Major Blow to Service Agreement Arbitration Clauses

The Washington state Supreme Court on Thursday upheld an AT&T customer's right to file a class-action lawsuit against the company, saying the customer-service agreement stripped away some important consumer protections.

Michael McKee, of East Wenatchee, filed a class-action suit against AT&T, alleging it wrongly charged him and others for city utility surcharges and usurious late fees.

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McKee took his case to court. Meanwhile, AT&T argued that the dispute should be settled through arbitration, noting that McKee agreed to mandatory arbitration when he signed up for service in 2002. Such arbitration clauses are ubiquitous, and often consumers must agree to them as a condition of accepting a credit card, a cell phone or other services.

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A Chelan County Superior Court found the dispute-resolution provision of AT&T's Consumer Services Agreement "unconscionable" and denied AT&T's motion to compel arbitration. AT&T appealed.

On Thursday, in an unanimous decision, the Supreme Court upheld the lower court's ruling.

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WASHINGTON, D.C. – More than two dozen public interest organizations on Thursday launched a nationwide effort to stop the corporate use of binding mandatory arbitration (BMA) clauses, those insidious paragraphs that are tucked in the fine print of an array of contracts and through which millions of consumers unwittingly waive their right to access the courts.