Story in the LA Times about a ruling that could have far reaching implications for consumers. Cingular Wireless (now AT&T) includes an arbitration clause in the cell phone contracts their customers sign, mean arbitration is mandated in the case of a dispute, rather than being allowed to pursue a regaular lawsuit in a court of law. The clause prevents consumers from suing bringing class action suits when they are wronged by the company.
The case is important because credit card companies, retailers, phone companies and many other large corporations use these clauses in contracts with their customers. In a case where a company rips thousands of consumers off for a couple of hundred dollars each, the individuals don’t have the strength to go after the company for the couple of hundred dollars they took.
That type of litigation could cost a few thousand dollars to pursue, nothing a normal person would do to recoup their couple of hundered dollars. But consumers can band together in class action suits, where the economy of scale works to bring justice to those who otherwise would not be able to afford it by themselves.
The California court found Cingular’s arbitration clause unconscionable because the contract was drafted by somone with superior bargaining power, the dispute involved a small amount of damages, and the party with the superior bargaining power was accused of trying to cheat a large number of people out of the small amount of money.
This is a good case for consumers. Hopefully this reasoning will be followed in other jurisdictions.