AT&T’s Ban on Class Actions is Unlawful, Customers Argue

Santa Monica, CA — Cell phone customers who sued AT&T and Cingular
over abuses in the companies’ 2004 merger are asking a federal court in
Seattle to protect their rights and give them their day in court. In
papers filed late last Friday, lawyers representing potentially
millions of AT&T cell phone customers asked the court to invalidate
the class action ban embedded in the company’s arbitration clause,
which AT&T claims requires the court to dismiss the case.
 
“At stake here is the right of AT&T customers to get a fair hearing
and obtain justice,” said Harvey Rosenfield, a lawyer with the
non-profit Foundation for Taxpayer and Consumer Rights (FTCR). “If the
court rules that AT&T and Cingular’s customers cannot join together
to sue these companies, then the companies will never be held
accountable.”  
 
Lawsuit Targets Cingular Practices in Merger with AT&T
 
When Cingular bought its rival cell phone company AT&T in 2004, it
promised regulators and the public that AT&T customers would
continue to enjoy the same quality service. However, according to the
lawsuit filed in July 2006, after the merger, Cingular deliberately
degraded the quality of the AT&T network in order to force AT&T
customers to move to Cingular’s network, pay an $18 “upgrade fee,” buy
brand new phones and sign up for new two year plans. Dissatisfied
consumers who wanted to move to a different company were required to
pay Early Termination Fees of $150 or more. (Cingular has since
rebranded the merged companies as AT&T.) A copy of the complaint in the case can be viewed here.
 
Defendants Say Arbitration Clause Bars Lawsuit
 
After the suit was filed, AT&T asked the court to dismiss the case
on the grounds that all AT&T customers had agreed as a condition of
obtaining service that any disputes had to be handled on an individual,
one-on-one basis by private arbitration firms paid for by AT&T. 
While AT&T has made various changes to its arbitration clause over
the past few years, the critical ban on class actions has remained
unchanged.
 
In a lengthy investigation into the arbitration clause that included
the deposition of numerous AT&T witnesses, lawyers for AT&T
customers learned that:
 
1. The arbitration clause to which consumers allegedly agreed was
contained in the fine print in the back of a booklet packaged in a box
with their cell phones. In other transactions, it was mentioned but not
explained.
 
2. The actual rules that govern the arbitration process consume over
12,000 words. They do not appear on AT&T’s web site. They can only
be found through following a link to the site of a company hired by
AT&T to administer the arbitrations, which are conducted through
private "judges."

3. According to reports published by AT&T’s arbitration
provider, only 10 consumer arbitrations have been held against AT&T
since October 2006, proving that the class action ban exculpates the
company from liability.
 
After the lawsuit was filed, AT&T changed the arbitration clause to
try to make it more likely that the court would uphold it. Indeed, it
was changed a second time during a deposition in the case when a lawyer
for consumers got a witness for AT&T to acknowledge a loophole, at
which point Cingular’s lawyer got up and made a phone call to dictate a
change in the agreement.
 
In their opposition to individual arbitration filed on Friday, lawyers
for AT&T customers said that the class action ban was unlawful
under state contract law because it would effectively prevent customers
from obtaining justice. They also pointed out that numerous courts have
invalidated AT&T’s (and other cell phone companies’) class action
bans on the same grounds.
 
"AT&T makes much of the window-dressing terms it has tacked on to
its arbitration clause to hide the impact of its class action ban,”
said Leslie Bailey of Public Justice.  "But we’re confident that once
the court looks at all the evidence, it will recognize that without a
class action, these customers would not be able to hold the company
accountable."  Public Justice represents the plaintiffs along with FTCR
and a team of nationally recognized lawyers that includes Bruce Simon
of the California-based Pearson, Simon, Soter, Warshaw & Penny firm
and Paul Stritmatter of the Washington-based firm of Stritmatter,
Kessler, Whelan and Coluccio.
                                                                                                                              
Read the brief in opposition to AT&T’s motion for arbitration.

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