AT&T Arbitration Clause Gutted, More to Come

You know them, those pesky clauses that tell consumers that they can’t go to court but must assent to a arbitration of the dispute much to the favor of the one paying the freight. Well folks the State of Washington has essentially said that AT&T has overstepped their bounds on such agreements –

I thought you might like to read a hot-off-the-presses appellate court decision [PDF] in a case from Washington State, McKee (Michael) v. AT&T Corp., where the court just found certain clauses in AT&T’s EULA “unconscionable”. I have it as text for you.

But what does that mean? This ruling will help you find out. The ruling explains what the term means. And there’s a section on choice of law, too, which some of you were asking about the other day, so you can see how the court chose Washington State, despite the AT&T argument that it should be New York.

Now that we’ve decided to follow the Apple v. Psystar case, I was particularly interested in sharing it with you, because this ruling will help you understand one of the affirmative defenses Psystar has raised, claiming that Apple’s terms are both substantively and procedurally unconscionable. It’s their 13th affirmative defense.

I also want you to see why I always tell you that it’s in the court system that the little guy at least has a chance to get a fair shake, no matter how huge and powerful the other side might be.

“Courts, not arbitrators, decide the validity of arbitration agreements,” the court wrote, and this one didn’t pass the sniff test in all its parts:

AT&T’s Consumer Services Agreement is substantively unconscionable and therefore unenforceable to the extent that it purports to waive the right to class actions, require confidentiality, shorten the Washington Consumer Protection Act statute of limitations, and limit availability of attorney fees. We emphasize that these provisions have nothing to do with arbitration. Arbitrators supervise class actions, conduct open hearings, apply appropriate statutes of limitations, and award compensatory and punitive damages, as well as attorney fees, where appropriate. 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 dispute resolution section is severable from the balance of the contract. We affirm the trial court in all respects unless otherwise noted and remand for further proceedings consistent with this opinion.

I am glad to see that someone has stepped in a said ‘no more’. This ruling has not banned arbitration just eliminated the secrecy, lack of appeal to the courts, etc. Am I against arbitration? No. If done right it does save money. But the lopsided nature of the agreements is unwarranted. Fact is companies are using arbitration as a cover for shoddy work or service. Why do they care to do a good job if the consumer has no recourse for remedy?

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