A federal appeals court granted a cellphone company's request to send claims of illegal billing practices to arbitration on an individual basis.
Florida customers of Cingular Wireless (now doing business as AT&T Mobility) filed a class action lawsuit after they discovered they were being charged a $2.99 monthly fee for "optional" roadside assistance service they had never requested. According to the lawsuit, which alleged violations of the state Deceptive and Unfair Trade Practices Act, the charges were hidden in their bills and when they found them, Cingular refused to remove them from prior bills or to immediately cancel the unwanted service without charge.
Cingular asked the trial court to require that each customer file a separate complaint in arbitration, based on a contract provision that required arbitration and prohibited class actions. The class action ban would prevent the claims of all the customers from being heard at one time, even though the facts and claims are identical in each case. Not only would this preclude an efficient, one-time disposition of the matter, it also would prevent most individuals from seeking relief because of the time and expense of pursuing such small individual claims.
Arbitration is a system of dispute resolution that is relatively informal, limits access to information, and from which there are typically no written findings and no appeals. Companies increasingly include forced arbitration clauses with class action bans in their "take it or leave it" standard preprinted contracts for employment, medical care, nursing home admissions, cellphone services, credit cards, and many other products and services. Arbitration waives important rights – the right to a court or jury trial, access to relevant documents and other evidence, and the right to an appeal. It can also be prohibitively expensive. Arbitrators are selected by the companies who write the contracts and depend on those companies for their continued employment. This may make arbitrators biased toward repeat players. Finally, an arbitration involving an individual claim cannot force a business to provide a remedy for all the people injured by an illegal practice, as a court can in a class action.
Attorneys with AARP Foundation Litigation filed AARP's "friend of the court" brief pointing out the importance of class actions in providing consumers with relief from violations of law. The brief detailed the numerous courts that have refused to enforce class action bans when they present the only way victims of various corporate wrongdoing can obtain relief.
Deciding it is bound to find the arbitration clause enforceable because of a recently decided U.S. Supreme Court precedent (Concepcion v. AT&T, a case in which AARP had also participated with a brief), the court held that the arbitration clause and class action ban are valid.
What's at Stake
Most arbitration clauses now not only bar people from going to court but also prevent them from pursuing arbitration on a classwide basis. However, class actions often are the only effective way to stop corporate wrongdoing and obtain relief for victims. They are particularly appropriate in consumer cases if damages or amounts in dispute are small for each individual, but in total enable businesses to accrue massive profits. As seen in this case, prohibiting class actions makes it impossible to mount an effective challenge to unlawful practices that harm large numbers of people.
Cruz v. Cingular Wireless was decided by the U.S. Court of Appeals for the 11th Circuit.