AT&T's Arbitration Clause Strips Consumers Of Their Rights

We just love the word unconscionable. You know who doesn’t love it? AT&T. Their mandatory binding arbitration clause was ruled unconscionable by the state Supreme Court of Washington, after AT&T tried to prevent a consumer who believed he was being systematically overcharged from filing a class action lawsuit.

So, why was this particular arbitration clause unconscionable, anyway? Groklaw says that it includes provisions that have nothing to do with the purpose of arbitration — such as the requirement for secrecy.

The court explains:

It forbids class actions and requires that all arbitrations be kept confidential. The agreement also states in relevant part that “[n]o dispute may be joined with another lawsuit, or in an arbitration with a dispute of any other person, or resolved on a class-wide basis,” and “[a]ny arbitration shall remain confidential. Neither you nor AT&T may disclose the existence, content, or results of any arbitration or award, except as may be required by law or to confirm and enforce an award.” CP at 718-19. The dispute resolution section also provides that any claim must be brought within two years and limits a consumer’s right to collect punitive damages and attorney fees.

They also added that AT&T just wasn’t fooling anyone by trying to hide a bunch of baloney in the arbitration agreement:

Limiting consumers’ rights to open hearings, shortening statutes of limitations, limiting damages, and awarding attorney fees have absolutely nothing to do with resolving a dispute by arbitration. Courts will not be so easily deceived by the unilateral stripping away of protections and remedies, merely because provisions are disguised as arbitration clauses.

AT&T EULA’s Terms Are Found “Unconscionable” – What Does That Mean? [Groklaw] (Thanks, tz!)

(Photo: Todd Kravos )


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  1. SkokieGuy says:

    As I first read this I cheered, thinking that perhaps the days of companies proactively stripping consumers of any rights via mandatory binding arbitration are finally numbered.

    Sadly, this ruling will simply help companies rewrite their binding arbitration agreements to may them more ironclad and less subject to future court rulings like this one.

    • dragonfire81 says:

      @SkokieGuy: Hopefully customers keep fighting back hard against them. If mandatory arbitration was *GASP!* made illegal then no company could come up with any work around.

      I’ve noticed a few contracts that have still have an arbitration clause but it’s now non-binding, in other words if you go to arbitration and aren’t happy with the results, you can take it to court.

      Not a perfect solution, but it’s progress.

  2. Sidecutter says:

    Um, Meg? Ben beat you to this on Friday…


  3. Ben Popken says:

    My post was just a quick announcement. Meg is going into more depth.

  4. MPHinPgh says:

    To AT&T: “Neener Neener”.

    There. I feel so much better.

  5. Tiber says:

    They cover the same topic, yes, but beyond that they are different. Ben’s article says THAT arbitration clauses are unconscionable, this explains WHY they made that ruling.

    From what I get, they didn’t necessarily ban arbitration clauses, they just ruled that, when going to arbitration, your contract can not be used to deny you the rights you would have in court. Mandatory arbitration may or may not still be legal, but this sets a nice precedent against it. Also remember that this ruling only applies to Washington State, but it still has far reaching effects regarding precedent, or AT&T could appeal it all the way to the Supreme Court, and they could make it apply nationally.

    This is just my opinion, and I’m not a lawyer.

  6. AndrewJC says:

    I still don’t^H^H^H^H^H can’t understand why mandatory arbitration hasn’t been completely outlawed. The ability to bring suit to right wrongs is something that is guaranteed to every citizen. Whether that’s right or not is another matter, but it’s still a right that’s provided. Signing a contract with somebody should NOT be able to limit that right.

    • @AndrewJC: Because in its intent arbitration is actually beneficial to the consumer. Namely, it should have a more rapid resolution than a court case, and the costs must be footed by the company. The problem is that because the company is paying for it, they get to pick the private firm that does the arbitration, and like all service industries, arbitration companies like repeat business.

      What it really needs is to be court lite. Neither party should have any say in who hears the arguments. The problem is the abuses that occur.

  7. econobiker says:

    So can we still print up checks with the endorsement line containing micro print saying that by cashing this check the company removes any current and future requirement for binding arbitration much like the cashing those checks enrolls us in some travel program???

  8. Psychosocial says:

    Would some kind act of Congress please make this illegal. Thank you.

  9. darkryd says:

    Suck it, AT&T!

  10. tz says:

    Groklaw’s PJ usually provides in-depth analysis. Groklaw is just starting to cover Psystar v. Apple (do the EULAs that say by clicking “I Agree”, RumplestiltskinwareCo can take your firstborn enforcable…) and that could get interesting.

    I think I saw the original arbitration article, but the analysis is meaningful.

    And yes, AT&T could rewrite it, but note how much junk that says “You give up your right to…” has been declared void. If you are ever stuck, you might have to push it, but here is a guide to what might or might not be valid.

    Now, if consumerist could just send to each of the fortune 500, or perhaps the biggest shrinkrap sofware companies, “By opening this envelope, you agree you owe us $1M…”.

  11. george_washington says:

    A very shady tactic by AT&T indeed. The right / ability to bring about a suit against individuals of wrongdoings is something that is guaranteed to every citizen… So why is mandatory arbitration still around? Let me guess.. To protect the Corporation. Like we are doing now on Wall Street. Air Force Ones, Air Jordans / Jordan Shoes, Jordan Release Dates, Nike Dunks and Nike SB Shoes.