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Appeals Court Shreds Out AT&T Arbitration Clause

Finds cell phone contracts that deny consumers the right to sue "unconscionable"

In a major victory for consumers, the 9th U.S Circuit Court of Appeals in San Francisco has allowed a class action lawsuit against AT&Tto proceed, labeling restrictions in the company's contracts "unconscionable."

The court threw out the provision in Cingular/AT&T contracts that prohibits consumers from joining in class action suits, saying the waiver is unenforceable under California law.

The ruling is the latest in a series of federal court decisions that have held the class action waiver to be unenforceable.

The class action waivers -- also known as "forced arbitration clauses" -- are despised by consumer advocates who say their only purpose is to render consumers powerless to defend themselves against huge corporations.

Or as blogger Rob Beschizza put it, the contracts "represent, in black and white, everything that's rotten about the relationship between company and consumer."

"These are often designed to deprive the buyer of as many rights as possible, and the argument over their legality goes on and on. This was one such example, seeking to replace the legal system with a corporate Monkey Court," Beschizza said.

The ruling gives the go-ahead to a class action consumer suit claiming Cingular Wireless service deteriorated after the mobile phone carrier was fully acquired by AT&T Inc. in 2004.

"Hopefully the trend will continue uninterrupted in the courts of other states, said William Weinstein, lead plaintiffs attorney in the case.

The 9th Circuit said its decision is consistent with at least 10 other cases that have come before federal courts in the state. Several of them have involved AT&T/Cingular Wireless.

A similar suit is currently pending in Washington state.

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