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AT&T Arbitration Clause Ruled Unconscionable

ScuttleMonkey posted more than 6 years ago | from the new-contracts-just-ask-to-surrender-all-rights dept.

The Courts 261

Tech.Luver writes to tell us the Consumerist is reporting that a small clause in AT&T contracts has been ruled "unconscionable" by the 9th circuit court of appeals. The clause in question stated that if you use AT&T service you surrender your right to class action lawsuits and instead have to participate in mandatory binding arbitration.

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261 comments

hooray! (1, Funny)

Anonymous Coward | more than 6 years ago | (#20288067)

this is an important victory for my rights online!!!

Re:hooray! (5, Funny)

AchiIIe (974900) | more than 6 years ago | (#20288965)

Actually, your right online `on second life` had a similar ruling

  Second Life Arbitration Clause Unenforceable
> http://games.slashdot.org/article.pl?sid=07/06/08/ 2017257 [slashdot.org]

I see a trend here. On the other hand, if those contracts were permitted then I'd be having my own that read as follows:

Legal Notice: BY ACCEPTING THIS BRICK THROUGH YOUR WINDOW, YOU ACCEPT IT AS IS AND AGREE TO THE DISCLAIMER OF ALL WARRANTIES, EXPRESSED OR IMPLIED, AS WELL AS DISCLAIMERS OF ALL LIABILITY, DIRECT, INDIRECT, CONSEQUENTIAL OR INCIDENTAL, THAT MAY ARISE FROM THE INSTALLATION OF THIS BRICK INTO YOUR BUILDING.

Article or link? (3, Insightful)

hazem (472289) | more than 6 years ago | (#20288069)

Can we have an article or link? Or should we write directly to tech.luver?

Re:Article or link? (5, Informative)

Constantine XVI (880691) | more than 6 years ago | (#20288085)

Re:Article or link? (5, Funny)

Anonymous Coward | more than 6 years ago | (#20288669)

Wait a second. Are you saying that the editors actually did something?

Re:Article or link? (1)

ColdWetDog (752185) | more than 6 years ago | (#20288099)

There is a link in the"related articles" [consumerist.com]

But, come on "editors". I know it's Saturday but let's do some simple stuff at least.

Re:Article or link? (0)

Anonymous Coward | more than 6 years ago | (#20288445)

Articles? We don't need no stinking articles!

Old news (5, Insightful)

Zatchmort (1091857) | more than 6 years ago | (#20288077)

Well, this is nothing new. Most "contracts" are just waiving the consumer's rights. On the other hand, I'm glad somebody finally called them on it, since this is so blatantly obvious.

URL? (-1, Redundant)

Avitor (640676) | more than 6 years ago | (#20288079)

No link?

Re:URL? (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20288111)

No link?
You must be new here. No one reads the fucking article!

AC Sig for Cowards:
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Madonna > *

all fine print (5, Informative)

seanadams.com (463190) | more than 6 years ago | (#20288083)

"unconscionable" basically means that no person of sound mind could have been expected to accept the contract at the time the contract was signed.

Seem to me like that should apply to all EULAS, click-through terms of service, notice of terms after the fact, etc. No person should be expected to wade through such a contract for such trifling matters as purchasing a telephone, installing some software, etc.

Re:all fine print (0, Insightful)

Anonymous Coward | more than 6 years ago | (#20288179)

"unconscionable" basically means that no person of sound mind could have been expected to accept the contract at the time the contract was signed.
Yet they did. So did literally millions of other Americans. In fact, almost all contracts these days include binding arbitration clauses. This is a good thing, because it helps to reduce the number of frivolous lawsuits clogging up the court. It reduces fees for companies and reduces product and service cost. All in all, it's a very good thing.

The idea that it's "unconscionable" is just ridiculous. Every one capable of accepting a contract can figure out what it means and binding arbitration is a benefit to both sides of a contract. Literally the only people this ruling benefits are class action vulture attorneys, who sue, cost a company millions of dollars, and get those actually effected small coupons to buy more of the defective product.

Then again, the Ninth Circuit Court is the most overturned court, so we don't have to worry about this decision sticking.

Re:all fine print (2, Insightful)

Anonymous Coward | more than 6 years ago | (#20288309)

And how much do you want to bet they just ruled that it was unconsciable for the person to waive their rights to a CLASS-action lawsuit in place of arbitration, rather than individual arbitration?

A class-action lawsuit usually happens because a company is being grossly negligent, not just screwing over a person here or a person there.

Personally I think most of the clogging going on in the court system has nothing to do with frivilous lawsuits, it has to do more with the lack of streamlining in the judiciary process in regards to how many filings are needed to get anything done. I mean c'mon, other than discovery, and analysis thereof, how long should this shit really take?

- A very annoyed American.

Re:all fine print (3, Informative)

JoshHeitzman (1122379) | more than 6 years ago | (#20288483)

"And how much do you want to bet they just ruled that it was unconsciable for the person to waive their rights to a CLASS-action lawsuit in place of arbitration, rather than individual arbitration?" It doesn't appear to be even that much. At the end it says "In sum, we hold that Cingular's class arbitration waiver is unconscionable under California law", so it only seems to go as far as ruling unconscionable the waiver of class arbitration (and even then only when it is done through an adhesion contract and only where the amounts in dispute are small and numerous customers of the company have such small amounts in dispute). If the contract had been written better it looks like the part waiving class arbitration could have been voided without also voiding the waiver of class action lawsuits, but it wasn't written in such a way.

Re:all fine print (5, Insightful)

Anonymous Coward | more than 6 years ago | (#20288319)

No, binding arbitration is NOT of benefit to both sides of this particular contract, nor of many similar contracts.

For most consumer services, such as those offered by AT&T, the amount of any dispute is likely to be too small to make it worth anybody's while to go to arbitration. Yes, it would cost even more to go to court, but the fact is that the consumer isn't going to recover enough to cover the costs of arbitration, any more than she would recover the costs of litigation.

Therefore, even if a consumer can afford it, the only way she is going to bring up such a dispute is as a matter of principle... and there's not even any incentive to do THAT, because the point of bringing up a matter of principle is to punish somebody for wrongdoing, and the amount recovered by arbitrating a single dispute would mean nothing to a huge player like AT&T unless many, many people went to arbitration, which everybody knows they won't... especially since AT&T's costs for arbitrating thousands of nearly identical cases are far lower than consumers' costs for arbitrating those same cases one-by-one.

Forcing everything to be arbitrated on a case-by-case basis would mean that the cost to consumers of recovering whatever they've been screwed out of was hundreds or thousands of times the amount recovered. Which means that nobody would actually get compensated, nor would AT&T (or whoever) ever suffer enough costs to deter bad behavior.

That's why there are class actions... they're there so that the larger party in this sort of situation can't just change the rules at will, ignore the other terms of the contract, screw over the other parties, and suffer no consequences whatsoever.

So, basically, to be opposed in principle to class actions is to say that people screwed over by large corporations should get no recourse at all. Maybe the corporation has to worry about its reputation, but it will never be FORCED by law to live up to its contracts the way you or I would be.

That is unconscionable. It puts large players above the law, it is basically a return to feudalism, and it is repugnant to any decent person.

Fuck you, you corporate cocksmoker.

Re:all fine print (1)

sacrilicious (316896) | more than 6 years ago | (#20289009)

This is a good thing, because it helps to reduce the number of frivolous lawsuits clogging up the court. It reduces fees for companies and reduces product and service cost. All in all, it's a very good thing.

I'm skeptical. Along with reducing frivolous lawsuits, it reduces legitimate lawsuits. How is it so clear that the benefits outweigh that cost?

Re:all fine print (4, Insightful)

Kadin2048 (468275) | more than 6 years ago | (#20289187)

In fact, almost all contracts these days include binding arbitration clauses. This is a good thing, because it helps to reduce the number of frivolous lawsuits clogging up the court.
You seem to assume that all lawsuits are frivolous. This is dumb -- if that was true, we should just eliminate the entire legal system and let people work everything out mano y mano.

Allowing monopolists to force consumers to give up their rights is obviously wrong and subverts centuries of jurisprudence.

Re:all fine print (1)

Jah-Wren Ryel (80510) | more than 6 years ago | (#20289205)

Then again, the Ninth Circuit Court is the most overturned court, so we don't have to worry about this decision sticking.
The ninth circuit court's jurisdiction is roughly 20% of the US population. The only reason they have more overturned decisions than any of the other circuit courts is because they try way more cases than any other circuit court.

Re:all fine print (4, Interesting)

Guppy06 (410832) | more than 6 years ago | (#20289351)

"Literally the only people this ruling benefits are class action vulture attorneys, who sue, cost a company millions of dollars, and get those actually effected small coupons to buy more of the defective product."

Considering this is AT&T we're talking about, I'm sure this is also a win for civil liberties groups looking to actually take AT&T to court for their warrantless wiretaps.

Parent is a fucking idiot. (-1, Troll)

Anonymous Coward | more than 6 years ago | (#20288193)

"unconscionable" basically means that no person of sound mind could have been expected to accept the contract at the time the contract was signed.

Seem to me like that should apply to all EULAS, click-through terms of service, notice of terms after the fact, etc. No person should be expected to wade through such a contract for such trifling matters as purchasing a telephone, installing some software, etc.
First of all, you failed to spell "seems" correctly. What you don't understand is that companies must cover their ass or get sued by ambulance chasing lawyers with litigious clients. It takes a lot of legalese to cover your ass so you don't get sued over "trifling matters."
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Re:all fine print "unconscionable (1)

r1_97 (462992) | more than 6 years ago | (#20288221)

I think it means that it's so unfair that it shocks the conscience of the court. It has a lot to do with the essential nature of the subject matter of the contract and the relative bargaining power (or lack thereof) between the parties.

Re:all fine print (4, Interesting)

kimvette (919543) | more than 6 years ago | (#20288249)

Well, where software is concerned, EULAs are moot. You see the EULA after you make the purchase and open the package. Open the package, the store will refuse to accept it. Your right of first sale (it's a commodity good, NOT a work for hire) allows you to use it for its intended purpose without restriction. You are still of course bound by patents and copyrights, but not to use the package for its advertised purpose, or even to resell it to someone else when you're finished with it.

With AT&T, you're buying a service; it amounts to a work for hire, in essence. As such, they can require you to agree to certain terms, but not ones which would restrict you from certain rights, e.g., if they work with the government to subert your constitutional rights (e.g., engaged in wiretapping without a warrant), engage in fraud and charge you for services you do not receive, or falsely advertise their services (advertising them as unlimited), and so forth, it is unreasonable for a court to accept that waiver of such rights is valid or even possible.

First Sale Doctrine & Software (3, Informative)

Elemenope (905108) | more than 6 years ago | (#20288383)

Well, where software is concerned, EULAs are moot. You see the EULA after you make the purchase and open the package. Open the package, the store will refuse to accept it. Your right of first sale (it's a commodity good, NOT a work for hire) allows you to use it for its intended purpose without restriction. You are still of course bound by patents and copyrights, but not to use the package for its advertised purpose, or even to resell it to someone else when you're finished with it.

Not that I disagree that's how it ought to be, but last I checked/heard/read the US Appeals courts were still thoroughly confused on the point of whether the First Sale Doctrine applies to software licensed for purchase. Any lawyers in the house who know one way or the other? Have there been any definitive rulings, esp. Supreme court rulings on the issue?

Re:First Sale Doctrine & Software (1)

Todd Knarr (15451) | more than 6 years ago | (#20288431)

I don't think anyone's ever taken a case on on that point. They're all interested in trying to argue that the EULA's not valid, or that their agreement to it should be set aside. I don't recall anyone ever arguing that the EULA's irrelevant because they never agreed to it and don't have to agree to it.

Were I cynical, I'd suggest that this might be because it'd turn it from a sexy First Amendment case into a bog-standard Uniform Commercial Code contract case that wouldn't make for nearly as good a headline for the lawyers.

Re:all fine print (1)

CoughDropAddict (40792) | more than 6 years ago | (#20288437)

Software EULAs have been upheld in court: see ProCD v. Zeidenberg [wikipedia.org] . The judge's analysis rested mostly on the Uniform Commercial Code (or UCC), not copyright law.

"Work for hire" is a concept that only applies to copyright law; it makes no sense to talk about it in the context of a service.

These basic errors lead me to question the rest of your analysis as well.

Re:all fine print (1)

kimvette (919543) | more than 6 years ago | (#20288583)

That may be valid if in fact the software can be returned. The simple fact is that once you purchase software online, or in most stores, and disagree with the EULA, the return will be refused. You're left holding the bag. In such cases the EULA is pretty much irrelevent and you still have your right of first sale, so you can pretty much do what you darn well please with that commodity good.

Now, for a phone directory? It's factual information, and not subject to copyright. Were the software a work for hire I'd agree that the contract law ruling would hold water, but where it was offered as a commidity good, Zeidenberg should have pushed the appeal process much further.

ProCD May Not Be On Point (4, Interesting)

Alaren (682568) | more than 6 years ago | (#20288611)

I am not a lawyer, but I am in law school. The following is not legal advice.

While you are correct, please remember that the fact-finding in the ProCD case suggested that the purchaser in fact knew of the EULA (I think there was a line about it on the outside of the box IIRC). Actual or constructive knowledge of the EULA's existence was enough for the EULA to be a contract; additionally, when ProCD went down you could still return opened software to some places, aa the judge mentions returning the software in the opinion. In the final analysis, I still think ProCD was wrongly decided, but even so it wasn't as big a victory for EULA's as people make it out to be.

There has not been a case where a purchaser in genuine ignorance of a EULA or its existence has been held to it. This AT&T case is a minor victory, but in general lawyers will do precisely the wrong thing and the legislature will support it. Just wait for the day when you buy your groceries and sign a receipt stating that you have license to eat them, but not resell them. Eight judges out of ten seem incapable of understanding technology or rationally grasping the deeper principles that underlay the law, and at this rate it won't be long before you can't even resell your furniture, let alone your software.

Re:all fine print (2, Interesting)

Belial6 (794905) | more than 6 years ago | (#20288697)

"With AT&T, you're buying a service; it amounts to a work for hire, in essence. As such, they can require you to agree to certain terms, but not ones which would restrict you from certain rights, e.g., if they work with the government to subert your constitutional rights (e.g., engaged in wiretapping without a warrant), engage in fraud and charge you for services you do not receive, or falsely advertise their services (advertising them as unlimited), and so forth, it is unreasonable for a court to accept that waiver of such rights is valid or even possible."

Funny you say that. AT&T committed fraud against me just this week. They are "Cramming" my phone bill. I signed up for a basic flat rate service at $10.95 a month (+all of the various taxes). Two months into it and I already have a $125 bill! To be fair, I did make 3 minutes worth of long distance calls and dialed local number to connect to my ISP on this line while I was waiting for my DSL connection. Nothing after that though, as I use my cell and Vonage for all of my calls.

Re:all fine print (2, Interesting)

Panthar37 (685745) | more than 6 years ago | (#20289243)

EULAs for software can be overcome. It requires a firm tone and the promise of corporate letter writing. When store managers are told they will be hearing from the corporate office because they didn't satisfy a customer, they will refund you the money. The fact that EULAs are contained inside a sealed box and state that if you do not agree with the terms of service, "you may return the product for a refund" creates a catch-22 for the seller. You can't read it until its open. So, in order to decide you do not accept the terms, you must open it first. They will lose this argument unless they begin printing the EULA on the outside.

You know what's unconscionable? (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20288101)

Cory Doctorow's stupid, stupid haircut.

Isn't this is most or all credit card agreements? (4, Interesting)

Etherwalk (681268) | more than 6 years ago | (#20288109)

Isn't this in most or all credit card agreements?

Re:Isn't this is most or all credit card agreement (0)

Anonymous Coward | more than 6 years ago | (#20288133)

Isn't this in most or all credit card agreements?

Some of them, depends on what jurisdiction you live in. It would be interesting if these clauses get tossed as well.

Re:Isn't this is most or all credit card agreement (1)

DarkNinja75 (990459) | more than 6 years ago | (#20288267)

I noticed it on mine, knew I was getting screwed by signing it, but didn't have any other option.

Re:Isn't this is most or all credit card agreement (1)

ari_j (90255) | more than 6 years ago | (#20288345)

I actually saw a credit card agreement that gave you a chance to opt out of that provision. The only problem is that everyone has to opt out of it in order to gain any real advantage. I do disagree with the blurb's choice of terminology. This is not a "small" clause. It's the clause that lets the company get away with screwing each customer over for a few dollars a year.

Re:Isn't this is most or all credit card agreement (1)

shmlco (594907) | more than 6 years ago | (#20288591)

The only credit card agreement I saw that let you opt out of a provision did so by letting you close the account and then agreeing to pay off the card.

Re:Isn't this is most or all credit card agreement (1)

ari_j (90255) | more than 6 years ago | (#20288981)

I got bored and read some WaMu junk mail a few weeks back, and they had a legitimate opt-out provision. But still, it's worthless if you are the only one who opts out, and since nobody even knows about the arbitration clause there's certainly nobody looking for the opt-out clause. I'm sure that you also have to opt out by means of telegram, carrier pigeon, or in-person visit between the hours of 1 and 2 on February the 29 any year that it has fallen on a Tuesday for more than three consecutive years. But they did have one.

Re:Isn't this is most or all credit card agreement (1)

fast penguin (910736) | more than 6 years ago | (#20289045)

If they allow for an opt-out, it's because enough people care. Just because you don't, doesn't mean nobody does.

Out of hand (5, Interesting)

WwWonka (545303) | more than 6 years ago | (#20288139)

I am glad this got struck down. We are seeing more and more of corporate America using these so called "to smart for the normal guy" contracts that really are never read,signed, or agreed to in a "normal" manner. Hell, recently I got a postcard from Sprint saying that my monthly web service was going to rise a few dollars a month and that by paying my next bill I agree to their service and conditions and the raise. What the f&*k? Of course I am going to have to pay my bill or else they would shut my service off, give me a bad credit mark, and then go to collections on me. A no-win situation.

I keep asking myself, what the f$*k is going on in America lately?

Re:Out of hand (1)

Amiga Lover (708890) | more than 6 years ago | (#20288163)

I'm waiting for the RIAA to respond to their court-ordered requirement to pay legal fees to one of the people they sued, with "It's company policy not to pay out judgments against us", or something equally stupid - and then get away with it, or at least successfully stall for years or decades.

Re:Out of hand (2, Interesting)

UbuntuDupe (970646) | more than 6 years ago | (#20288185)

What's going on? My theory is that both sides (that means the consumer too) have gotten better lawyers to find some loophole that lets them weasel out of an agreement. So now, the only way anyone will offer a services is if they have a fallback of "oh, it means whatever we want". They might as well, because it will mean whatever a court says it means.

The old joke about Russia was "we pretend to work, they pretend to pay us". Here, it's, "we pretend to agree to it, they pretend it will be enforced."

I first wanted to blame lack of competition, but you have to realize, the overly-broad, extremely-detailed contract persists even in areas where there is more than enough competition, like internet portal registration.

Does anyone know if Europe has this problem?

Re:Out of hand (2, Interesting)

excelblue (739986) | more than 6 years ago | (#20288203)

Actually, they have invalidated your entire contract by raising the rates and are thus asking you to agree to a new contract with increased rates. However, they already stated in the old contract that such agreements can be made by paying a bill. So, for practical reasons, this is a good thing; that means you get to cancel without an early termination fee and switch to a provider that can provide you services for a price you can agree on. You are simply misinterpreting the implications. What they're saying is: we're raising rates, pay if you agree; cancel service if you don't.

Re:Out of hand (2, Insightful)

noidentity (188756) | more than 6 years ago | (#20288333)

I agree that "by doing unrelated action Y, you are also accepting contract X" is stupid, but in this case, if you don't like the new terms, let your next bill payment be your last. That's what it'd be anyway if you didn't accept the new terms. Now, if you say agreed to use service for a minimum of a year, either they stated up-front that they could change the contract terms mid-year (for example, raising rate to $1000 per month), or it's fixed for that first year or whatever.

Re:Out of hand (2, Insightful)

aeschenkarnos (517917) | more than 6 years ago | (#20288549)

I keep asking myself, what the f$*k is going on in America lately?

You've put the foxes in charge of the henhouses, that's what.

Where's the FTC? (5, Interesting)

schwit1 (797399) | more than 6 years ago | (#20288143)

Unconscionable terms are in most consumer contracts today, whether it be a product or a service. That's what happens when big business owns the government. AT&T has more influence with my elected representatives because of campaign finance rules, legalized influence pedaling and lobbyists.


This won't change until campaign contributions are limited to registered voters.

Re:Where's the FTC? (0)

Anonymous Coward | more than 6 years ago | (#20288187)

It won't change then either. CEO's are registered voters, and if limits are applied, they'll get their friends, family, and employees to donate as well to the same cause.

Re:Where's the FTC? (1)

MightyYar (622222) | more than 6 years ago | (#20288219)

This won't change until campaign contributions are limited to registered voters.
That's not a bad idea, but I'd expand it to "citizens"... there's no reason for you to give up your rights just because you don't want to vote.

Re:Where's the FTC? (1)

vranash (594439) | more than 6 years ago | (#20288325)

Except that A. if you aren't voting you shouldn't be financing people you aren't willing to put your vote where your wallet is.

And more importantly, limiting to registered voters would keep corporations from being able to directly offer financial assistance to campaigners, since last I checked companies, despite other things people consider as 'citizenship status' aren't allowed to vote :)

Re:Where's the FTC? (1)

MightyYar (622222) | more than 6 years ago | (#20288455)

I guess that I can see how you might not vote because you don't like the candidates, but would hate to see that result in my first amendment rights being scaled back. I mean, they are guaranteed to all citizens, not voters.

Re:Where's the FTC? (1)

Grimbleton (1034446) | more than 6 years ago | (#20288877)

Please point out your first amendment right to finance a campaign to me, and then explain the logistics thereof.

Re:Where's the FTC? (1)

MightyYar (622222) | more than 6 years ago | (#20288917)

Of course you don't have first amendment rights to finance a campaign. :)

But "soft money" is another matter altogether. I can go to Staples and print an unlimited amount of promotional material that I can then distribute. Did I support the campaign? Yes. Did I do it by sending them money? No. The only way to regulate this kind of spending is to forbid corporations to do so, since we mere people have the first amendment protecting our right to do the same.

Regulating "campaign finance" without also going after soft money is pretty ineffective.

Re:Where's the FTC? (2, Interesting)

clearreality (1116627) | more than 6 years ago | (#20288469)

I understand your frustration, however this is a case of the system clearly working in favor of the consumer. If you read the court's decision, they are very clear that this type of clause (no class-action lawsuits/arbitration) in this type of contract (contract of adhesion) is not going to be enforcable.

In short, this is exactly what you are looking for in terms of curtailing abuse by corporations.

The system is more than the President and Congress, it is also the Judiciary, and the courts are supposed to provide the check on their power. In this case, it appears to be working. Read the decision, you will be impressed. (And the 9th Circuit seems to be on track on this one, even including a URL in their decision that shows class arbitrations currently listed on the American Arbitration Association website!)

Link to the court's decision. [uscourts.gov] (PDF)

Re:Where's the FTC? (1)

iminplaya (723125) | more than 6 years ago | (#20289181)

This won't change until...

the voters nominate and elect somebody besides the incumbents and Party members. This is the tail wagging the dog. Campaign contributions have more influence on the voters than anybody else. They're always voting for the person with the flashiest ads and ignoring the substance. Thoughtful voting takes more effort than most people want to spend. Ignore the ads and follow their record [vote-smart.org] . That's the only thing that matters. That's the way to force a reduction in campaign spending so that anybody can afford to run.

Comcast is doing this too (3, Informative)

SCHecklerX (229973) | more than 6 years ago | (#20288145)

I just got the same notice in my most recent Comcast bill.

Re:Comcast is doing this too (1)

SomeDanGuy (1070108) | more than 6 years ago | (#20288315)

I was going to say the exact same thing! I just looked at a shiny Comcast pamphlet about this yesterday, which caused my eyes to glaze over at the sea of legal jargon.

Must be really bad... (1, Funny)

professorfalcon (713985) | more than 6 years ago | (#20288153)

has been ruled "unconscionable" by the 9th circuit court of appeals

Is that like double unconstitutional?

Geez, mods. (1)

Elemenope (905108) | more than 6 years ago | (#20288485)

Troll? Seriously? Oh come on, mods. That was, at worst, FUNNY. Wish I had mod points to help rectify the injustice. ;)

9th Circuit == Pretty Liberal (0, Flamebait)

tjstork (137384) | more than 6 years ago | (#20288155)

It's really no surprise. The 9th circuit's one of the most liberal courts in the country and so people looking for them to assert the right to liberal activities usually try and sue through them, and class action lawsuits are about as liberal as you can get.

Re:9th Circuit == Pretty Liberal (4, Interesting)

Registered Coward v2 (447531) | more than 6 years ago | (#20288257)

It's really no surprise. The 9th circuit's one of the most liberal courts in the country and so people looking for them to assert the right to liberal activities usually try and sue through them, and class action lawsuits are about as liberal as you can get.

Regardless of the 9th CC's viewpoint; a class action lawsuit is neither liberal or conservative; rather it adds a level of certainty to the legal landscape. Rather than face potentially hundreds of expensive lawsuits all around the country; class actions allow corporations to resolve liability issues once and in a final manner; while allowing individuals to sue when it would be too expensive to try to sue individually. I would expect the business community to prefer class actions suits to the alternative of defending themselves everywhere over small amounts; even though the likelihood of such cases is much smaller since the payouts probably
wouldn't cover the lawyers fees. Still the certainty of class actions is better than uncertainty of individual actions since you at least have some control over teh cost of defense and ultimate liability.

Re:9th Circuit == Pretty Liberal (1)

Waffle Iron (339739) | more than 6 years ago | (#20289369)

I would expect the business community to prefer class actions suits to the alternative of defending themselves everywhere over small amounts

Especially since the damages are usually "repaid" in the form of discount coupons for their own products. This even saves them the cost of having to buy ads in magazines to distribute their promotional discounts.

Re:...and in Canada (1, Interesting)

Anonymous Coward | more than 6 years ago | (#20288339)

Michael Geist recently wrote on his website about this topic and how it applies in Canada. Unfortunately, the Supreme Court of Canada concluded that the arbitration clause was enforceable and that the use of a hyperlink was sufficient.

Yes, you are correct, the Canadian Supreme court did make that ruling.

But the largest provinces (Ontario & Quebec) have already amended their consumer protection legislation to make these clauses null and void.

The other provinces will likely follow, making this court decision irrelevant.

Re:...and in Canada (1)

flyingfsck (986395) | more than 6 years ago | (#20288705)

Also, Canada has the concept of 'equity', which the US doesn't. This basically means that what is good for the goose is good for the gander and that makes any heavy one-sided contract clause unenforceable.

This might mean something..... (0, Flamebait)

Farfnagel (898722) | more than 6 years ago | (#20288241)

....if any sane court had made the ruling. The 9th Circus can hardly be considered a sane court.

Re:This might mean something..... (1)

Megane (129182) | more than 6 years ago | (#20289121)

....if any sane court had made the ruling. The 9th Circus can hardly be considered a sane court.

That's what I was thinking too, but you know even a stopped clock is right twice a day.

Arbitration is dangerous... (1, Insightful)

Anonymous Coward | more than 6 years ago | (#20288251)

More and more, I'm seeing arbitration agreements put into contracts everywhere. These are a direct danger to every one of us as it removes our right to seek action in the civil courtroom amongst our peers. For those not in the know, an arbitration is exactly like a court trial, except not in the courtroom. An arbitrator acts as the judge AND the jury. This arbitrator is simply going to be a lawyer or ex-Judge. It is simply not the same as a court trial.

- Cyrus

The Litigation Monopoly (1)

yintercept (517362) | more than 6 years ago | (#20288501)

If you talk to the arbitrators of the world, they would say that litigation leads to more harm than arbitration. In litigation, there is always a winner and loser. In more cases than not the primary loser of litigation is the public at large.

Arbitration seeks to redress contract disputes in ways that are beneficial to both members of a dispute.

The ruling like the one not cited [slashdot.org] in this /. post are really ruling that litigation lawyers should have a monopoly on class actions.

While I do not like corporations sneaking things into agreements, the result of choosing arbitration over litigation as a means of handling disputes is probably reflected in the price of the product.

Personally, I wish the arbitration community could find a way to break the litigation monopoly as arbitration generally leads to a better result than litigation which generally leads to inequitable results with one winner and vanquished losers.

Re:The Litigation Monopoly (0)

Anonymous Coward | more than 6 years ago | (#20288823)

You are right. Arbitration generally leads to a better result than litigation for corporations. Oh, you forgot to put in the for corporations part.

Yes, courts should have a monopoly on deciding the law in cases of legal dispute. Oh, you did not say that. You want someone else to decide the outcome of a legal dispute.

You want the party the corporations choose to decide the outcome of the legal dispute. You want the party whose business livelihood depends on the corporations choosing them to decide the outcome of the legal dispute to make the decision. You want to pretend there exists no conflict of interest or reason why a consumer would not want to surrender their legal rights to a party chosen by their legal adversary.

Good for you.

Re:The Litigation Monopoly (1)

schwit1 (797399) | more than 6 years ago | (#20289091)

Arbitration can be a good thing for everybody, if done fairly. The ground-rules for fair arbitration need to be decided equally as opposed to being imposed by one side on the other. That's the problem with current consumer agreements, they are all cookie cutter, one-sided contracts.

Unconscienable == invalid & unenforceable (3, Informative)

redelm (54142) | more than 6 years ago | (#20288279)

Now the 9th has a hard-earned reputation as avant-garde [nutjobs]. This is an astounding ruling. The binding arbitartion clause is pure boilerplate found in many, many contracts. For the 9th to toss it out changes many contracts.


Perhaps this is in connection with unequal power consumer level contracts. But then I would suggest that some PUC isn't doing it's job. And if it isn't because the Legislature hasn't seen fit to include DSL as a regulated service, then I'm not sure the courts can or should interfere.


Please note I'm not criticisning the 9th's decision. They might well be correct: it is the height of absurdity for a court to respect any contested provisions to bypass it. Courts are to resolve disputes fairly. Provisions otherwise are contemptuous.

Re:Unconscienable == invalid & unenforceable (5, Informative)

clearreality (1116627) | more than 6 years ago | (#20288615)

The 9th Circuit's decision on this one seems to be well-reasoned. You can read the decision here. [uscourts.gov] (PDF)

They basically state that the contact in question for this type of case must be a contract of adhesion, and they clearly define what that means. A contract of adhesion is defined as a contract between a party of greater bargaining power and a party of weaker power (ie, AT&T and a wireless subscriber), and the contract must be standardized for use with all equivalent parties of weaker power (ie, all wireless subscribers), and the presentation of that contract must be "take it or leave it" (ie, no chance to negotiate).

It is good to note that the ability to walk away from a contract does not change that the contract is a contract of adhesion, even if you accept that contract instead of walking away.

The court also adequately addresses the issue of marketplace alternatives, specifically stating that even if meaningful alternative services exist (ie, Verizon, Sprint, T-Mobile, etc), that this does not change the fact that the contract may be procedurally unconsionable (a "contract of adhesion" is also stated as being automatically procedurally unconsionable to some degree).

Note, for a contract or clause of a contract to be unenforceable, it has to be both substantively and procedurally unconsionable to enough of a degree as to be ruled unenforceable. Please read the court's decision and other documents to learn more about legal unconsionability.

On the issue of arbitration, the court seems to treat arbitration with respect, and cites several cases where arbitration was used and also lists some favorable reasons for people and companies to use arbitration. This is clearly not a case of the court dismissing arbitration -- this is a case where the members of the class who want to sue AT&T would be at a severe disadvantage if they were required to use individual arbitration. Note, AT&T stated that they did not want to use class arbitration to resolve the issue, they specifically wanted individual arbitration. The court actually presents opinions supporting class arbitration at one point in the decision.

This decision makes sense, and shows that terms that are included in contracts of adhesion are vulnerable to being ruled unenforceable. This is good news from the consumer standpoint, and does not weaken arbitration or consumer's rights in any way I can see.

I am not a lawyer. I just RTFA.

Re:Unconscienable == invalid & unenforceable (2, Informative)

mrbrown1602 (536940) | more than 6 years ago | (#20288625)

For the 9th to toss it out changes many contracts.

Not really. Courts have thrown out arbitration clauses before, simply because they're weighted too much in favor of one corporation with a lot of power, versus an individual. One case in particular comes to mind... Hooters of America v. Phillips.

the word on the streets? (-1, Flamebait)

Anonymous Coward | more than 6 years ago | (#20288335)

linux is still for fags. just go to the public restrooms and you'll find a linux user to suck your dick.

bte: you'll know them by their secret sign, a small penguin.

fucking faggots.

Re:the word on the streets? (0)

Anonymous Coward | more than 6 years ago | (#20288567)

A linux user getting some action?

Now I know why you got modded flamebait.

Simple solution... (0)

Shag (3737) | more than 6 years ago | (#20288357)

if you use AT&T service you surrender your right to class action
So don't do that, then.

(Do people actually still use AT&T for anything other than iPhones?)

Re:Simple solution... (0)

Anonymous Coward | more than 6 years ago | (#20288377)

yes, anyone with an unexpired service agreement with cingular.

Re:Simple solution... (2, Insightful)

Internet Ronin (919897) | more than 6 years ago | (#20288387)

Actually all major wireless carriers contain this clause. Legally binding arbitration usually results in a carrier-favored decision 99% of the time. It's why it's in there, so don't be quick to judge, it's an industry standard.

Re:Simple solution... (0)

Anonymous Coward | more than 6 years ago | (#20288599)

you will use AT&T service [the only service in your area] you surrender your right to class action
there, fixed it for you.

Re:Simple solution... (0)

Anonymous Coward | more than 6 years ago | (#20288699)

The local cable company decided not to make service available in my neighborhood.
Therefore, in my area, broadband means SBC. I can purchase SBC's packages or I can use dial-up.
Since I often have to connect to my VPN at the office, I am forced into buying SBC's inferior services.

Please note: AT&T is no longer the AT&T which I grew up with and as such, I refuse to call SBC what the company's executives wish for the rest of us to call them. If you're interested, read their press release on the AT&T-SBC merge + name change [att.com] .

Re:Simple solution... (2, Interesting)

MightyYar (622222) | more than 6 years ago | (#20288703)

You have a nice low number so I'll give you the benefit of the doubt :)

What carrier doesn't have such a clause in their contract? I ask because I was actively trying to avoid arbitration clauses, but have given up hope... I can no longer find a credit card without one, for instance.

Re:Simple solution... (1)

Belacgod (1103921) | more than 6 years ago | (#20288819)

They're the local phone company in Chicago (thus, the DSL people who, surprise surprise, are better than the cable internet folks).

Re:Simple solution... (1)

saxoholic (992773) | more than 6 years ago | (#20288893)

>(Do people actually still use AT&T for anything other than iPhones?) Yes. Since AT&T's purchase of SBC, (basically returning themselves to their pre-trust size) and the lack of any other local phone company in the area, many people have no choice but to use AT&T as the local provider of their land-line. This problem isn't as large as it would have been a few years ago before VOIP, but a lot of people don't like VOIP

Inevitable (1)

Bullfish (858648) | more than 6 years ago | (#20288393)

I see it as a sign of the wins consumers have had in court against spurious pactices by companies. Rather than try to produce a better service or product, a number of companies have started to try to protect themselves from their customers. It also shows up in attempts through influence peddling at a legislative level to slant things in the direction of business and away from the consumer. Why is the department of homeland security involved in file-sharing at all? The companies all know that all consumers have to do is stop buying from them, so they are trying to make contracts like this standard (as someone has pointed out that comcast is also doing this for example) across industries or in a block through government.

If you consider that some of the wins against manufacturers have lead to some collossal settlements, it is no wonder they are trying anything they can, including trying to force consumers to waive their rights. I expect this to get worse, not better.

9th Circuit Reversals (3, Insightful)

Pinky3 (22411) | more than 6 years ago | (#20288573)

The 9th Circuit is the largest circuit, so you would expect more appeals from the 9th Circuit. However, the Supreme Court hears a disproportionately large fraction of appeals from the 9th Circuit. Since the Supreme Court doesn't hear appeals unless a number of Justices believe the decision may have been decided improperly, this is evidence that the Supreme Court has greater difficulty with the decisions of the 9th Circuit than any other. In the last term, 90% of appeals from the 9th Circuit were upheld (19 of 21), i.e., the 9th Circuit was reversed. The 9th Circuit is reversed 9-0 more than any other circuit when not a single Justice agrees with the 9th Circuit.

Re:9th Circuit Reversals (3, Informative)

clearreality (1116627) | more than 6 years ago | (#20289001)

Your statistics are correct, however there is some additional information that should be considered.

The 9th Circuit Court processed (the courts say "terminated") 13,424 cases in 2006. That's right, over thirteen thousand. Out of thirteen thousand, 22 cases were heard by the Supreme Court, and 19 were reversed. That is not a bad record.

Data here [uscourts.gov] (choose 9th Circuit) and here [uscourts.gov] (choose 2006).

Also, note that the appeals process is designed to overturn incorrect decisions. For an example of this, see the statistics at this [mit.edu] page. Note the percentages of cases that are reversed or vacated for all courts.

The percentage of overturned cases should be higher for the Supreme Court, as they get to decide whether to review cases or not. This means they will mainly choose cases where they think they need to correct a bad decision, clarify a law, etc. So, having a high percentage of cases overturned by the Supreme Court means that the Supreme Court is doing its job well, not that the other courts are doing a bad job.

A win for the consumer... for now. (2, Insightful)

Lumpy (12016) | more than 6 years ago | (#20288623)

Problem is that every time consumers win something like this they hire teams of lawyers to write a new contract that get's around those damned pesky legal rights that the consumers have.

Honestly Corperations need to be attacked constantly on this stuff because they go out of their way to write "contracts" that are completely designed to screw the customer. There should not be any contracts. If you cant afford that new $950.00 stulish phone then you dont get it. Sign up for service, buy the phone outright and switch every month if you want to, this allowing the Cellphone companies to act the way they do is ridiculously nasty to the consumer.

but this is america, where your laws are bought by the highest bidder, as a consumer you have no chance.

Re:A win for the consumer... for now. (1)

Renraku (518261) | more than 6 years ago | (#20288659)

The prices of cell phones are seriously inflated to corner people into the contracts.

AKA you can pay $400 for this base model cell phone, or you can get it for free, with 2 year contract.

Precedented (2, Informative)

Anonymous Coward | more than 6 years ago | (#20288681)

Reading the court's opinion, the ruling follows several other precedents. In short, Cingular attempted to prevent the filing of class actions by mandating all disputes be settled by individual arbitrations. The court ruled that this was essentially an unfair agreement in this case. Because the amounts being claimed were small--these are cell phone fees--eliminating class actions shields Cingular from responsibility for its own mistakes. It's unbalanced to force each affected individual to present their own suit, when the problem is that Cingular mislead the group.

Finally, the Federal Arbitration Act [wikipedia.org] doesn't preempt California law because the flaw is a broad contractual one--it unfairly benefits one party. The Act prevents states from limiting arbitration specifically, but subjects arbitration clauses to the state's contract laws.

Waiving rights (1)

bagsc (254194) | more than 6 years ago | (#20288873)

"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws." Amendment XIV, US Constitution

IANAL, but doesn't enforcing a contract requiring binding arbitration and barring use of the courts mean "without due process of the law"?

How does this work? (2, Insightful)

JamesRose (1062530) | more than 6 years ago | (#20288921)

Does this mean,

A) That part of it is void.
B) None of the document is binding, because part of it is void.

Re:How does this work? (1)

NessunoImp (1138559) | more than 6 years ago | (#20289043)

Having just read the opinion, the only part of the contract that is void is the part that waives the consumer's right to class action lawsuits in court, and really only in cases involving the same basic complaint against Cingular/AT&T.

And, fwiw, people who are up in arms against the idea of binding arbitration on contracts really have very little idea of what they are talking about. Arbitration generally saves people thousands upon thousands of dollars of ridiculous lawyers fees while the two sides posture in court for months before trial.

Also, people complaining about how this all stems from the "corporate control of the government" are truly confused about life. Contracts are agreements between two private citizens or entities. Did the government come to your house and force you to sign your lease or mortgage? And in this case, it's the government that is being used by the consumer to escape from his own ignorance or bad judgment when he signed the agreement.

The tin-foil-hat crowd on slash.dot is quite substantial, I'm discovering.

It's a California law issue (4, Informative)

Animats (122034) | more than 6 years ago | (#20289221)

The key to this is that California law applies. "Under California law, a contract provision is unenforceable due to unconscionability only if it is both procedurally and substantively unconscionable." The "Discover Bank test" applies: "Under this three-part inquiry, courts are required to determine: (1) whether the agreement is " 'a consumer contract of adhesion' " drafted by a party that has superior bargaining power; (2) whether the agreement occurs " 'in a setting in which disputes between the contracting parties predictably involve small amounts of damages' "; and (3) whether " 'it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.' (quoting Discover Bank, 36 Cal. 4th at 162-63)"

Arbitration clauses aren't being disallowed generally. But when, as the court puts it, "the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money", the courts can allow class action suits.

This is a routine decision based on California law; there are about a half dozen cases so far based on Discover Bank. Read the decision. [uscourts.gov]

what we need as consumers in these contracts (1)

RobertLTux (260313) | more than 6 years ago | (#20289299)

1 the ability to basically include a standard set of definitions ( define you and the company)
2 standard blocks in the contracts with a hash before them (this means that a block in the contract with a given hash means the same as any block with that hash)
3 Total banning of the practice of hiding funny clauses in deep or obscure parts of the contract (ie you agree to sell your first born in paragraph 13 section b)
4 the whole contract must be A printed on the box (or attached to the outside) B smaller than 2 pages of 18 point type (single space US letter pages)
5 if the contract is modified via changing a notice on a website then A all persons effected must be notified B All persons effected must be allowed to cancel or obtaine a CASH refund
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