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Court Rules Against AT&T's Service Agreement
The Seattle Post-Intelligencer is running a story about a recent ruling from the Washington State Supreme Court, which decided that AT&T's service agreement was not capable of waiving a customer's right to file a lawsuit against the company. The full opinion (PDF) is also available. From the conclusion:
"AT&T's Consumer Services Agreement is substantively unconscionable and therefore unenforceable to the extent that it purports to waive the right to class actions, require confidentiality, shorten the Washington Consumer Protection Act statute of limitations, and limit availability of attorney fees. ... Courts will not be easily deceived by attempts to unilaterally strip away consumer protections and remedies by efforts to cloak the waiver of important rights under an arbitration clause."
These arbitration clauses are also widely-overturned. This is hardly news--courts have been striking them down left and right for a decade now. Binding arbitration agreements are among the most common provisions stricken from agreements, including EULAs (in fact, it's the most common violation stricken down in software licenses).
The basic premise is that choosing ADR should be preserved as an option, but waiving your rights to contest actions in order to get service is wrong. It is. It has little to do with class actions--it's about litigating your individual grievances with the company.
Contrary to the editorializing in the summary, however, it has nothing to do with anything other than the fact that binding arbitration is disfavored as a lopsided provision offering no advantage to the customer.
These arbitration clauses are also widely-overturned. This is hardly news--courts have been striking them down left and right for a decade now. Binding arbitration agreements are among the most common provisions stricken from agreements, including EULAs (in fact, it's the most common violation stricken down in software licenses).
The basic premise is that choosing ADR should be preserved as an option, but waiving your rights to contest actions in order to get service is wrong. It is. It has little to do with class actions--it's about litigating your individual grievances with the company.
Contrary to the editorializing in the summary, however, it has nothing to do with anything other than the fact that binding arbitration is disfavored as a lopsided provision offering no advantage to the customer.
Binding arbitration clauses can be fine, even in adhesionary contracts, and the court even mentions this:
We emphasize that these provisions have nothing to do with arbitration. Arbitrators supervise class actions, conduct open hearings, apply appropriate statutes of limitations, and award compensatory and punitive damages, as well as attorney fees, where appropriate.
The issue is where they are substantively unconscionable, as here, where ATT has also stricken out the availability of class actions:
A&T's Consumer Services Agreement is substantively unconscionable and therefore unenforceable to the extent that it purports to waive the right to class actions, require confidentiality, shorten the Washington Consumer Protection Act statute of limitations, and limit availability of attorney fees.
Because any party's foreseeable claims would be very small, by removing the ability to file a class action, ATT was essentially immunizing themselves from suits - no lawyer is going to take a case, even on contingency, that's worth only $10 or $15... But if it's $10 or $15 to fifty-thousand customers, now you're talking.
So, again, this decision does not say all arbitration clauses are unconscionable, and even goes out of its way to say they could be fine... but only "could" be fine - the issue is what other clauses are present.
No. No. No. Wrong. Wrong. Wrong.
You can sign away certain rights, including the right to sue. There is (apparently) nothing unconstitutional about this contract. There is no constitutional guarantee to sue someone.
What the judge said was that it was unconscionable, meaning that the contract has clauses that are so burdensome that no person would agree to them if they had a choice. Unconscionable clauses are typically rendered unenforceable by courts. The case was decided on Washington state law. The constitution, the U.S., Washington's, or otherwise doesn't enter into it.
Oh, and since this was decided by a state court, this ruling has no legal effect on anyone outside of Washington.
All of the "contracts" that I have entered into that contained clauses that said that the other party could change the terms and conditions when they wanted to, also allowed me to cancel without penalty if and when that happened.
Usually, they send you letter explaining in detail the changes they are making (in full legalese) and then somewhere on page three or four list how to cancel your contract with them. I have always found that it appears to be very simple and easy to cancel the contract when they make these changes. I have never tried to cancel one of these contracts because they were always for something that at that time was more valuable to me than the changes were annoying (none of the ones I have received actually increased my costs).
The truth is that all men having power ought to be mistrusted. James Madison
You can cancel without penalty when this happens. A lot of people took advantage of it to get out of cell phone contracts back when cellular 911 service became mandated. The wireless carriers lobbied for and got the right to charge a fee for the 911 service. This fee was a change in the contract, so spades of people who'd been itching to get out of their contracts without paying the early termination fee simply said they didn't agree to the new fees. Since the carriers were required to provide 911 service and they wanted to charge the fee, they canceled the contract, thus nullifying the early termination fee.
Then the agreement is automatically invalid. All contracts have to have something called consideration. Basically, both sides have to get something of value out of the agreement. A contract in which only one side is getting value lacks consideration and is legally invalid.