Originally from World Arbitration And Mediation Review (WAMR)

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NINTH CIRCUIT HOLDS THAT CLASS

ARBITRATIONWAIVERS IN CELL PHONE
CONTRACTS ARE UNENFORCEABLE

The Ninth Circuit Court of Appeals overturned a judgment of the United
States District Court for the Central District of California, which granted a
motion to compel arbitration pursuant to an arbitration clause in a cellular
phone contract. The Ninth Circuit held that the class arbitration waiver was
unconscionable and that refusal to enforce unconscionable waivers was not
preempted by the FAA.1

In Shroyer v. New Cingular Wireless Services, Inc., Kennith Shroyer
filed a class action lawsuit seeking to recover for injuries he and other
AT&T customers incurred as a result of the 2004 merger between AT&T
Wireless Services, Inc. and Cingular Wireless LLC. Shroyer claimed that
the cellular phone services received by AT&T customers deteriorated
significantly after the merger and that the new company, New Cingular
Wireless Services, Inc. (“Cingular”), induced AT&T customers to transfer
their service plans to Cingular in an effort to increase its profits.

Specifically, after the merger, Cingular informed Shroyer that his services
would be improved if he signed a new contract with Cingular. Under the
new contract, however, he would lose the more favorable terms contained in
his contract with AT&T.