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Arbitration Clause Violated State Law

ATT Arbitration System

SAN FRANCISCO, CA -- January 25, 2002 -- A mandatory arbitration clause that AT&T included in consumer telephone agreements was declared "illegal and unconscionable" by the U.S. District Court, Northern District of California (Darcy Ting et al. v. AT&T). Considered a violation of California's Consumer Legal Remedies and Unfair Competition Law, the provision effectively barred customers from joining class-action lawsuits.

The AT&T agreements also unfairly attempted to limit the company's damages and to keep the arbitration process secret. "It is not just that AT&T wants to litigate in the forum of its choice--arbitration," Judge Bernard Zimmerman wrote, "It is that AT&T wants to make it very difficult for anyone to effectively vindicate her rights, even in that forum."

The AT&T decision comes on the heels of a U.S. Supreme Court ruling that allowed the federal Equal Employment Opportunity Commission to sue on behalf of a disabled worker even though he had previously agreed to arbitration of workplace disputes. (See discussion of EEOC v. Waffle House). Consumer groups are hopeful that the tide has turned against forced arbitration, which is common today in service agreements, employment contracts, credit card agreements, automobile purchases, leasing contracts, and health care contracts. They point out that the arbitration process is costly, discourages claims, and often favors business as opposed to consumers.

Consumer Action and Trial Lawyers for Public Justice (TLPJ) filed the AT&T action on behalf of telephone customers. The law firm of Brayton Purcell supports the principles espoused by TLPJ in this case. Alan Brayton, the founding and senior partner of the firm, sits on TLPJ's Board of Governors and Executive Committee.

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