed over by large corporations should get no recourse at all. Maybe the corporation has to worry about its reputation, but it will never be FORCED by law to live up to its contracts the way you or I would be.

That is unconscionable. It puts large players above the law, it is basically a return to feudalism, and it is repugnant to any decent person.

Fuck you, you corporate cocksmoker.

Re:all fine print

[jhp64]

I've also heard the critique that arbitrators may not be completely impartial. I think they are not randomly assigned, like judges can be, but instead are hired by the parties. Now consider: big companies try to use arbitrators a lot, while any given individual will rarely if ever use one. If you're an arbitrator who rules against a big company, how much business is that company going to give to you in the future? If you rule against an individual, how much does that hurt you?

Therefore in the arbitration system, there is an incentive for arbitrators to rule against individuals and in favor of big corporations.

Re:Article or link?

[Constantine XVI]

http://consumerist.com/consumer/victories/cingular s-class-arbitration-waiver-ruled-unconscionable-by -9th-circuit-court-of-appeals-290806.php
It was edited out of the Firehose entry (by mistake, I assume)

Re:Article or link?

[Constantine XVI]

It's actually Sunday.

Out of hand

[WwWonka]

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?

Where's the FTC?

[schwit1]

Unconscionable terms are in most consumer contracts today, whether it be a product or a service. That's what happens when big business owns the government. AT&T has more influence with my elected representatives because of campaign finance rules, legalized influence pedaling and lobbyists.

This won't change until campaign contributions are limited to registered voters.

Re:Article or link?

[xouumalperxe]

Neither. Slashdot has just passed the denial stage regarding its readers ever reading TFA.

Re:Unconscienable == invalid & unenforceable

[clearreality]

The 9th Circuit's decision on this one seems to be well-reasoned. You can read the decision here.(PDF)

They basically state that the contact in question for this type of case must be a contract of adhesion, and they clearly define what that means. A contract of adhesion is defined as a contract between a party of greater bargaining power and a party of weaker power (ie, AT&T and a wireless subscriber), and the contract must be standardized for use with all equivalent parties of weaker power (ie, all wireless subscribers), and the presentation of that contract must be "take it or leave it" (ie, no chance to negotiate).

It is good to note that the ability to walk away from a contract does not change that the contract is a contract of adhesion, even if you accept that contract instead of walking away.

The court also adequately addresses the issue of marketplace alternatives, specifically stating that even if meaningful alternative services exist (ie, Verizon, Sprint, T-Mobile, etc), that this does not change the fact that the contract may be procedurally unconsionable (a "contract of adhesion" is also stated as being automatically procedurally unconsionable to some degree).

Note, for a contract or clause of a contract to be unenforceable, it has to be both substantively and procedurally unconsionable to enough of a degree as to be ruled unenforceable. Please read the court's decision and other documents to learn more about legal unconsionability.

On the issue of arbitration, the court seems to treat arbitration with respect, and cites several cases where arbitration was used and also lists some favorable reasons for people and companies to use arbitration. This is clearly not a case of the court dismissing arbitration -- this is a case where the members of the class who want to sue AT&T would be at a severe disadvantage if they were required to use individual arbitration. Note, AT&T stated that they did not want to use class arbitration to resolve the issue, they specifically wanted individual arbitration. The court actually presents opinions supporting class arbitration at one point in the decision.

This decision makes sense, and shows that terms that are included in contracts of adhesion are vulnerable to being ruled unenforceable. This is good news from the consumer standpoint, and does not weaken arbitration or consumer's rights in any way I can see.

I am not a lawyer. I just RTFA.

Re:Article or link?

[Anonymous Coward]

Wait a second. Are you saying that the editors actually did something?

Re:hooray!

[AchiIIe]

Actually, your right online `on second life` had a similar ruling

  Second Life Arbitration Clause Unenforceable
> http://games.slashdot.org/article.pl?sid=07/06/08/ 2017257

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:

Legal Notice: BY ACCEPTING THIS BRICK THROUGH YOUR WINDOW, YOU ACCEPT IT AS IS AND AGREE TO THE DISCLAIMER OF ALL WARRANTIES, EXPRESSED OR IMPLIED, AS WELL AS DISCLAIMERS OF ALL LIABILITY, DIRECT, INDIRECT, CONSEQUENTIAL OR INCIDENTAL, THAT MAY ARISE FROM THE INSTALLATION OF THIS BRICK INTO YOUR BUILDING.