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Court Rules Lawsuit Against AT&T/Cingular Can Proceed

Customers allege poor service during buyout

By Martin H. Bosworth and Jon Hood
ConsumerAffars.com

May 29, 2009

A U.S. District Court judge in Washington ruled that a class action suit filed by former Cingular customers against the company is valid. The suit was brought over charges that as Cingular bought AT&T Wireless in 2004, it immediately dismantled the network, forcing customers to pay to switch over to the new network.

The plaintiffs alleged that in order to leave Cingular (which later rebranded itself as AT&T), they had to pay a steep termination fee of $175, and that they had to pay "upgrade" fees for new phones that functioned on the AT&T network.

The class is being led by MaryGrace Coneff of California. Thirteen other lead plaintiffs hail from Washington, Arizona, Florida, Virginia, Alabama, and New Jersey. The plaintiffs have all either paid transfer fees and bought new phones, paid early termination fees, or suffered poor cell service as a result of AT&T's conduct. The suit seeks reimbursement of charges and additional damages.

AT&T had pushed to dismiss the suit on grounds that their service contracts mandated that all disagreements with the company be handled in private arbitration. But Judge Ricardo Martinez disagreed, striking down that clause as "unconscionable" and a violation of consumer rights under Washington state law.

"[T]he actual award to the individuals that comprise a class is only one of the principal aims of a class action lawsuit," Judge Martinez wrote. "Class action lawsuits are necessary and effective avenues for consumers whose economic positions vis-à-vis their corporate opponents would not allow them to proceed on a case-by-case basis."

AT&T claimed its contracts were built to be friendly to customers, citing its willingness to pay for all arbitration costs and a potential award of $5,000 if any arbitration is found in the customer's favor. But Judge Martinez cited testimony from consumer lawyers who said the sheer cost and time involved in pursuing individual claims against a company the size of AT&T's would be unethical and unfair to the customer.

Martinez insisted that "the Court will not condone such a broad and exculpatory practice."

"This is a major victory for AT&T customers all over the nation,” said Harvey Rosenfield, founder of California-based Consumer Watchdog. “The company broke its promise to its customers, making them pay millions of dollars more than they should have. Now we can move forward to get people their money back."

AT&T spokesman Fletcher Cook said the company disagreed with the court's decision, and was planning its response.

Although corporations claim arbitration is a fair way to avoid the costs of settling disputes in court, a number of consumer organizations oppose the "forced arbitration" clauses hidden in a variety of business contracts. The clauses are anything but consumer-friendly: they are usually shoved into the middle of dozens of paragraphs of fine print, and force the consumer to take the contract as it is or abandon it altogether.

Additionally, a recent study by Public Citizen found that an arbitration tribunal hearing credit card claims ruled against consumers 94 percent of the time. The study also revealed the close relationship that corporations and tribunal associations share: one arbitrator heard 68 cases in one day, and ruled in favor of the corporation every time.

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