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Judge finds AT&T Customer Agreement "illegal and unconscionable"

archives from January 2002

Consumer Action, a non-profit group, won a landmark ruling in a suit to stop AT&T from forcing a binding arbitration clause on its customers. The class action suit charged the telephone giant with violations of the Consumer Legal Remedies Act and the Unfair Business Practices Act. The ruling means AT&T's arbitration clause will not apply to about 7 million residential customers in California.

If this decision is upheld after AT&T's planned appeal, other courts could adopt the precedent. Then consumers throughout the U.S. would have the chance to a fair fight against any unfair business practices.

San Francisco Federal Judge Bernard Zimmerman found that AT&T tried to eliminate its long distance customers' rights by inserting a broad new mandatory arbitration provision in a one-sided contract. AT&T's own research showed the majority of its customers would not read the entire contract. In fact the AT&T study concluded that after reading the bold text in the cover letter, which states "[p]lease be assured that your AT&T service or billing will not change under the AT&T Consumer Services Agreement; there's nothing you need to do," "[a]t this point most would stop reading and discard the letter."

Zimmerman's decision notes, "One of the authors of the study did not find this conclusion to be a cause of concern, and no one on the detariffing team ever expressed concern to her about this conclusion. On the contrary, AT&T was concerned that if its customers focused on the Legal Remedies Provisions, they might become concerned, less likely to perceive detariffing as a non-event and possibly defect. As a high ranking member on the detariffing team stated: 'I don't want them to tell customers that now individual contracts need to be established with customers and pay attention to the details sic].'[...]"

If you would like more details on this case, click here for Consumer Action's January 15, 2002 news release.

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