Court Reminds Us All: You Have No Right To Sue Your Phone Company

Consumerist – by Chris Morran

If you don’t like your wireless company’s service, or your current rate plan, you’re free to change providers. But if you think your wireless provider is breaking the law, you can’t sue the company; and it doesn’t matter which of the four major carriers you have, because they all strip their customers’ of their legal rights.  

AT&T wireless customers in California recently tried to sue the telecom giant in federal court over the company’s controversial former policy of throttling “unlimited” data customers’ data speeds after they reached an arbitrary monthly threshold. But recently, the judge in the case reminded the plaintiffs that they had all signed away their right to sue AT&T when they became customers.

Not only does AT&T have a mandatory arbitration clause in itsterms and conditions — requiring that all customers resolve disputes either in small claims court or through the byzantine process of binding arbitration — but in 2011 AT&T convinced the U.S. Supreme Court that it was legal to force customers into such an agreement by inserting a few paragraphs into a 20,000-word contract that the customer has no authority or ability to negotiate.

In this latest attempt at a lawsuit, the plaintiffs argued that enforcing AT&T’s arbitration clause would be a violation of consumers’ First Amendment right “to petition the Government for a redress of grievances.”

The plaintiffs contended that small claims court is an inadequate forum for their class action dispute, which could involve potentially huge numbers of AT&T customers.

In the bigger picture, the plaintiffs also questioned the application of the 1925Federal Arbitration Act to consumer disputes. That 91-year-old statute states that when both parties to a contract agree to settle their disputes in binding arbitration, neither party can later try to force the other into having that matter settled in the legal system.

However, the FAA was drafted at a time when it would be unheard of for a customer to sign a 40-page contract for phone service. Instead, contracts were primarily between businesses or individuals who each negotiated the terms of the agreement. The plaintiffs in this case tried to make the point that applying the FAA to consumer disputes would violate their constitutional rights.

The problem with these arguments, explained the judge in his order [PDF] compelling arbitration, is that the First Amendment is a protection against a governmental abridgment of free speech, not a regulation of private parties.

The plaintiffs had claimed that the court’s enforcement of an arbitration clause would be a state action in violation of the First Amendment, but the judge countered that there is a lack of precedent to back up this line of thinking when it comes to cases involving arbitration.

“Plaintiffs have pointed to no authority holding that judicial enforcement, particularly of an arbitration award, constitutes state action,” reads the order.

The judge also claims that court enforcement of other common provisional restrictions in contracts — choice of venue, statute of limitations, and limitations on damages — has not raised constitutional concerns.

The judge does concede in his order that through the 2011 AT&T ruling and the subsequent American Express v. Italian Colors Restaurant ruling — in which SCOTUS held that an arbitration clause’s ban on class actions must be enforced, even in cases where an individual plaintiff could not feasibly mount a credible action — that one could argue that the “Supreme Court’s interpretation of the FAA has swung the pendulum to the point of actually encouraging businesses to impose pre-dispute arbitration clauses,” but points out that “no court has yet to hold or suggest there is sufficient encouragement or coercion by virtue of the FAA to implicate state action… Whatever encouragement the FAA gives to the implementation of pre-dispute arbitration clauses, it falls short of government conduct in cases where state action has been found.”

Whenever we write one of these stories about forced arbitration, we inevitably get emails saying “Why don’t people read their contracts?” or “If they don’t agree to the forced arbitration, they can switch companies.”

To the first question: Even if you read your contract and know what’s in it, you’re generally not free to make any changes. However, many companies reserve the right to make changes to those contracts at their discretion. As we saw recently,GrubHub recently tweaked its user agreement to include an arbitration clause— and you don’t even have to click on a nearly pointless “I agree” or “I have read and understand the terms” button. By simply continuing to use the site, you’re agreeing to the new terms.

Regarding the second question: With an increasing number of companies using arbitration clauses, there are fewer opportunities to consumers to vote with their wallets. In the wireless world, all four major providers — AT&T, Verizon,Sprint, and T-Mobile — include mandatory arbitration in their terms of use.

Of those four, only T-Mobile gives users the ability to opt out of the arbitration clause, but that must be done within 30 days of either buying your first phone from T-Mo or first activating a new line (whichever of the two comes earlier). So if you’re a current T-Mobile customer who has passed that 30-day mark, you have no way to sue the company in court if they break the law.

Last month, Sen. Patrick Leahy from Vermont and Sen. Al Franken from Minnesota introduced the Restoring Statutory Rights Act, which states that the 1925 Federal Arbitration Act “did not, and should not have been interpreted to, supplant or nullify the legislatively created rights and remedies which Congress… has granted to the people of the United States for resolving disputes in State and Federal courts.”

The legislation would create an exception in the Arbitration Act for disputes involving individuals and small businesses. The only way individuals would enter into arbitration is if they agreed to do so after the dispute has been filed. That’s very different from the current process, which automatically shunts all customer disputes into binding arbitration.

Our colleague George Slover, senior policy counsel at Consumers Union, says that the bill “restores the Federal Arbitration Act to what Congress intended — arbitration as a way for businesses to decide to handle their business disputes, but not as a way to insulate their misconduct from accountability to consumers.”

Unfortunately, without bipartisan support or any public outcry, that legislation currently looks doomed to sit unconsidered by the Senate Judiciary Committee, meaning companies will continue to abuse arbitration clauses and strip consumers of their right to sue in court.

https://consumerist.com/2016/03/14/court-reminds-us-all-you-have-no-right-to-sue-your-phone-company/