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Consumers´ Suit Against AT&T for Abuses in Wake of Merger With Cingular Should Go Forward, Federal Court Told

SANTA MONICA, Calif., Mar. 17 /PRNewswire/ --

AT&T's Ban on Class Actions is Unlawful, Customers Argue

SANTA MONICA, Calif., March 17 /PRNewswire-USNewswire/ -- Cell phone customers who sued AT&T and Cingular over abuses in the companies' 2004 merger are asking a federal court in Seattle to protect their rights and give them their day in court. In papers filed late last Friday, lawyers representing potentially millions of AT&T cell phone customers asked the court to invalidate the class action ban embedded in the company's arbitration clause, which AT&T claims requires the court to dismiss the case.

"At stake here is the right of AT&T customers to get a fair hearing and obtain justice," said Harvey Rosenfield, a lawyer with the non-profit Foundation for Taxpayer and Consumer Rights (FTCR). "If the court rules that AT&T and Cingular's customers cannot join together to sue these companies, then the companies will never be held accountable."

Lawsuit Targets Cingular Practices in Merger with AT&T

When Cingular bought its rival cell phone company AT&T in 2004, it promised regulators and the public that AT&T customers would continue to enjoy the same quality service. However, according to the lawsuit filed in July 2006, after the merger, Cingular deliberately degraded the quality of the AT&T network in order to force AT&T customers to move to Cingular's network, pay an $18 "upgrade fee," buy brand new phones and sign up for new two year plans. Dissatisfied consumers who wanted to move to a different company were required to pay Early Termination Fees of $150 or more. (Cingular has since rebranded the merged companies as "AT&T.") A copy of the complaint in the case can be viewed here: www.consumerwatchdog.org/documents/6540.pdf.

Defendants Say Arbitration Clause Bars Lawsuit

After the suit was filed, AT&T asked the court to dismiss the case on the grounds that all AT&T customers had agreed as a condition of obtaining service that any disputes had to be handled on an individual, one-on-one basis by private arbitration firms paid for by AT&T. While AT&T has made various changes to its arbitration clause over the past few years, the critical ban on class actions has remained unchanged.

In a lengthy investigation into the arbitration clause that included the deposition of numerous AT&T witnesses, lawyers for AT&T customers learned that:

1. The arbitration clause to which consumers allegedly agreed was contained in the fine print in the back of a booklet packaged in a box with their cell phones. In other transactions, it was mentioned but not explained.

2. The actual rules that govern the arbitration process consume over 12,000 words. They do not appear on AT&T's web site. They can only be found through following a link to the site of a company hired by AT&T to administer the arbitrations, which are conducted through private "judges."

3. According to reports published by AT&T's arbitration provider, only 10 consumer arbitrations have been held against AT&T since October 2006, proving that the class action ban exculpates the company from liability.

After the lawsuit was filed, AT&T changed the arbitration clause to try to make it more likely that the court would uphold it. Indeed, it was changed a second time during a deposition in the case when a lawyer for consumers got a witness for AT&T to acknowledge a loophole, at which point Cingular's lawyer got up and made a phone call to dictate a change in the agreement.

In their opposition to individual arbitration filed on Friday, lawyers for AT&T customers said that the class action ban was unlawful under state contract law because it would effectively prevent customers from obtaining justice. They also pointed out that numerous courts have invalidated AT&T's (and other cell phone companies') class action bans on the same grounds.

"AT&T makes much of the window-dressing terms it has tacked on to its arbitration clause to hide the impact of its class action ban," said Leslie Bailey of Public Justice. "But we're confident that once the court looks at all the evidence, it will recognize that without a class action, these customers would not be able to hold the company accountable." Public Justice represents the plaintiffs along with FTCR and a team of nationally recognized lawyers that includes Bruce Simon of the California-based Pearson, Simon, Soter, Warshaw & Penny firm and Paul Stritmatter of the Washington-based firm of Stritmatter, Kessler, Whelan and Coluccio.

Read the brief in opposition to AT&T's motion for arbitration at http://www.consumerwatchdog.org/resources/OppoArb_Coneff.pdf.