Tuesday, October 7, 2003
High Court Declines to Review Ruling AT&T Cannot Require State Long Distance Customers to Arbitrate
By a MetNews Staff Writer
The U.S. Supreme Court yesterday declined to review a February ruling in which the Ninth U.S. Circuit Court of Appeals rejected imposition of arbitration agreements on the company’s California long distance customers.
The Ninth Circuit decision was based on state consumer protection laws.
A three-judge appellate panel upheld most of a lower court ruling that nullified AT&T mandates that its customers give up the right to sue and instead submit to arbitration. Also struck down as unconscionable under California consumer protection laws were clauses that barred class actions, compelled unhappy customers to pay half the arbitrator fees, eliminated liability for willful misconduct, and imposed a gag order on plaintiffs, even victorious ones.
Judge A. Wallace Tashima, writing for the court, had rejected AT&T’s assertion that the lower court ruling was “inherently hostile” to arbitration, which federal law encourages.
”If the district court indicated any hostility, it was not directed at arbitration, but at the manner in which it was forced upon consumers, the way in which AT&T avoided liability for willful misconduct, and the costs to consumers of vindicating their rights,” Tashima wrote in February.
The company later eliminated the willful misconduct language and rewrote the confidentiality provision.
A similar legal action in another circuit last year ended up with a ruling in AT&T’s favor.
AT&T’s new policy became effective in August 2001, after the New York-based company notified its customers by mail of the new agreement. First, though, the long-distance telephone company conducted extensive market research to see how customers would react. The research showed that most customers would never read the contract, but instead throw away the document after reading a disclaimer advising that “service or billing will not change.”
The only way to opt out of the new contract was to call up and cancel AT&T service.
”AT&T did not change the substance of the letter as a result of its market research—indeed, internal AT&T documents indicate that the letter was specifically intended to make customers less alert to the details of the CSA,” Tashima noted.
But customer Darcy Ting read the whole notice and filed suit, along with Consumer Action, a nonprofit group.
U.S. Magistrate Judge Bernard Zimmerman of the Northern District of California ruled last year that AT&T’s agreement was “illegal and unconscionable” under California’s Consumer Legal Remedies Act.
AT&T argued that California laws are preempted not only by federal laws encouraging arbitration, but by the body of communications law that culminated in the Telecommunications Act of 1996—legislation replacing complex tariff regulations with competitive contracting between providers and customers.
Deferring to California consumer protection law forces telephone companies to improperly discriminate in favor of one state’s customers at the expense of all others, AT&T argued.
But the Ninth Circuit rejected the argument, as well as a Seventh Circuit ruling from last year that upheld a preemption defense to a state law challenge against AT&T’s contract in another state.
”By definition, the deregulated marketplace encompasses state laws of general applicability,” Tashima said. “Here, California’s unconscionability law is not unlike that of most other states, and even if it were, it does not make an otherwise competitive market non-competitive.”
The high court also yesterday rejected a petition for writ of certiorari from Jerry Rubin, declining to decide if he should have been allowed to list his occupation as “peace activist” on the ballot in a Santa Monica city election.
The Ninth Circuit rejected Rubin’s appeal last year, ruling that the city did not violated the First Amendment or the Equal Protection Clause by barring Rubin from using the designation in running for city council.
Judge Barry G. Silverman said then that the city clerk was entitled to reject Jerry Rubin’s proposed designation under state regulations adopted by the city. Those rules are valid, Silverman said, because they are politically neutral, serve the city’s reasonable interest in “preserving the simplicity of its ballot,” and leave the candidate with reasonable alternative means of communication.
Rubin drew more than 5,000 votes in the 2000 council election, despite not having a ballot designation after the city clerk rejected the one he wanted to use. The official, relying on regulations issued by the secretary of state, concluded that “peace activist” is a status, rather than a “profession, vocation, or occupation” as required by Elections Code Sec. 13308.
Santa Monica, a charter city, is not required to follow the state regulations but has opted to do so. Rubin told the clerk that he earns his living selling bumper stickers for various causes, including peace.
The U.S. Supreme Court and other circuits, Silverman noted, have given states wide latitude in conducting their elections. He cited decisions upholding laws that bar candidates from listing more than one party affiliation, preclude write-in voting, prohibit candidates qualifying by petition from using party designations that do not correspond to the names of recognized parties and require parties to demonstrate support by obtaining petition signatures or receiving a specified number of votes in order to remain on the ballot.
A regulation will be struck down, Silverman contrasted, if it imposes a “severe” restriction on speech, as in the case of the California law banning political parties from endorsing candidates who were not party nominees, or a Missouri law requiring that candidates’ positions on term limits be printed next to their names on the ballot.
The burden on Rubin, the judge said, is not severe. He can still describe himself and his activities in the 200-word candidate statement, which the city prints and distributes at its expense.
Copyright 2003, Metropolitan News Company