AT&T Arbitration Clause Ruled Unconscionable 261
Tech.Luver writes to tell us the Consumerist is reporting that a small clause in AT&T contracts has been ruled "unconscionable" by the 9th circuit court of appeals. The clause in question stated that if you use AT&T service you surrender your right to class action lawsuits and instead have to participate in mandatory binding arbitration.
Article or link? (Score:4, Insightful)
Re:Article or link? (Score:5, Informative)
It was edited out of the Firehose entry (by mistake, I assume)
Re:Article or link? (Score:5, Funny)
Re:Article or link? (Score:5, Funny)
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http://consumerist.com/consumer/victories/cingula
Though I agree it is poor form not including one in the article.
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But, come on "editors". I know it's Saturday but let's do some simple stuff at least.
Re:Article or link? (Score:5, Funny)
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Re:Article or link? (Score:5, Funny)
Old news (Score:4, Insightful)
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Well, this is nothing new. Most "contracts" are just waiving the consumer's rights. On the other hand, I'm glad somebody finally called them on it, since this is so blatantly obvious.
Actually, 100% of contracts are a waiver of some rights by one or both parties. That's what a contract is: an exchange of negotiated consideration ("consideration" here is a legal term, meaning either detriment or benefit to one or both parties, depending on which jurisdiction you're in).
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Serious effort needs to be made to ensure that those companies that attempt to implement clauses in contracts that infringe the law and the rights people should face criminal penalties, especially when the clauses are in
A few other examples (Score:3, Informative)
"YOu agree not to sue us" certainly pushes it. "NO WARRANTY EXPRESSED OR IMPLIED" is probably less of a problem in most jurisdictions.
A lot of this is contextual. Not all rights can be waived in contract, but I would say that most rights could be.
Re:A few other examples (Score:5, Insightful)
I assume we're talking about the situation only in the US here. This problems has been addressed, reasonably successfully, in various other jurisdictions.
For example, in the UK we have a legal requirement that a shop advertising a typical returns policy also has to state clearly that shoppers' statutory rights are not affected. That and things like the Sale of Goods Act and Distance Selling Regulations guarantee shoppers some basic protections regardless of anything a vendor might like to say at sale time.
From a different angle, we have the Unfair Contract Terms Act, which basically says that certain types of contractual clause (things like disclaiming liability even in the case of obvious negligence) are not enforceable.
As a third approach, there is also the point that you have to go into a contract with both sides understanding what's happening and getting something out of it. If you have a contract that is basically a standard issue piece of legalese prepared by the legal department of the big guy, and not effectively negotiable by the little guy, then the courts can strike parts of it if they determine that the imbalance in bargaining power meant the basic properties of a binding contract weren't met.
So through a combination of requiring that those being given information about Ts and Cs also be told that they have other rights, and statute law that renders certain kinds of gross disclaimer explicitly impotent, and the ability for courts to cancel out parts of a contract that weren't negotiated on an equal basis, we have a reasonable degree of protection against the sort of thing you're talking about.
I don't know what the situation is here regarding binding arbitration, though. I've heard of it being used, but from an ethical perspective I tend to think that such terms should automatically be considered unfair in law. We have a legal system to resolve our differences, and allowing a contract to specify that one party may not avail themselves of that system without jumping through hoops is just undermining the legal system. The only reason someone could possibly have for that is if they wanted to pull a fast one that the legal system would not let them get away with. I do appreciate that for two large organisations with effectively equal bargaining power this might not be the case, but I think with things like this it's always best to err on the side of caution.
Re:Old news (Score:4, Interesting)
You do have the right to give up rights, but the right to sue is generally not one of the rights you can give up, provided that the other party did something bad enough. The line is, however, very fuzzy.
The standard statement "by participating in this program, you agree not to sue us" is called an exculpatory clause, and it IS binding under most circumstances.
I would not go so far as to say "most circumstances". It is binding if it is reasonable. Generally, "reasonable" includes clauses like "you agree not to sue us for anything out of our control", a.k.a. the "acts of God" clause. It also includes clauses that protect companies from liability caused in part by the actions of the other party---if you twist your ankle while skiing, you can't sue the ski lodge for renting you the skis, for example. It is sometimes upheld in cases of negligence on the part of the protected party, but is not generally upheld in cases of gross negligence, and is almost never held up in cases of actual intentional harm caused by the protected party.
For example, as long as AT&T runs their business legitimately, that clause is probably okay. The second they overcharge somebody for service, though, the clause is likely out the window because AT&T (or another agent acting on their behalf) took action that directly resulted in harm to the other party. Thus, if it can be proven that AT&T's direct actions caused harm, no contract will cover their backsides. This is also generally the case for gross negligence (failing to exercise even the least amount of care in preventing harm to the other party).
The primary purpose of these clauses isn't really to protect the company, as a company probably would probably not lose a case for most of the types of harm that these clauses can legitimately address. The primary purpose is to make the layman reader of the contract believe that he/she has no case, and thus prevent that person from ever contacting a lawyer to find out that he/she actually does.
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It's not just hypothetically true; it's tautologically true.
I'm not sure what point you're making, but any 'contract' agreed to by only one party is just toilet paper. Now, if you're disputing the threshold for agreement, sure, that's a valid legal concern (and has been as far as the twentieth century has been concerned), but your point doesn't provide a unique perspective.
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all fine print (Score:5, Informative)
Seem to me like that should apply to all EULAS, click-through terms of service, notice of terms after the fact, etc. No person should be expected to wade through such a contract for such trifling matters as purchasing a telephone, installing some software, etc.
Re:all fine print (Score:5, Interesting)
With AT&T, you're buying a service; it amounts to a work for hire, in essence. As such, they can require you to agree to certain terms, but not ones which would restrict you from certain rights, e.g., if they work with the government to subert your constitutional rights (e.g., engaged in wiretapping without a warrant), engage in fraud and charge you for services you do not receive, or falsely advertise their services (advertising them as unlimited), and so forth, it is unreasonable for a court to accept that waiver of such rights is valid or even possible.
First Sale Doctrine & Software (Score:4, Informative)
Well, where software is concerned, EULAs are moot. You see the EULA after you make the purchase and open the package. Open the package, the store will refuse to accept it. Your right of first sale (it's a commodity good, NOT a work for hire) allows you to use it for its intended purpose without restriction. You are still of course bound by patents and copyrights, but not to use the package for its advertised purpose, or even to resell it to someone else when you're finished with it.
Not that I disagree that's how it ought to be, but last I checked/heard/read the US Appeals courts were still thoroughly confused on the point of whether the First Sale Doctrine applies to software licensed for purchase. Any lawyers in the house who know one way or the other? Have there been any definitive rulings, esp. Supreme court rulings on the issue?
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I don't think anyone's ever taken a case on on that point. They're all interested in trying to argue that the EULA's not valid, or that their agreement to it should be set aside. I don't recall anyone ever arguing that the EULA's irrelevant because they never agreed to it and don't have to agree to it.
Were I cynical, I'd suggest that this might be because it'd turn it from a sexy First Amendment case into a bog-standard Uniform Commercial Code contract case that wouldn't make for nearly as good a headline
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"Work for hire" is a concept that only applies to copyright law; it makes no sense to talk about it in the context of a service.
These basic errors lead me to question the rest of your analysis as well.
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Now, for a phone directory? It's factual information, and not subject to copyright. Were the software a work for hire I
Comment removed (Score:5, Interesting)
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But even more than I hate EULAs, I hate sweeping and incorrect legal analysis by armchair lawyers.
"Software EULAs have no legal weight" is demonstrably false: there are cases where they have been upheld. The question is more complex than that. That's the only statement I was trying to make.
As an aside, I see several other cases described on this page [jonesday.com] that apparently have also upheld the enforceability of EULAs. I
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Some providers have a "service" wherein if you use a certain amount of a certain a-la-carte service (or in some cases, ANY of that service) they'll automatically kick you into the next highest service plan, and charge you
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A class-action lawsuit usually happens because a company is being grossly negligent, not just screwing over a person here or a person there.
Personally I think most of the clogging going on in the court system has nothing to do with frivilous lawsuits, it has to do more with the lack of streamlining in the judiciary
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Re:all fine print (Score:5, Insightful)
No, binding arbitration is NOT of benefit to both sides of this particular contract, nor of many similar contracts.
For most consumer services, such as those offered by AT&T, the amount of any dispute is likely to be too small to make it worth anybody's while to go to arbitration. Yes, it would cost even more to go to court, but the fact is that the consumer isn't going to recover enough to cover the costs of arbitration, any more than she would recover the costs of litigation.
Therefore, even if a consumer can afford it, the only way she is going to bring up such a dispute is as a matter of principle... and there's not even any incentive to do THAT, because the point of bringing up a matter of principle is to punish somebody for wrongdoing, and the amount recovered by arbitrating a single dispute would mean nothing to a huge player like AT&T unless many, many people went to arbitration, which everybody knows they won't... especially since AT&T's costs for arbitrating thousands of nearly identical cases are far lower than consumers' costs for arbitrating those same cases one-by-one.
Forcing everything to be arbitrated on a case-by-case basis would mean that the cost to consumers of recovering whatever they've been screwed out of was hundreds or thousands of times the amount recovered. Which means that nobody would actually get compensated, nor would AT&T (or whoever) ever suffer enough costs to deter bad behavior.
That's why there are class actions... they're there so that the larger party in this sort of situation can't just change the rules at will, ignore the other terms of the contract, screw over the other parties, and suffer no consequences whatsoever.
So, basically, to be opposed in principle to class actions is to say that people screwed over by large corporations should get no recourse at all. Maybe the corporation has to worry about its reputation, but it will never be FORCED by law to live up to its contracts the way you or I would be.
That is unconscionable. It puts large players above the law, it is basically a return to feudalism, and it is repugnant to any decent person.
Fuck you, you corporate cocksmoker.
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Re:all fine print (Score:5, Insightful)
Therefore in the arbitration system, there is an incentive for arbitrators to rule against individuals and in favor of big corporations.
Re:all fine print (Score:4, Interesting)
Speaking as an attorney,
Don't be silly. The plaintiff's each get $10-$100 in coupons (for which their lawyers get 10x that).
You misspelled "ambulance chaser."
Please understand that attorney advertising was an ethical violation in all 50 states until the bizarre Supreme Court ruling that it was an issue of "commercial free speech," and understand that attorneys are overwhelmingly opposed to it and embarrassed by the ambulance chasers who have destroyed our profession.
hawk, esq.
Re:all fine print (Score:4, Interesting)
The ambulance chasers are only one symptom of the omnipresent rot in the legal profession. That your industry has escaped much needed regulation and oversight is a testament to just how much undue power and influence lawyers have on our society, laws and governments.
In a country where anyone can, without qualification, defend themselves in court, the entire concept of a bar associations is a joke to begin with. They exist for one purpose; to line the pockets of their members. How many US bar associations really protested against Guantanamo? How many stand against illegal wiretapping? Shouldn't the legal profession be at the forefront in defending the attack on legal rights. Instead they're more likely to be found in positions of power, leading that same attack.
Your profession is pretty much rotten to the core. Personally, I would just get rid of bar associations and the like and subject the whole lot of you to the harsh winds of the free market and watch your tear yourselves apart. But that's never going to happen is it? You're the ones that end up drafting all the laws after all.
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That is an interesting proposition (and sort of scary, I would hate to be stuck with a lawyer who was a good salesman but had no understanding of the law). Would you advocate the same idea for the medical profession?
The free market is good for a lot of things, but regulation can be an important component just because consumers do no
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I'm skeptical. Along with reducing frivolous lawsuits, it reduces legitimate lawsuits. How is it so clear that the benefits outweigh that cost?
Re:all fine print (Score:5, Insightful)
Allowing monopolists to force consumers to give up their rights is obviously wrong and subverts centuries of jurisprudence.
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So, if you have a dispute with Microsoft, it's chairs at twenty paces?
[shudder]
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It certainly is true they have more cases, but everybody understands that so they use this fascinating trick called "percentage" when comparing. The Supreme Court decides which cases they want to review, and of these, the 9th Circuit's cases are overturned 30% of the time, which is
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Just last year in Buckeye Check Cashing, Inc. v. Cardegna (US Supreme Court 02/21/2006), SCOTUS ruled (7-1) that it is for an arbitrator to decide whether or not a contract containing an arbitration clause is illegal. In this case Cardegna claimed that Buckeye violated Florida usary laws with a high interest loan. The Florida Supreme Court ruled the arbitration clause was unenforceable because the whole
Re:all fine print (Score:5, Interesting)
Considering this is AT&T we're talking about, I'm sure this is also a win for civil liberties groups looking to actually take AT&T to court for their warrantless wiretaps.
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And while you are at it, could you provide some statistics please about just how much they are clogging the courts?
Isn't this is most or all credit card agreements? (Score:5, Interesting)
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Out of hand (Score:5, Interesting)
I keep asking myself, what the f$*k is going on in America lately?
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The old joke about Russia was "we pretend to work, they pretend to pay us". Here, it's, "we pretend to agree to it, they pretend it will be enforced."
I firs
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You've put the foxes in charge of the henhouses, that's what.
Re:Out of hand (Score:5, Interesting)
Enclose a photocopy of the postcard with your bill and without a check and send it in with a note.
"Please contact me regarding the rejection of your new rate offer, my contract and payment of this bill."
See what happens.
Where's the FTC? (Score:5, Interesting)
This won't change until campaign contributions are limited to registered voters.
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But "soft money" is another matter altogether. I can go to Staples and print an unlimited amount of promotional material that I can then distribute. Did I support the campaign? Yes. Did I do it by sending them money? No. The only way to regulate this kind of spending is to forbid corporations to do so, since we mere people have the first amendment protecting our right to do the same.
Regulating "campaign finance" without also going afte
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In short, this is exactly what you are looking for in terms of curtailing abuse by corporations.
The system is more than the President and Congress, it is also the Judiciary, and the courts are supposed
Comcast is doing this too (Score:4, Informative)
...and in Canada (Score:5, Informative)
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Unconscienable == invalid & unenforceable (Score:4, Informative)
Perhaps this is in connection with unequal power consumer level contracts. But then I would suggest that some PUC isn't doing it's job. And if it isn't because the Legislature hasn't seen fit to include DSL as a regulated service, then I'm not sure the courts can or should interfere.
Please note I'm not criticisning the 9th's decision. They might well be correct: it is the height of absurdity for a court to respect any contested provisions to bypass it. Courts are to resolve disputes fairly. Provisions otherwise are contemptuous.
Re:Unconscienable == invalid & unenforceable (Score:5, Informative)
They basically state that the contact in question for this type of case must be a contract of adhesion, and they clearly define what that means. A contract of adhesion is defined as a contract between a party of greater bargaining power and a party of weaker power (ie, AT&T and a wireless subscriber), and the contract must be standardized for use with all equivalent parties of weaker power (ie, all wireless subscribers), and the presentation of that contract must be "take it or leave it" (ie, no chance to negotiate).
It is good to note that the ability to walk away from a contract does not change that the contract is a contract of adhesion, even if you accept that contract instead of walking away.
The court also adequately addresses the issue of marketplace alternatives, specifically stating that even if meaningful alternative services exist (ie, Verizon, Sprint, T-Mobile, etc), that this does not change the fact that the contract may be procedurally unconsionable (a "contract of adhesion" is also stated as being automatically procedurally unconsionable to some degree).
Note, for a contract or clause of a contract to be unenforceable, it has to be both substantively and procedurally unconsionable to enough of a degree as to be ruled unenforceable. Please read the court's decision and other documents to learn more about legal unconsionability.
On the issue of arbitration, the court seems to treat arbitration with respect, and cites several cases where arbitration was used and also lists some favorable reasons for people and companies to use arbitration. This is clearly not a case of the court dismissing arbitration -- this is a case where the members of the class who want to sue AT&T would be at a severe disadvantage if they were required to use individual arbitration. Note, AT&T stated that they did not want to use class arbitration to resolve the issue, they specifically wanted individual arbitration. The court actually presents opinions supporting class arbitration at one point in the decision.
This decision makes sense, and shows that terms that are included in contracts of adhesion are vulnerable to being ruled unenforceable. This is good news from the consumer standpoint, and does not weaken arbitration or consumer's rights in any way I can see.
I am not a lawyer. I just RTFA.
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Now the 9th has a hard-earned reputation as avant-garde [nutjobs].
Correction: people have unfairly and incorrectly tarred them with a reputation as avant-garde [nutjobs].
http://www.volokh.com/posts/1184633750.shtml [volokh.com]
let's look at how often the Supreme Court decides that the 9th got it wrong. Last term, the Supreme Court's reversal rate for 9th Circuit cases was 90.5 percent. Yikes--that's huge! But wait, for on-the-merits cases, the Supremes reversed the 3rd and 5th Circuits all of the time last term. Cases from state appellate courts fared no better: They also had a 100 percent reversal rate. Overall, this past term the Supreme Court reversed 75.3 percent of the cases they considered on their merits. The pattern holds true for the 2004 and 2005 terms as well, when the Supremes had overall reversal rates of 76.8 percent and 75.6 percent, respectively. For those years, the 9th was reversed 84 percent and 88.9 percent of the time, or about a case or two more each year than it would have been if it had conformed to the reversal rate of the other circuits. How do one or two cases a year add up to a court run amuck?
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Now the 9th has a hard-earned reputation as avant-garde [nutjobs]. This is an astounding ruling. The binding arbitartion clause is pure boilerplate found in many, many contracts. For the 9th to toss it out changes many contracts.
So? That's a good thing. These binding arbitration clauses are very bad. They completely bypass customers' rights to take the company to court. Especially since these arbitrators receive their business from the big companies, and therefore probably see things their way most of the time.
Perhaps this is in connection with unequal power consumer level contracts.
A normal contract is a tit-for-tat agreement. EULAs make demands of the customer while offering only the promise not to sue for using the product they bought legally. By definition, an EULA is not a fair contrac
Inevitable (Score:2)
9th Circuit Reversals (Score:4, Insightful)
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The 9th Circuit Court processed (the courts say "terminated") 13,424 cases in 2006. That's right, over thirteen thousand. Out of thirteen thousand, 22 cases were heard by the Supreme Court, and 19 were reversed. That is not a bad record.
Data here [uscourts.gov] (choose 9th Circuit) and here [uscourts.gov] (choose 2006).
Also, note that the appeals process is designed to overturn incorrect decisions. For an example of this, see th
A win for the consumer... for now. (Score:3, Insightful)
Honestly Corperations need to be attacked constantly on this stuff because they go out of their way to write "contracts" that are completely designed to screw the customer. There should not be any contracts. If you cant afford that new $950.00 stulish phone then you dont get it. Sign up for service, buy the phone outright and switch every month if you want to, this allowing the Cellphone companies to act the way they do is ridiculously nasty to the consumer.
but this is america, where your laws are bought by the highest bidder, as a consumer you have no chance.
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AKA you can pay $400 for this base model cell phone, or you can get it for free, with 2 year contract.
Precedented (Score:2, Informative)
Waiving rights (Score:2)
IANAL, but doesn't enforcing a contract requiring binding arbitration and barring use of the courts mean "without due process of the law"?
How does this work? (Score:2, Insightful)
A) That part of it is void.
B) None of the document is binding, because part of it is void.
It's a California law issue (Score:5, Informative)
The key to this is that California law applies. "Under California law, a contract provision is unenforceable due to unconscionability only if it is both procedurally and substantively unconscionable." The "Discover Bank test" applies: "Under this three-part inquiry, courts are required to determine: (1) whether the agreement is " 'a consumer contract of adhesion' " drafted by a party that has superior bargaining power; (2) whether the agreement occurs " 'in a setting in which disputes between the contracting parties predictably involve small amounts of damages' "; and (3) whether " 'it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.' (quoting Discover Bank, 36 Cal. 4th at 162-63)"
Arbitration clauses aren't being disallowed generally. But when, as the court puts it, "the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money", the courts can allow class action suits.
This is a routine decision based on California law; there are about a half dozen cases so far based on Discover Bank. Read the decision. [uscourts.gov]
what we need as consumers in these contracts (Score:2)
2 standard blocks in the contracts with a hash before them (this means that a block in the contract with a given hash means the same as any block with that hash)
3 Total banning of the practice of hiding funny clauses in deep or obscure parts of the contract (ie you agree to sell your first born in paragraph 13 section b)
4 the whole contract must be A printed on the box (or attached to the outside) B smaller than
told you so. (Score:2)
Okay, it's a start ... (Score:2)
Re:9th Circuit == Pretty Liberal (Score:5, Interesting)
Regardless of the 9th CC's viewpoint; a class action lawsuit is neither liberal or conservative; rather it adds a level of certainty to the legal landscape. Rather than face potentially hundreds of expensive lawsuits all around the country; class actions allow corporations to resolve liability issues once and in a final manner; while allowing individuals to sue when it would be too expensive to try to sue individually. I would expect the business community to prefer class actions suits to the alternative of defending themselves everywhere over small amounts; even though the likelihood of such cases is much smaller since the payouts probably
wouldn't cover the lawyers fees. Still the certainty of class actions is better than uncertainty of individual actions since you at least have some control over teh cost of defense and ultimate liability.
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Especially since the damages are usually "repaid" in the form of discount coupons for their own products. This even saves them the cost of having to buy ads in magazines to distribute their promotional discounts.
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From what I can tell, the fundamental question was whether the contract was fair - in particular whether the two parties to the contract had equal bargaining power.
Since conservatives are supposedly all about the free market. I would think that conservatives would be extremely concerned about situations where the market was not free. I would also think that conservative
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And as you go on to elucidate so well, consumers have nowhere NEAR equal bargaining power.
For the free-market advocates who drone on and on about Adam Smith and the invisible hand and what have you, they always miss that Smith's economics only apply in an economy where the seller and the buyer have approximately equal influence over the price a
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What carrier doesn't have such a clause in their contract? I ask because I was actively trying to avoid arbitration clauses, but have given up hope... I can no longer find a credit card without one, for instance.
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Geez, mods. (Score:2)
Troll? Seriously? Oh come on, mods. That was, at worst, FUNNY. Wish I had mod points to help rectify the injustice. ;)
The Litigation Monopoly (Score:2)
Arbitration seeks to redress contract disputes in ways that are beneficial to both members of a dispute.
The ruling like the one not cited [slashdot.org] in this
While I do not like corpo
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Re:hooray! (Score:5, Funny)
Second Life Arbitration Clause Unenforceable
> http://games.slashdot.org/article.pl?sid=07/06/08
I see a trend here. On the other hand, if those contracts were permitted then I'd be having my own that read as follows:
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That's what I was thinking too, but you know even a stopped clock is right twice a day.
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