Cingular Class Action Defense Case-Stern v. Cingular Wireless: Arbitration Provision Waiving Class Action Remedy Unenforceable California Federal Court Holds
California Federal District Court Holds Arbitration Clause Requiring Arbitration at Customers’ Expense and Waiving Right to Class Action Device to be Unconscionable and Unenforceable
In November 2004, plaintiff signed a service agreement with AT&T Wireless, and received a booklet entitled “Important Information and Service Agreement” that contained in part an arbitration clause governed by the Federal Arbitration Act (FAA) and a class action waiver. Cingular Wireless thereafter acquired AT&T Wireless; its customers also signed service agreements that contained arbitration clauses, but Cingular’s agreement provided that the company would pay the cost of the arbitration unless the customer’s action is frivolous, and that the company would pay the customer’s attorney fees if the arbitrator awarded the amount the customer demanded or more. In December 2005, plaintiff filed a class action lawsuit in California federal court against AT&T and Cingular for violations of the Federal Communications Act, declaratory relief, breach of contract, violations of California’s unfair competition law (UCL), and violations of California’s Consumers Legal Remedies Act (CLRA), based on the allegation that defendants charged customers for services that the customers had not authorized, totaling approximately $9 per month. Stern v. Cingular Wireless Corp., 453 F.Supp.2d 1138, 1141-43 and 1149 (C.D. Cal. July 28, 2006). Defense attorneys moved to compel arbitration and stay the litigation; plaintiff’s lawyer argued that the arbitration clause was unconscionable and unenforceable. The district court denied the defense motion, concluding that the class action waiver was unconscionable.