9th Circuit Grabs a New AT&T Arbitration Case

(CN) - Cingular Wireless urged the 9th Circuit to reject a class action that alleges adverse effects from its merger with AT&T Wireless, arguing that customers must arbitrate their claims individually.

Two years after AT&T merged with Cingular in 2006, Washington state customers filed a class action, claiming breach of contract, fraud and violation of the state Consumer Protection Act. The complaint claims that Cingular intentionally degraded AT&T's wireless network after the merger to force customers into choosing between a more expensive Cingular plan and an early termination fee.

U.S. District Court Judge Ricardo Martinez denied AT&T's motion to compel arbitration in 2009, calling the arbitration provisions in the carrier's contract "substantively unconscionable" and unenforceable under Washington law.

But that decision came into question in April 2011 after the U.S. Supreme Court upended a similar case involving AT&T's arbitration contracts, Concepcion v. AT&T Corp. In that case, a sharply divided court said the Federal Arbitration Act pre-empts state laws that prohibit contracts from disallowing class action lawsuits.

As the appeal for the Cingular case came before the 9th Ciruit on Monday, an attorney for the carriers emphasized the precedence of Concepcion.

Concepcion means a "death knell" for state laws that declare arbitration agreements unenforceable because they bar class actions, Mayer Brown attorney Evan Tager told the three-judge panel.

Judge Raymond Fisher said the carriers could "achieve half a victory" with the Supreme Court ruling, noting that consumers still have a procedural means to attack an contract bar on class actions. He asked if Washington law recognizes substantive and procedural unconscionability.

Frank Bland Jr., counsel for the consumers, cited a Washington appeals court decision that said procedural unconscionability was enough to strike down a contract. He added, however, that the state Supreme Court has not weighed in on the issue.

Judge Susan Graber said the court would have to remand the consumers' case if it found that Concepcion "deals with substantive unconscionability only."

Claiming that Concepcion addressed the identical clause as the present case, Bland urged the court to look at other parts of the contract to determine if it is unconscionable.

Trager said Concepcion clearly applied.

"The bottom line is they are asking you to create a split with four other Courts of Appeal and disregard the decisions of 17 district judges within this circuit."

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