Supreme Court Declines to Hear T-Mobile Appeal of Class-Action Lawsuit Case
The U.S. Supreme Court Tuesday declined to hear an appeal by T-Mobile that raised the issue of whether federal law preempts state laws that block carriers from prohibiting their subscribers from banding together to pursue class- action lawsuits. As a result, the litigation will continue. The decision also means that all carriers will need to review the arbitration clauses in their customer service agreements and revise them as needed to comply with the requirements of California state law, officials said.
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“The Court’s decision lets stand rulings by lower courts that adversely affect the rights of tens of millions of consumers and businesses to have their disputes resolved by individual arbitration -- rights granted by Congress under the Federal Arbitration Act and now under attack in numerous states,” T-Mobile said. “T-Mobile USA remains a strong proponent of arbitration as a speedy and inexpensive way for consumers to resolve disputes, and as an alternative to lawyer-driven class action lawsuits.”
The lead case was T-Mobile v. Laster, from the Ninth U.S. Circuit Court of Appeals in San Francisco. Jennifer Laster bought a T-Mobile phone and signed a written agreement to resolve disputes with T-Mobile through individual arbitration. But then she started a class-action lawsuit claiming that T-Mobile violated California law by charging sales tax on the full retail value of discounted wireless telephones.
A federal district court in San Diego sided with Laster, saying the bar on taking the carrier to court is unconscionable if “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.” The Ninth Circuit Court of Appeals affirmed that in an unpublished opinion.
In a brief filed with the high court, T-Mobile noted that the Ninth Circuit decision was in direct conflict with opinions in other circuits and stressed the need for Supreme Court review. “Resolution of this conflict is necessary because the proper application of the [Federal Arbitration Act] to consumer arbitration agreements presents a recurring issue of fundamental and national importance,” T-Mobile argued. “The enforceability of agreements to arbitrate under the FAA is a matter that affects the rights of tens of millions of consumers and businesses.” Any state law that arbitration must allow for a class-action lawsuit “undercuts the benefit of arbitration as a streamlined, low-cost alternative to litigation,” T-Mobile said.
CTIA filed with the court in support of T-Mobile, as did AT&T Mobility. “By blessing the efforts of California and other States to advance antiarbitration policies in contravention of federal law, the Ninth Circuit has undermined the utility of arbitration agreements and has cast uncertainty on the provisions contained in the contracts of hundreds of millions of wireless customers,” CTIA said. “The result will be higher costs and uncertainty for CTIA members and the threat of correspondingly higher rates for their customers.” CTIA is “disappointed” in the decision, said General Counsel Mike Altschul.
But attorneys for Laster said case law is on their side. “Every state and federal court to confront the question presented has reached the same conclusion -- that the FAA, as its plain text indicates, does not preclude courts from assessing on a case-by-case basis and in a manner that does not discriminate against arbitration whether class-action bans are unconscionable under generally applicable state contract law,” Laster said in a brief filed with the high court.