Consumers Can't Sign Away Rights To Class Action Lawsuits

The Supreme Court of Washington State has ruled that consumers cannot sign away their right to participate in a class action lawsuit, according to the Seattle Post-Intelligencer.

“The class-action waiver is unconscionable because it effectively denies large numbers of consumers the protection of Washington’s Consumer Protection Act,” Justice Tom Chambers wrote.

The “mandatory arbitration” clause that many businesses use to help prevent consumers from suing often includes a clause that supposedly waives the consumer’s right to a class action lawsuit. From the P-I:

Microsoft, RealNetworks, Amazon.com, Intel and the Association of Washington Business filed “friend of the court” briefs on behalf of Cingular, while AARP, the state attorney general and the National Association of Consumer Advocates supported consumers.

“We are still studying the court’s ruling,” an AT&T spokesman said Friday. “It is important to note that the ruling does not address the plaintiff’s claims, but, rather, only the arbitration clause.

“We continue to believe that a consumer is better off pursuing a claim under our arbitration clause, rather than pursuing a class action.”

Sorry, AT&T, Microsoft, RealNetworks, Amazon.com, Intel and the Association of Washington Business… We continue to believe that class action waivers are a bunch of baloney. So there.

State high court says consumers can’t sign away class-action rights [Seattle P-I] (Thanks, Toren!!)
(Photo:cmorran123)

PREVIOUSLY: Cingular Tries to Get Class Action Lawsuit Thrown Out, Cites Arbitration Clause

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  1. FS123 says:

    Amazing. My jaw dropped when I read this. Sure lawyers make out the best in class action lawsuits, but at least companies have to worry, in Washington at least, about customers getting their day in court. I hope this spreads to other states.

  2. banned says:

    Of course the arbitration clause has no real teeth, it is only there to protect frivolous lawsuits. They allow a judge to uphold the clause if they feel the suit is ridiculous. Without such clauses, people would be suing companies out of business.

  3. 3drage says:

    Now they just need to make it illegal for employers and service providers to require arbitration clauses to be signed prior to employment/enrollment.

  4. mjlizzad says:

    ROCNRULE, um no. That’s what a motion to dismiss is for.

    This is a really good thing (TM). Consumers have no real choice since 1) all the major carriers force consumers to waive their right to bring a real claim against the carrier and 2) the contracts are offered on a “take it or leave it” basis. I hope more state courts hold the waiver of class action, award of attorney’s fees, and liquidated early termination fees invalid.

  5. Greasy Thumb Guzik says:

    I’d rather they ruled that the actual consumers got 75% of the award in real cash instead of the shysters getting half the money & the public getting a coupon for $5 off on their next purchase!

  6. Xerloq says:

    @Greasy Thumb Guzik: That’s exactally why I have mixed feelings about class-action suits. I’ve received 5 or 6 settlement coupons throughout the years (despit never knowing I was part of a class action) and none were for more than $10. I’d never sue for $10, not even on principle – it’s a poor economic choice.

    Granted, I understand that lawsuits are largely symbolic. Aren’t sites like Consumerist more effective than a lawsuit? I think so.

  7. mrwilson says:

    For class action cases filed in federal court after February 2005, (in a nutshell) attorneys must base their fee on the coupon redemption amount, rather than the face value amount. That’s one of the things that CAFA (the “Class Action Fairness Act”) did. That means that for cases filed after that date, plaintiffs’ class action attorneys have no incentive to settle cases for nearly-worthless coupons that are unlikely to be redeemed. Although there are still class cases pending from before 2/05, as time passes and those remaining cases settle or are otherwise dismissed, fewer and fewer cases will settle for coupons. As a practical matter, coupon settlements in nationwide cases will be, by and large, a thing of the past. Now, plaintiffs’ attorneys are incentivized to settle for cash, or other real relief for class members. Depending on the case, of course, individual class members’ relief might still be small (if ten million people are ripped off for $1 apiece, then each person isn’t going to get more than $1 apiece back), but the relief is nevertheless unlikely to take coupon form.

  8. queen_elvis says:

    Of course, as soon as the employer appeals it up to the Supreme Court, the five-man Corporate Interests Mafia will just reverse it. Then they’ll go on a hunting trip paid for by corporate money and claim to be offended when someone points out that it’s unethical to take presents from an appellant.

    Sites like Consumerist are probably significantly LESS effective than a class action lawsuit, as class actions are extremely expensive for the parties being sued. $10 for every class member x millions of class members = company is going out of business. Negative publicity and executive email bombs can also be effective, but gets a corporation’s attention like financial ruin.

  9. rhombopteryx says:

    @mrwilson:

    Rah – rah for the Class Action Fairness Act – NOT.

    While the attorneys fees-tied-to-the-redemption-amount is maybe a good thing, CAFA removes/PREVENTS whole categories of class actions from being brought in the first place, and adds considerable burdens on the remaining consumer class actions that can be brought.

    So yay, now the attorneys will get a smaller percent, and the consumers will get a bigger percent, of ZERO. The sued-for-defrauding company saves a lot on payouts and legal fees, though. I wonder who bought this piece of legislation, anyway.

  10. Jesse in Japan says:

    Does this mean that contracts that contain these clauses are null and void or does it just mean that those particular clauses are void?

  11. alhypo says:

    Wow. I actually find myself somewhat satisfied with the supreme court here in Washington. Too bad the supreme supreme court has gone to shit.

  12. banned says:

    @mjlizzad:
    A motion to dismiss is a motion, it still has to be decided on by a judge. If it was that easy, there would be no class-action clause because the arbitration clause already says you can’t sue them. But it has little teeth, which is why they have to add the clause “If you do manage to sue, it cannot be class-action”, and even then we’ve all seen these these suits. If the judge thinks its a valid suit, they could choose not to uphold the motion.

  13. snowferret says:

    wow big surprise here.
    I guess it’s good that it’s been spelled out for those greedy companies. Now after your friggin civil rights too…

  14. mrwilson says:

    @rhombopteryx: As a plaintiffs’ class action lawyer myself, believe me when I say that I am no big CAFA fan. You state that CAFA “prevents whole categories of class actions from being brought in the first place.” I think you are misinformed about what CAFA actually does. Which categories do you believe are barred by CAFA? CAFA simply requires that (for cases involving $5 million or more in the aggregate) the suit be in federal court when you allege a class consisting of members who are residents of multiple states, or if the defendant is diverse.

  15. rhombopteryx says:

    @mrwilson:

    While CAFA doesn’t outright “prohibit” certain types of class actions, by making them into a ‘federal’ case CAFA applies new rules and procedural holdings that in many cases have just that end result. As a lawyer, you’re probably quite familiar with the idea that different procedural rules mean different outcomes. There are a few other blogs that deal extensively with CAFA’s shortcomings, anyone interested in this stuff can look there for actual instances of ‘state court procedure you’re in, CAFA you’re dismissed‘ cases.