Monday, September 1, 2008

Class action waiver unconsionable in State of Washington

Groklaw is reporting on an appellate court decision from Washington State that upholds a trial court's denial of a motion by AT&T to compel arbitration, under the terms of its Consumer Services Agreement.

I particularly like this sentence from the ruling:
Courts will not be easily deceived by attempts to unilaterally strip away consumer protections and remedies by efforts to cloak the waiver of important rights under an arbitration clause.
The discussion on Groklaw mentions, among other things, that the standard for demonstrating unconscionability vary from state to state in the US. In particular in this case the court didn't have to rule on the question of whether unilateral changes of contract terms were procedurally unconscionable, because in Washington, it's sufficient to demonstrate substiantive unconscionability alone. The court notes:
However, having held below that the entire dispute resolution provision is substantively unconscionable, we find it unnecessary to reach the issue of procedural unconsionablity.
It is worth noting that, in Ontario, where I live, this question probably wouldn't come up anymore--at least not in an analogous context. The Consumer Protection Act specifically provides that:
Without limiting the generality of subsection (1), any term or acknowledgment in a consumer agreement or a related agreement that requires or has the effect of requiring that disputes arising out of the consumer agreement be submitted to arbitration is invalid insofar as it prevents a consumer from exercising a right to commence an action in the Superior Court of Justice given under this Act. 2002, c. 30, Sched. A, s. 7 (2).
and
A consumer may commence a proceeding on behalf of members of a class under the Class Proceedings Act, 1992 or may become a member of a class in such a proceeding in respect of a dispute arising out of a consumer agreement despite any term or acknowledgment in the consumer agreement or a related agreement that purports to prevent or has the effect of preventing the consumer from commencing or becoming a member of a class proceeding. 2002, c. 30, Sched. A, s. 8 (1).
So, under Ontario law, I believe that the original class action suit would have been explicitly authorized, and the provision in the contract that required arbitration would be unenforceable. (The usual "I'm not a lawyer; this isn't legal advice" disclaimer applies, naturally.)

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