Courts Reject Tech Corporation Bans on Class Action Suits

Frosty Piss writes "Class action waivers included in cell phone companies' contracts with customers are invalid in Washington State because they violate the state's Consumer Protection Act, the state Supreme Court ruled Thursday. Five plaintiffs accused Cingular of overcharging customers between $1 and $40 per month in roaming and hidden charges. Cingular had an arbitration clause that required individual arbitration and prohibited class action litigation or class action arbitration. From the article: 'In another class action-related ruling issued Thursday, the high court unanimously ruled in favor of a couple that filed a class action suit against America Online, Inc., claiming the Internet provider created and charged them for secondary membership accounts that they didn't want.'"

Opposite decision just released today in Canada

[shadowspar]

Interestingly, the Supreme Court of Canada just released [www.cbc.ca] a decision [umontreal.ca] that cuts the opposite way. The Court upheld the "binding arbitration" clauses that many companies put in their various contracts and agreements. This essentially shields them from class actions, since disputes have to go to arbitration instead of the courts.

Since the matters involved in these cases actually took place, two provinces (Ontario and Quebec) have passed consumer protection laws (probably similar to Washington's) that protect consumers' ability to sue as a class. More jurisdictions need to step up to the plate and do the same.

Re:Do class action suits ever benefit the consumer

[pintpusher]

On the one hand, class actions give the consumers the opportunity to build up enough clout to get noticed and possibly get the corp to change its behavior. Plaintiffs get added to the suit more or less automatically (you've seen those mailers that notify you that you're involved...). But the consumer rarely (in my experience) gets any real remuneration as a result. In this particular Cingular case, the plaintiffs could have added just about anybody who used their service during the specified period resulting in many thousands of plaintiffs in the class action. Cingular would probably have to pay out a few dollars per plaintiff in the form of future credits or something like that, plus legal fees. Of course, it may also allow them to weasel their way out of paying those who are no longer customers and various other bits of chicanery. But, by the nature of the class action, the handful of initial plaintiffs are able to leverage themselves into a position of reasonably significant power and actually get something done. (note that I haven't read the Cingular case, and my inferences above are based on my past experiences with class actions).

On the other hand (bet you forgot about that first hand up there!) according the TFA, Cingular is willing to pay out the state's defined small-claims amount _or more_ in individual arbitration. That's $4,000 in Washington state. But they're banking on the idea that only a handful of individuals would bother. However, if the customers were actually pro-active about it and all those who were eligible for the class action took the initiative and entered arbitration for something that was provably wrong on the part of the corp, then the individual plaintiffs stand to gain significantly more on an individual basis while the corpp stand to lose significantly more.

I would like to see some consumer advocacy group take a different approach in cases like these. I'd like to see them run a couple test arbitrations from their pool of original plaintiffs. If they are successful, use the information gathered as a result of this to assist additional plaintiffs in pursuing the same arbitration. They could put together packages of "how-to arbitrate the cingular over-charging thing" and send them to anyone who would have been eligible for the class action in the first place. Then you'd possibly see (provided the rewards were high enough) a significant number of well-armed plaintiffs entering arbitration at the same time. THat would likely have a real affect on a large corp. Nothing like having the legal dept suddenly swamped with massive number of arbitrations and then finding lots of well informed and prepared plaintiffs across the table from them. They may find themselves in a situation where they are _asking_ for a class action in violation of their own contract. That would be nice.

Re:Taking advantage of the non-tech savvy?

[cecille]

Not even the sales people understand. I just signed on to a plan with Bell. They had recently re-done their plans and now they were something like "15 dollars less", but now include a "network fee" of...you guessed it...round about the amount the plan decreased by in the first place. I could not for the life of me get the sales person to actually explain what the hell I was paying for in the contract fee if it wasn't actually to use their network for my cell service. IE...if I don't pay the "network fee" then I don't have cell service at all. The contract fee is therefore for nothing.

Re:They do, by making companies think twice

[Just Some Guy]

Consequently, limiting class-action suits, along with court-awarded damages and restitution is a horrible idea; corporations would be able to literally kill thousands and still turn a profit!

How about my idea: punitive damages go to the federal government's general fund. That way, you can still punish corporations that don't understand motivations other than financial penalties, but remove all profit incentive from the equation. Would this have any drawbacks?

Re:Just a reminder...

[pintpusher]

The better thing to remember is: It's a contract, and you can negotiate it before you sign it.

I had an interesting adventure with a major corp recently. I was being courted by a major food service vendor who has recently moved into this area. I'm a pretty small fish -- maybe $1,000 a week in wholesale grocery supplies, but their sales rep has a couple major accounts on either side of me and it was easy for him to stop in. So we went through the whole deal of pricing everything out and determined that we could save a reasonable amount by using this company.

So out comes the "application". I've been in the restaurant business for a few years now and have some idea of what standard practice is... anyway, I decided I didn't want credit. I wanted to just purchase COD. It's really easier in the long run in many ways -- less book-keeping, easier to budget money, instant credit, no messing with chargebacks or mystery invoices etc etc etc. So I start reading through the various agreements they expect me to sign. I looked at the salesman and said "you know I want COD only?" He agreed it was ridiculous. So I told him I'd mark it up over the next few days and then he could pick it up.

So there were three agreements. One was a personal guarantee, which I never sign, ever. So a big line through that one. The second was a statement about my legal right to purchase wholesale in the state (no biggie, standard stuff and a tax id number). The third was essentially a credit app with some extra stuff thrown in relating to how to deal with bad product and so forth. So I start lining through stuff that doesn't apply to COD, stuff that puts all of my company's assets on the line for groceries. I rewrite a couple of other bits to make them more palatable to me, like fixing the court of jurisdiction to be my state, not theirs; changing the part about 3 days written notice by certified return receipt if we get bad product; etc etc. When it was all done, I'd probably struck a good 60% of the contract and rewritten another 20%, and then I signed it.

About two weeks go by and we hear from the salesman (you should have seen the look on his face when he picked the thing up). The credit department (I don't want credit) had denied my application, not because of all the stuff in the contract that I'd marked up, but because I hadn't signed the personal guarantee. go figure. So all I can assume is they know their contract is onerous and were willing to let it go so long as I put all my personal crap on the line for a COD account. needless to say, I'm still using my old provider who loves me and gets paid every week for seven years...

I think I'll write a "service provider agreement" and make anyone who wants to provide me a service sign it.... hmmm... that might be fun ;)

"Let the Market Decide!"

[Evilest Doer]

Actions like this show that the Great Holy Infallible Markets (TM) usually decide that eliminating your rights and stepping all over you generate the most profits. Especially if they can collude and set "industry standard" business practices. In fact, the few consumer protection laws that do exist are one of the few reasons that we really aren't a Corporate Dictatorship yet.