Lawsuit Against AT & T

In March of 2006, two customers filed a class action lawsuit against AT&T which eventually led to AT&T compelling arbitration as their contract waives their right to a class action lawsuit. After passing through a regional court, the case made its way to the supreme court. The majority of the justices ruled in favor of AT&T in a 5-4 vote. The case was characterized by a close split in the court which draws attention to each sides careful reasoning. Although the justices ruled in favor of AT&T, careful reasoning and interpretation of the Federal Arbitration Act reveal that the court should not have upheld AT&T’s right to waive class action rights. Moreover, the current ruling presents a serious obstacle to consumers trying to receive a fair

AT&T had supposedly offered free phones to anyone that signed a contract with the company, however, AT&T charged new customers a sales tax on the retail value of each “free” phone. The customers argued that the company’s promotion was fraudulent because they were charged for what should have been a “free” phone. AT&T, in turn, disputed the lawsuit because there was an arbitration clause inside of the contract meaning that they could prevent a class action lawsuit and instead force arbitration, a cheaper method of settling individual customer disputes. The controversy surrounding the case comes from the fact that AT&T limits the customers right to limit customer disputes to arbitration, waiving the customer’s right to force a class action lawsuit, essentially taking away a tool that has been used to achieve justice in previous

More specifically, the minority found that both documents shared similar language and more importantly, a similar intention. The FAA states that arbitration contracts are valid and just except when “such grounds as exist at law or in equity for the revocation of any contract”. Correspondingly, the California law in question states that “class action waivers in any contract are unenforceable”. Essentially, the minority argued that the FAA actually gives the power to the state prohibit arbitration contracts. Additionally, the justices noted a previous case, Discover Bank v. Superior Ct., in which class action waivers were unconstitutional when contracts are unconscionable—unfair or in favor of the superior power cheating consumers of money—and as a result, the waivers cannot be imposed. The justices used this reasoning to extend their beliefs, however, they were not successful in stripping AT&T from the right to waive class action