Mandatory Arbitration

Court Voids Class-Action Ban

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Cingular Wireless raised the bar too high when it banned class actions in its standard subscriber contracts, the Washington Supreme Court has ruled.

The provision is unconscionable and cannot be severed from a clause compelling mandatory arbitration, making both unenforceable, the court said in an en banc ruling.

The class-action ban undermines the state’s consumer protection law and in effect exculpates Cingular from legal liability, the court said.

“When consumer claims are small but numerous, a class-based remedy is the only effective method to vindicate the public’s rights,” the majority opinion said. “Class remedies not only resolve the claims of the individual class members but can also strongly deter future similar wrongful conduct, which benefits the community as a whole.” Scott v. Cingular Wireless, No. 77406-4 (PDF)

The plaintiffs had sought class-action status in a lawsuit alleging Cingular overcharged consumers by up to $40 a month through roaming and hidden charges.

A dissent argued that the majority was making rather than following the law. “The majority takes on the legislative prerogative of making public policy and contravenes federal law requiring that arbitration agreements be accorded the same consideration as other contracts,” the dissenting opinion (PDF) said.

A hat tip to How Appealing, which posted news of the ruling.

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