OLYMPIA – Class-action waivers included in cell phone companies’ contracts with customers are invalid in Washington state because they violate the state’s Consumer Protection Act, the state Supreme Court ruled Thursday.
In a 6-3 ruling, the high court said such waivers deny “plaintiffs a forum to vindicate the consumer protections guaranteed by Washington law and effectively exculpates its drafter from liability for a broad range of wrongful conduct.”
The case before the court stemmed from a class-action lawsuit filed in King County in 2004 against Cingular Wireless. The five plaintiffs accused Cingular of overcharging customers between $1 and $40 per month in roaming and hidden charges.
In its contracts with customers, Cingular had an arbitration clause that required individual arbitration and prohibited class-action litigation or class-action arbitration.
The court wrote that requiring individual arbitration undermines the Legislature’s intent “by dramatically decreasing the possibility that they will be able to bring meritorious suits.”
“When consumer claims are small but numerous, a class-based remedy is the only effective method to vindicate the public’s rights,” the majority, lead by Justice Tom Chambers, wrote. “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.”
The court did not make a decision on the plaintiff’s claims. It reversed a King County trial court ruling that ordered individual arbitration based on the Cingular contract, and sent the case back for trial.
The majority wrote that the opinion does not prevent the parties from agreeing to class-wide arbitration.
“This is a huge blow for companies that are trying to ban class actions in their small print contracts. We all sign them,” said Doug Dunham, an attorney for the five people who filed the lawsuit. “Class actions are what keeps them honest.”
Messages left with attorneys for Cingular were not immediately returned Thursday.
AT&T issued a statement saying that their arbitration clause is “consumer friendly,” noting that if the company loses arbitration it pays the greater of amount of either the arbitration or the state’s statutory definition of a small claim.
“We continue to believe that a consumer is better off pursuing a claim under our arbitration clause, rather than pursuing a class action,” spokesman Walt Sharp said in a written statement.
The dissent said the majority “adopts a sweeping rule that without doubt invalidates thousands, if not millions, of arbitration agreements without regard to the specific terms of those agreements.”
“If there is to be state policy forbidding class action waivers in consumer agreements, it should come from our Legislature, not this court,” wrote Justice Barbara Madsen, joined by Justices James Johnson and Bobbe Bridge.
In another class-action-related ruling issued Thursday, the high court unanimously ruled in favor of a couple that filed a class-action suit against America Online Inc., claiming the Internet provider created and charged them for secondary membership accounts that they didn’t want.
A trial court had dismissed their case, based on AOL’s terms of service, which contains a clause specifying Virginia as the forum for any suits relating to the membership services. But Virginia does not allow class action suits. In its ruling, the high court affirmed the Court of Appeals, which held that the clause was unenforceable since Virginia doesn’t allow such lawsuits.