South-Western Legal Studies in Business

Cell Phone Company Arbitration Requirement Unconscionable
Description Federal court held that the arbitration clause of a cell phone company was unenforceable as it was unconscionable. The clause made it unlikely that any consumer with a complaint would undertake the costly procedure required.
Topic Alternate Dispute Resolution
Key Words Arbitration; Unenforceable; Unconscionable
C A S E   S U M M A R Y
Facts When consumers subscribed to T-Mobile cell service the contract included a clause requiring arbitration of disputes with the American Arbitration Association. It did not allow parties to consolidate claims against T-Mobile and required consumers to cover half the administrative costs of arbitration. Some T-Mobile subscribes sued the company in state court for violations of the California Business and Professions Code and of the Consumer Legal Remedies Act. T-Mobile moved the case to federal court and asked it to compel arbitration.

Motion denied. The arbitration clauses were procedurally unconscionable. They were buried in the details of a lengthy contract of adhesion. That is a contract imposed and drafted by a party of superior bargaining strength and relegates to the other party only the opportunity to adhere to it or reject it. The contract is one sided. It prohibits class actions against T-Mobile; that clause is unenforceable. Individual subscribers may have small damages that make action against the company only likely if there can be a class action. Since there were real issues of whether the contract violated consumer protection law, the arbitration requirements made it unlikely any one consumer could contest the matter.

Citation Janda v. T-Mobile, USA, --- F.Supp.2d --- (2006 WL 708936, N.D. Calif., 2006)

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