Cingular's Class Arbitration Waiver Ruled "Unconscionable" By 9th Circuit Court Of Appeals

Like many many companies, Cingular has a little thing in their contracts saying that if you use their service, you void your right to a class action lawsuit and instead have to go through “mandatory binding arbitration,” which is basically an extra-judicial corporate court exempt from many of the basic rules and laws and procedures and rights of real court. Well, today, that clause was ruled “unconscionable” by the 9th Circuit Court Of Appeals. Therefore, lawsuits can proceed against Cingular and go to real court, not monkey court. Hooray!

Shroyer v. New Cingular Wireless Docket No. 06-55964 [PDF] (Thanks to Fred!)

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  1. ptkdude says:

    Doesn’t this only apply in the 9th Circuit?

  2. Esquire99 says:

    @ptkdude: No. Since it was a Federal Appeals court, it will be treated as binding precedent in virtually all lower courts.

  3. Nick says:

    Awesome. This is exactly what I hoped would happen! Now we need a flurry of lawsuits in order to drive these clauses out of all consumer agreements.

  4. juri squared says:

    @schwnj: Hear hear! This makes me feel like it’s a little less of a pipe dream.

  5. homerjay says:

    I believe that clause was originally listed as the “Its worth a try” clause.

  6. bricklayer says:

    We’ll see how long this lasts. The 9th Circuit is the most overturned appeals court in the country.

  7. timmus says:

    Oooh… Monkey Court. I like that phrase! I hope it catches on as the unofficial name for arbitration.

  8. huadpe says:

    @bricklayer: I doubt the Supreme Court would take this case. Another appeals court hasn’t issued a contradictory ruling, and this isn’t a new constitutional or statutory issue which requires guidance for the courts of the country. The statues regarding contract law are fairly old and well litigated.

  9. ptkdude says:

    @bradg33: Good to know. Thanks!

  10. ckolony says:

    @PTKDUDE & @PTKDUDE: Not only does this Opinion only apply in the 9th Circuit, it only applies in California. If you read the first couple of sentences of the opinion, you will see that the Court is specifically interpreting California law. Luckily for us, and unluckily for lots of other states, California Business and Professions Code prohibits a wide assorted of nefarious activity. I worked a case where we were suing a guy for selling selling fake rolexs on eBay, and we pled violations of something like 10 different subsections of Cal. Bus. & Prof. Code § 17200. It was pretty fun. That said, the stuff about whether the FAA preempts state law remedies would likely be persuasive to other jurisdictions.

    Lastly, I doubt Cingular will appeal this, or that the Supreme Court would take it, or overturn it. This case is mostly about interpreting state law–not the typical thing that the Ninth Circuit gets reversed on.

  11. Anonymous says:

    The 9th Circuit has ruled these clauses “unconscionable” under California law several times. A suit against PayPal comes to mind, but I can’t remember the specifics. This is why we need a Federal law.

  12. azntg says:

    Note to self: Move to California or other state that maintains laws beneficial to consumers (while maintaining a business in a state with favorable business laws, no less. Hehe!)

    Seriously though, after reading how Binding Arbitration is more like the Scopes trial, sans the court, any rulings against binding arbitration is a good ruling, in my opnion.

    And yes, I’m proud to say that I took advantage of opt-out of binding arbitration, if there was such a clause in the Agreement letters of the services I use. I’m sure I’ll never get anywhere near that point with the companies, but still I must say: awfully nice of them to bury those in fine print.

  13. crnk says:

    @bricklayer:
    interesting article, but I think that a lot of those numbers seem a little inflated because of the size. 3 times the AVERAGE size of the others? Also, there was no statistics on how many cases they handle…..just because they are a set proportion larger doesn’t mean they handle more cases in that same proportion…for all we know, they might handle 10x as many cases as any other district court…

  14. weg1978 says:

    I’m not a big fan of Cingular’s policy here, but the 9th circuit would overturn the law of gravity if it thought it had jurisdiction.

  15. STrRedWolf says:

    Okay, first Linden Labs (Second Life), then AT&T’s wireless unit.

  16. Trackback says:

    The 9th Circuit Court of Appeals toasted a Cingular contract tidbit recently, ruling as "unconscionable" a  clause which declares that by using its service, you void your right to bring a class action lawsuit against them.

  17. apshore says:

    This ruling is broader than it appears. Note in the conclusion:

    “Due to the non-severability clause, under California law Cingular’s entire arbitration clause is void by its own terms.”

    They just voided the entire arbitration clause in ALL Cingular’s California contracts.

  18. gtr225 says:

    It looks like today is one of the rare days that the judicial system works for consumers! But still a good day nonetheless.

  19. mrwilson says:

    Keep this in mind the next time you hear the oft-repeated maxim that “there is no benefit to consumer class actions,” or its close cousin, “only the lawyers benefit from class actions.”