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Cingular Fails To Stop Three Class Actions From Proceeding In California State Court

The Los Angeles Times recently reported that the efforts of Cingular Wireless to stop three class actions from proceeding in California state court came to an end on June 5, 2006, when the United States Supreme Court refused to grant certiorari in cases involving California court rulings that rejected class action restrictions in arbitration agreements. The rulings permitted plaintiffs to “bypass” arbitration. According to the Los Angeles Times, “The central questions was how much room the federal law [Federal Arbitration Act] leave for states to apply neutral rules such as California’s prohibition on ‘unconscionable’ contracts. The California Supreme Court invoked that doctrine in 2005 to bar waivers of class-action rights in disputes that ‘predictably involve small amounts of damages’ and large numbers of customers.” See Discover Bank v. Superior Court, 36 Cal.4th 148, 162 (Cal. 2005).

The U.S. Supreme Court’s decision in this case is not surprising in light of the history of this class action. Plaintiffs’ attorneys argued in the California trial court that the class action ban in the arbitration contracts were unconscionable and invalid. On May 18, 2005, the California Court of Appeal for the First District, Division 5, reversed, concluding “that under the facts in the present case the contractual ban on class-wide arbitration is not unduly one-sided, harsh, or in violation of public policy.” Parrish v. Cingular Wireless, LLC, 28 Cal.Rptr.3d 802, 805 (Cal.App. 2005). The California Supreme Court granted review and transferred the matter back to the Court of Appeal for reconsideration in light of its then-recent opinion in Discover Bank. On remand, the California appellate court agreed with plaintiffs’ attorneys, concluding “that the arbitration clause at issue here prohibiting class-wide arbitration is unconscionable and unenforceable.” Parrish v. Cingular Wireless, LLC, 2005 WL 2420719 (Cal.App. 2005), but the opinion was not published. It is exceptionally difficult to persuade the California Supreme Court or the United States Supreme Court to review an appellate decision that is not published.

Nonetheless, the petition generated understandable interest: Though it denied review, the U.S. Supreme Court permitted the Pacific Legal Foundation, the American Bankers Association, the U.S. Chamber of Commerce, and Amazon.com leave to file amici curiae briefs. The scope of FAA is still the subject of considerable debate; Circuit Courts do not agree on whether the right to pursue class actions may be waived as part of an arbitration agreement and, if so, under what circumstances class action waivers are enforceable. While the U. S. Supreme Court refused to hear Cingular’s case, it is only a matter of time before the High Court will accept a case and address these thorny questions.

The article, “High Court Rebuffs Appeal By Cingular,” may be found in the Business Section of the June 6, 2006, Los Angeles Times.