Comcast's Class Action Waiver Ruled "Unconscionable"

Comcast can’t use their mandatory arbitration clause to keep its Georgia customers from obtaining class-action status in a lawsuit that alleges Comcast inappropriately collected too many franchise fees. The amount that was improperly collected (about $11 a subscriber) isn’t enough to warrant a bunch of individual lawsuits, so Comcast thought it could get away with it by citing its mandatory arbitration clause forbidding class-action lawsuits. It worked at first, but now the 11th Circuit Court is having none of it.

The 11th Circuit Court of Appeals has ruled that the class-action prohibition is “unconscionable,” and therefore it cannot be enforced. From the CL&P Blog:

The court held that as applied to a claim such as the one in this case, the prohibition on class actions is unconscionable because “[w]ithout the benefit of a class action mechanism, the subscribers would effectively be precluded from suing Comcast” for the violations at issue. As the court explained, “[t]he cost of vindicating an individual subscriber’s claim, when compared to his or her potential recovery, is too great.” Permitting Comcast to avoid litigation through the class-action waiver, the court held, would “allow Comcast to engage in unchecked market behavior that may be unlawful. Corporations should not be permitted to use class action waivers as a means to exculpate themselves from liability for small-value claims.” (emphasis added).

Boo mandatory arbitration clauses.

This act follows a ruling by the California Supreme Court that Circuit City could not enforce a clause that prevented its workers from seeking class-action status in a lawsuit against them, and, of course, the recent ruling by the 9th Circuit Court that prevented Cingular from dropping the class-action ban hammer on customers suing them in California.

Unconscionable is officially the word of the day.

Eleventh Circuit Strikes Down Arbitration Clause Containing Class-Action Waiver [CL&P]
(Photo:cmorran123)

Comments

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  1. SOhp101 says:

    Looks like “Crazy California” isn’t the only one who believes mandatory arbitration clauses are utter BS. I wonder if the same would apply to people working for a corporation? Would they lose their right to sue as well?

  2. Nick says:

    The dominoes are beginning to fall. This makes me happy. (A few years ago, I argued with a law professor colleague that these specific types of clauses were unconscionable, and thus unenforcible; he disagreed. Shows him.)

  3. dbeahn says:

    @schwnj: I suspect most lawyers never expected these clauses to hold up in the long run, but it did buy them many years while people got fed up and started challenging them.

  4. juri squared says:

    YES. Hooray, it’s consumer-rights Christmas!

  5. @SOhp101: “I wonder if the same would apply to people working for a corporation? Would they lose their right to sue as well?”

    At a guess, I would think that if you were an hourly employee, like a cashier or stockperson or greeter, you would have a good shot at having a mandatory arbitration clause voided as unconscionable. (Although a lot of the kinds of things people sue their employers over are handled by mandatory state administrative hearings, which amount to arbitration, but they don’t have the incentive to decide in favor of the employer.)

    If you were a salaried employee, the court would be more likely to assume you had an actual opportunity to dicker the terms of the employment contract and that you did, in fact, agree to the mandatory arbitration clause. (Although if you were one of 36,000 salaried store managers who all had the exact same contract for some giant corporation, probably then you could make a good case you didn’t get to dicker.)

    That would be my guess based on how I see cases going in various jurisdictions.

    Mostly I just like to say “dicker.”

  6. Karl says:

    Companies are already starting to react to these rulings, and changing their contracts to say that you can opt out of binding arbitration, usually by giving them written notice within a short amount of time. I’m guessing it’ll be harder to challenge these provisions. Make sure to look for them on the next contract you sign!

  7. @dbeahn: An appalling number of lawyers apparently missed the part of contract law where they talked about unconscionability and unenforceability. They insist that if it’s on the page, it’s CLEARLY enforceable.

    Personally I see the most ridiculous pre-nups (I primarily draft wills) full of all kinds of clauses that are clearly unenforceable or patently illegal in my state. I’ll say, “You do know that this isn’t enforceable in Illinois?” “Oh, I know that’s the law, but the lawyer said as long as we had a contract/prenup, we didn’t have to follow the *state* law but it’d be governed by the prenup.” Typically to do with disposition of children in case of a divorce: things that are downright tax fraud in terms of alimony/child support, agreements to do X, Y, or Z with the children that are decided by law based on the child’s best interest, not any prior contracts or the parents’ wishes even, and at least one that I’m pretty sure violated anti-slavery laws by actually selling the children to one another. All I can say is, I hope they never get divorced!

  8. homerjay says:

    I like it when the court uses the word unconscionable. Its like a big ol’ smack in the face.

  9. Anonymous says:

    @homerjay:

    Amen. It also directly calls into question the ethics of the drafters of such contracts.

  10. TechnoDestructo says:

    @s0crates82:

    Oooooh….I would have an orgasm if that led to sanctions against them.

    Free-market true believers (those who believe there really is a FREE market and that it is the economic equivalent of God) might defend such clauses saying “well, you have the choice of not entering into the contract.” But when these contracts are so ubiquitous, that amounts to “you have the choice of opting out of modern society.”

  11. mac-phisto says:

    oh, i don’t know. $11 is a lot of money to me. i almost think it would be more fun if they upheld the binding arbitration, but allowed every individual affected the right to argue their individual case in court at the expense of comcast.

    maybe then companies will think twice about making their own law books.

  12. STrRedWolf says:

    Don’t forget, Linden Research got their binding arbitration clause in their Second Life service invalidated for the same reason. Reuters article (although the Metaverse Messenger also covered it):

    [secondlife.reuters.com]

  13. speedwell (propagandist and secular snarkist) says:

    @TechnoDestructo: Free market true believers believe in choice. Coercive tactics such as mandatory, non-negotiable, “my way or the highway” arbitration clauses are not choice, they are fraud. Free market true believers are against fraud.