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Mandatory Arbitration Cannot Be Substituted for Court Remedy

AT&T's Mandatory Arbitration System Illegal

WASHINGTON, DC -- October 17, 2003 -- California AT&T telephone customers may not be forced to submit their claims to arbitration rather than to the courts, now that the U.S. Supreme Court has declined to hear an appeal by the company. The Court let stand a ruling making illegal those portions of AT&T's contracts that require mandatory arbitration rather than court remedies (Darcy Ting et al. v. AT&T, U.S. Court of Appeals for the Ninth Circuit). The AT&T contracts, which effect 7 million California customers, violated the state's Consumer Legal Remedies Act, according to the Appeals Court.

By refusing to review the Court of Appeals decision, the U.S. Supreme Court in effect agreed that these AT&T contract provisions also unfairly harm telephone consumers:

  • a bar on class actions;
  • a fee scheme that requires customers to split the arbitrator's fees with AT&T;
  • secrecy rules that require customers to keep quiet about their disputes with AT&T; and
  • liability protection for willful misconduct by AT&T.

"The Supreme Court's refusal to overturn a major victory for phone customers shows that corporations like AT&T cannot enforce abusive arbitration clauses that make it impossible for consumers to enforce their rights under consumer protection laws," said Paul Bland, Jr., an attorney for the plaintiffs (Press Release, October 6, 2003). "AT&T cannot evade laws that protect consumers by hiding in the fine print of its contracts an unfair and one-sided arbitration clause that most long distance customers won't read or can't understand."

Consumer Action and Trial Lawyers for Public Justice (TLPJ) filed the original 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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