For the London Free Press – October 6, 2008

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In a major victory for American consumers, the Washington state Supreme Court, following in the footsteps of Ontario consumer protection laws, has held AT&T cannot remove a consumer’s right to file a class-action lawsuit.

The court in McKee vs. AT&T Corp. held that under the particular facts at hand and where the laws of Washington state apply:

“AT&T’s Consumer Services Agreement is substantively unconscionable and therefore unenforceable to the extent that it purports to waive the right to class actions, require confidentiality, shorten the Washington Consumer Protection Act statute of limitations, and limit availability of attorney fees.”

This case arose over disputed charges that added up to little more than $2 a month. So why make such a big deal over such a small amount? Given the number of years AT&T has been in business and the number of cust-omers it serves, the potential impact of seemingly minimal overbilling is significant.

After attempts to resolve his billing issues failed, McKee decided to take on AT&T. He filed a class-action lawsuit, alleging violations of Washington’s Consumer Protection Act, as well as breach of contract and negligence. In response, AT&T tried to enforce an arbitration clause in its consumer services agreement that prohibited class actions.

Consumer services agreements, also known as end-user licence agreements (EULAs), are widely used in the service industry. Everything from phone services to software licences are subject to EULAs. They are usually not signed by consumers and the terms are set by the service providers. That’s not necessarily a bad thing. Commercial certainty depends on it.

The U.S. Court found that the arbitration clause in AT&T’s consumer service agreement removing a consumer’s right to file a class action was unconscionable and therefore unenforceable.

Ontario consumers enjoy similar protection from EULAs that purport to remove the right to commence class actions.

Ontario consumer protection laws prevent companies from enforcing such clauses. Under the Consumer Protection Act, 2002, “any term in a consumer agreement that requires or has the effect of requiring that disputes arising out of the consumer agreement be submitted to arbitration is invalid” if it prevents a consumer from bringing an action in court.

The Act also permits consumers to commence or become members of class actions relating to disputes arising from consumer agreements even if the agreement attempts to prevent such a measure.

So why is the right to file class actions such a big deal for consumers?

In cases where the violations are small, but a large number of consumers are affected, class actions may be the only way to redress wrongs effectively. Without the right to commence class actions, consumers may not be able to obtain effective legal representation.

The court also felt the EULA’s requirement to keep arbitration results secret “hampers plaintiffs in learning about potentially meritorious claims and serves no purpose other than to tilt the scales in favour of (the service provider).”