Donate

Be part of the solution.

Help AARP Foundation win back opportunity for struggling Americans 50 and over.

Charity Rating

AARP Foundation earns high rating for accountability from a leading charity evaluator. Read

 

Sign Up for Our
Newsletter

View Current Issue

The AARP Foundation Litigation Update, our quarterly email newsletter, provides information about our current activities and cases.

Connect with the
Foundation

Email:

foundation@aarp.org

 

Toll-free Nationwide:

888-OUR-AARP

(888-687-2277)

 

Toll-free TTY:

877-434-7598

 

AARP Foundation Tax ID

52-0794300

Pendergast v. Sprint Nextel

Court Declines Opportunity to Strike Arbitration Clauses

    

Florida’s highest court refused to consider whether a class action ban in an arbitration clause violates Florida law.

Background

Customers of Sprint Nextel challenged roaming charges they claim they incurred while they were in covered areas, in violation of Florida law. Because the individual charges were small enough to make it difficult to justify the time and expense of litigation on an individual basis, consumers sought to proceed as a class action. Although each consumer was overcharged only a small amount, overall the cell phone provider illegally collected large sums, the litigation argues. Sprint sought to enforce the contractual ban on class actions and to force consumers into individual arbitrations. The consumers argued that forcing them into individual arbitration would violate Florida public policy because it would limit enforcement of Florida law. Because there is no clear case law from Florida state courts to guide the federal courts as to how to interpret Florida law, the U.S. Court of Appeals for the 11th Circuit asked the Florida Supreme Court to decide whether the arbitration clause in unenforceable because it violates Florida public policy by unfairly limiting consumer rights or exculpating corporations from wrongdoing, as the plaintiffs argued.

Arbitration is an out-of-court dispute resolution process originally developed to resolve disputes between businesses with equal bargaining power in industries that benefited from having a decision maker with specialized expertise in a particular field. Now, arbitration is increasingly forced upon consumers in standard form contracts for virtually every good and service they purchase, without any opportunity to negotiate the terms of the contract. Arbitration clauses, which often include class action bans, are used by corporations specifically to avoid being held responsible for violating the law.
 
Often, arbitration clauses prevent a dispute from being heard at all. This is because arbitration is expensive and difficult for the average person. Clauses may also limit remedies and ban class actions. Class actions are often the only effective mechanism to challenge unfair or deceptive practices that can cheat people out of millions, a few dollars at a time. Because the remedies available in a typical consumer claim involve relatively small dollar amounts, it is far more expensive to litigate or arbitrate a claim on an individual basis than could ever be recovered. The only effective means to provide a remedy to the vast number of consumers affected by a corporate policy or practice impacting all consumers, and to ensure the corporation does not benefit from illegal activities is to aggregate the claims into a class action.

AARP’s brief, filed by attorneys with AARP Foundation Litigation, argued that arbitration clauses with class action bans eviscerate Florida’s consumer protection laws, which are designed to be enforced by private lawsuit rather than by a regulatory agency. Forced individual arbitration essentially shuts the door to any enforcement because it is too expensive, if not impossible, for most consumers to pursue a remedy. The brief noted Florida’s long history of holding unenforceable contract provisions that limit important substantive and procedural rights of Floridians.

After AARP filed its brief, the U.S. Supreme Court significantly limited challenges to arbitration in its 2011 decision AT&T v. Concepcion (a case in which AARP had also filed a brief). The Florida court declined to rule on whether Florida public policy would prevent enforcement of the arbitration clause in light of that U.S. Supreme Court decision.

What’s at Stake

The ruling closes courtroom doors to consumers seeking to challenge many business practices that are fraudulent, deceptive and unfair under Florida state laws. Reducing redress for people harmed by business practices takes off the table one of the most important incentives for a company to maintain high standards — its financial self-interest.

Case Status

Pendergast v. Sprint Nextel was decided by the Supreme Court of Florida. The enforceability of the arbitration clause will be decided by the Eleventh Circuit, which has already held in other cases that AT&T v. Concepcion requires enforcement of arbitration clauses even if they include a class action ban.

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts

Processing

Please wait...

progress bar, please wait

Search Legal Advocacy

Find
Legal Cases

Find the most recent cases in which AFL has advocated in courts nationwide for the rights of older persons, and filed AARP’s amicus curiae (“friend of the court”) briefs that help courts decide precedent-setting cases.

About
Foundation Litigation

AARP Foundation Litigation (AFL) is an advocate in courts nationwide for the rights of people 50 and older, addressing diverse legal issues that affect their daily lives and assuring that they have a voice in the judicial system. Learn more about our litigation teams.