NO. 08-16080-C

UNITED STATES COURT OF APPEALSFOR THE ELEVENTH CIRCUIT

LOURDES CRUZ, PAUL FLAHERTY, JR., and CURTIS SMITH,on behalf of themselves and all others similarly situated,

Appellants,

v.

CINGULAR WIRELESS, LLC,a foreign corporation now known as AT&T MOBILITY LLC,

Appellee.

Appeal from the United States District Courtfor the MIDDLE DISTRICT OF FLORIDA,

No. 2:07-cv-00714-jes-dnf

BRIEF AMICUS CURIAE OF AARP IN SUPPORT OF APPELLANTS IN SUPPORT

OF CERTIFICATION OR REVERSAL

Deborah M. ZuckermanAARP Foundation

Michael SchusterAARP

601 E Street, NWWashington, DC 20049(202) 434-2060

Attorneys for AARP

C1 of 3

CERTIFICATE OF INTERESTED PERSONS

Pursuant to Fed. R. App. P. 26.1 and 11th Cir. R. 26.1-1, counsel for Amicus

Curiae AARP hereby certifies that the following persons, attorneys, and

corporations have or may have an interest in the outcome of this case and/or are

subsidiaries or other identifiable legal entities related to a party:

1. AARP

2. AB Cellular Holding, LLC

3. Adorno & Yoss, LLP

4. AT&T Inc. (Ticker: T)

5. AT&T Mobility Corporation

6. AT&T Mobility LLC

7. Bailey, Leslie A., Esq.

8. Bell & Bands, PLLC

9. Bell, Harry F., Esq.

10. BellSouth Mobile Data, Inc.

11. Bland, F. Paul Jr., Esq.

12. BLS Cingular Holdings, LLC

13. Brown, W. Kent, Esq.

14. Cingular Wireless LLC

C2 of 3

15. Cruz, Lourdes

16. Flaherty, Paul, Jr.

17. Frazier, Hon. Douglas N., U.S. Magistrate Judge

18. Frevola, Albert L., Jr., Esq.

19. Gordon, Hargrove & James, PA

20. Gordon, Richard G., Esq.

21. Hargrove, John R., Esq.

22. Jacobson, Jeannine C., Esq.

23. Mayer Brown LLP

24. Morgan & Morgan, P.A.

25. Parasharami, Archis A., Esq.

26. Public Justice Foundation

27. Public Justice, P.C.

28. Radon, Amy, Esq.

29. RAM Broadcasting Corporation

30. SBC Alloy Holdings, Inc.

31. SBC Long Distance LLC

32. SBC Telecom, Inc.

33. Schuster, Michael, Esq.

C3 of 3

34. Smith, Curtis

35. Steele, Hon. John E., U.S. District Court Judge

36. Tager, Evan M., Esq.

37. Weinstein, Scott Wm., Esq.

38. Wilson, Jack L., Esq.

39. Wireless Telecommunications Investment Company, LLC

40. Yianne, Tim J., Esq.

41. Zuckerman, Deborah M., Esq.

By: /s/ Deborah M. ZuckermanCounsel for AARP

i

CORPORATE DISCLOSURE STATEMENT

The Internal Revenue Service has determined that AARP is organized and

operated exclusively for the promotion of social welfare pursuant to Section

501(c)(4) (1993) of the Internal Revenue Code and is exempt from income tax.

AARP is also organized and operated as a non-profit corporation pursuant to Title

29 of Chapter 6 of the District of Columbia Code 1951.

Other legal entities related to AARP include AARP Foundation, AARP

Services, Inc., Legal Counsel for the Elderly, AARP Financial, AARP Global

Network, and Focalyst.

AARP has no parent corporation, nor has it issued shares or securities.

By:______/s/__________________ Deborah M. Zuckerman

Counsel for AARP

ii

TABLE OF CONTENTS

CERTIFICATE OF INTERESTED PERSONS .................................................. C1

CORPORATE DISCLOSURE STATEMENT ........................................................ i

TABLE OF CONTENTS ......................................................................................... ii

TABLE OF CITATIONS ....................................................................................... iii

STATEMENT OF THE ISSUES ............................................................................ 1

STATEMENT OF INTEREST ................................................................................ 1

SUMMARY OF ARGUMENT ............................................................................... 5

ARGUMENT ........................................................................................................... 6

I. CLASS ACTION BANS THAT EXCULPATE CORPORATIONS FROM LIABILITY SHOULD NOT BE ENFORCED ................................ 6

A. Class Actions Provide the Only Effective Legal Recourse for Consumers With Small Claims ...................................... 6

B. Courts Have Refused to Enforce Class Action Bans in Arbitration Clauses When They “Close the Door of Justice” for Consumers ...................................................................... 11

CONCLUSION ...................................................................................................... 29

CERTIFICATE OF COMPLIANCE ..................................................................... 30

CERTIFICATE OF SERVICE .............................................................................. 31

iii

TABLE OF CITATIONS

CASES

Am. Online, Inc. v. Pasieka, 870 So. 2d 170 (Fla. Dist. Ct. App. 2004) .................................................. 18

Am. Online v. Super. Ct., 90 Cal. App. 4th 1, 108 Cal. Rptr. 2d 699 (2001) ...................................................................... 18

Armendariz v. Found. Health Psychare Servs., Inc., 24 Cal. 4th 83, 6 P.3d 669 (2000) ............................................................... 18

Broughton v. Cigna Healthplans of Cal., 21 Cal. 4th 1066, 988 P.2d 67 (1999) ......................................................... 18

Bucy v. AT&T Wireless Servs., Inc., No. A105910, 2005 WL 2404424 (Cal. Ct. App. Sept. 30, 2005) .............. 17

Cellco P’ship v. Hatch, 431 F.3d 1077 (8th Cir. 2005), cert denied, 127 S. Ct. 433 (2006) ....................................... 3

Coady v. Cross Country Bank, 299 Wis. 2d 420, 729 N.W.2d 732 (Ct. App. 2007) .............................. 21, 22

Cooper v. QC Fin. Servs., Inc., 503 F. Supp. 2d 1266 (D. Ariz. 2007) .......... 27, 28

Creighton v. Blockbuster, Inc., No. 05-482-KI, 2007 WL 1560626 (D. Or. May 25, 2007) ....................... 26

Cruz v. PacifiCare Health Sys., Inc., 30 Cal. 4th 303, 66 P.3d 1157 (2003) ......................................................... 18

Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 100 S.Ct. 1166 (1980) ................................................. 5, 7, 10

Discover Bank v. Shea, 362 N.J. Super. 200, 827 A.2d 358 (Law Div. 2001) ......................................................................................... 24

iv

Discover Bank v. Super. Ct., 36 Cal. 4th 148, 113 P.3d 1100 (2005) ....................................... 4, 18, 19, 26

Dix v. ICT Group, Inc., 160 Wash. 2d 826, 161 P.3d 1016 (2007) ............................................ 19, 20

Doerhoff v. Gen. Growth Props., No. 06-04099-CV-C-SOW, 2006 WL3210502 (W.D. Mo. Nov. 6, 2006) ........................................................................... 27

Doyle v. Giuliucci, 62 Cal. 2d 606, 401 P.2d 1 (1965) .......................................... 18

Eisen v. Carlisle and Jacquelin, 417 U.S. 156, 161, 94 S. Ct. 2140 (1974) .................................................... 7

Fiser v. Dell Computer Corp., 144 N.M. 464, 188 P.3d 1215 (2008). ........................................................... 8

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) .............................. 23

Global Travel Mktg. v. Shea, 908 So. 2d 392 (Fla. 2005) .................................... 18

Hialeah Auto., LLC v. Basulto No. 3D07-855, 2008 WL 4568067(Fla. Dist. Ct. App. Oct. 15, 2008) ............................................................. 18

In Re Cellphone Termination Fee Cases, JCCP 4332 (Ca. Super. Ct. Alameda County. compl. filed July 23, 2003) ...................... 2

In Re Cingular Cases, No. D047604, 2007 WL 93229 (Cal. Ct. App. Jan. 16, 2007) ...................................................................... 16

In Re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283 (3d Cir. 1998) ......................................................................... 9

Kinkel v. Cingular Wireless LLC, 223 Ill. 2d 1, 857 N.E.2d 250 (2006) ....... 15, 16

Kristian v. Comcast Corp., 446 F.3d (1st Cir. 2006) ...................................... 25, 26

v

Lee v. AT&T Wireless Servs., Inc., No. B186240, 2006 WL 1452936 (Cal. Ct. App. May 26, 2006) ..................................................................... 17

Lowden v. T-Mobile, USA, Inc., No. C05-1482P, 2006 WL 1009279 (W.D. Wash. Apr. 13, 2006) ............ 13

Luna v. Household Fin. Corp. III, 236 F. Supp. 2d 1166 (W.D. Wash. 2002) ..................................................................................... 13

Macarz v. Transworld Sys., Inc., 193 F.R.D. 46 (D. Conn. 2000) ....................... 10

Maffei v. Alert Cable TV, 316 N.C. 615, 342 S.E.2d 867 (1981) ........................... 8

McKee v. AT&T Corp., 164 Wash. 2d 372, 191 P.3d 845 (2008) ........................ 21

McKenzie Check Advance of Fla., LLC v. Betts, Nos. 4D08-493 & 4D08-494 (Fla. Dist Ct. App. brief filed Apr. 28, 2008) ............................................... 4

Meoli v. AT&T Wireless Servs., Inc., Nos. A106061, A106340, 106341, 2005 WL 2404427 (Cal. Ct. App. Sept. 30, 2005) ..................................... 17

Merritt v. Cingular Wireless LLC, No. B178747, 2006 WL 2744357(Cal. Ct. App. Sept. 27, 2006) .................................................................... 16

Muhammad v. County Bank of Rehoboth Beach, Del.,189 N.J. 1, 912 A.2d 88 (2006) ........................................................ 8, 23, 24

Nat’l Ass’n of State Util. Consumer Advocates v. FCC, 457 F.3d 1238, modified on denial of reh’g, 468 F.3d 1272 (11th Cir. 2006), cert. denied, Sprint Nextel Corp. v. Nat’l Ass’n of State Util. Consumer Advocates, 128 S. Ct. 1119 (2008) .................................................................................. 2

Parrish v. Cingular Wireless, LLC, No. A105518, 2005 WL2420719 (Cal. Ct. App. Oct. 3, 2005) ........................................................................ 17

vi

Paton v. Cingular Wireless, No. A108816, 2006 WL 1413537 (Cal. Ct. App. May 23, 2006) ..................................................................... 17

Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 1055 S. Ct. 2965 (1985) ........................................................ 7

Riensche v. Cingular Wireless, LLC, No. C06-1325Z, 2006 WL 3827477 (W.D. Wash. Dec. 27, 2006) ................................................................. 12, 13

Riensche v. Cingular Wireless, LLC, No. 06-1325Z, 2007 WL 3407137 (W.D. Wash. Nov. 9, 2007) ................ 12

Romano ex rel. Romano v. Manor Care, Inc., 861 So. 2d 59 (Fla. Dist. Ct. App. 2003) ........................................................................... 18

Scott v. Cingular Wireless, 160 Wash. 2d 843, 161 P.3d 1000 (2007) ............. 4, 12

S.D.S. Autos, Inc. v. Chrzanowski, 976 So. 2d 600 (Fla. Dist. Ct. App. 2007) ........................................................................... 18

Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976 (9th Cir. 2007) ................................................................ 14, 18

State ex rel. Dunlap v. Berger, 211 W. Va. 549, 567 S.E.2d 265 (2002) ................................................ 8, 23

Stern v. Cingular Wireless Corp., 453 F. Supp. 2d 1138 (C.D. Cal. 2006) ......................................................................................... 16

Stiener v. Apple Computer, Inc., 556 F. Supp. 2d 1016 (N.D. Cal. 2008) ................................................................................... 14, 15

Szetela v. Discover Bank, 118 Cal. Rptr. 2d 862 (Ct. App. 2002) ........................................................................................... 19

Ting v. AT&T, 182 F. Supp. 2d 902 (N.D. Cal. 2002) .......................................... 25

vii

Ting. v. AT&T, 319 F.3d 1126 (9th Cir. 2003), cert. denied, 540 U.S. 811, 124 S. Ct. 53 (2003) ............................... 3, 18, 25

U.S. Parole Comm’n v. Geraghty, 445 U.S. 388, 100 S. Ct. 1202 (1980) ........... 10

Vasquez v. Superior Court of San Joaquin County, 4 Cal. 3d 800, 484 P.2d 964 (1971) .............................................................. 8

Vasquez-Lopez v. Beneficial Oregon, Inc., 210 Or. App. 553, 152 P.3d 940 (Ct. App. 2007) ................................................................. 4, 26

Whitney v. Alltel Commc’ns, Inc., 173 S.W.3d 300 (Mo. Ct. App. 2005) ................................................................................... 22

Wigginton v. Dell, Inc., 382 Ill. App. 3d 1189, 890 N.E.2d 541 (App. Ct. 2008) ...................................................................................... 24, 25

Wing v. Cingular Wireless, LLC, No. A105906, 2005 WL 2417640(Cal. Ct. App. Oct. 3, 2005) ........................................................................ 17

Winig v. Cingular Wireless LLC, No. C 06 4297 MMC, 2006 WL 2766007(N.D. Cal. Sept. 27, 2006) .......................................................................... 16

Wong v. T-Mobile USA, Inc., No. 05-73922, 2006 WL2042512(E.D. Mich. July 20, 2006) ......................................................................... 28

OTHER AUTHORITIES

Christopher A. Baker, AARP Pub. Pol’y Inst., Breaking Up Is Hard to Do: Consumer Switching Costs in the U.S. Marketplace for Wireless Telephone Service (Oct. 2007), available at http://assets.aarp.org/rgcenter/consume/2007_18_wireless.pdf ............................................................................................ 1

Christopher A. Baker, AARP Pub. Pol’y Inst., Cell Phones for Safety and Security in Case of an Emergency, Fact Sheet

viii

(June 2006), available athttp://assets.aarp.org/rgcenter/consume/fs131_emergency.pdf .................... 2

Christopher A. Baker, AARP Pub. Pol’y Inst., Key Elements for Informed Choice and Consumer Protection in the WirelessTelecommunications Marketplace (Mar. 2005), available athttp://assets.aarp.org/rgcenter/consume/m_1_wireless.pdf ............................................................. 2

Alba Conte & Herbert B. Newberg, 6 Newberg on Class Actions § 21:30 (4th ed. 2002) .................................. 10

Counsel for the parties have consented to the filing of an amicus curiae brief by1

AARP.

STATEMENT OF THE ISSUES

AARP adopts the Statement of the Issues in Appellants’ Opening Brief.

STATEMENT OF INTEREST1

AARP is a non-partisan, non-profit organization with nearly 40 million

members, approximately 3 million of whom live in Florida. As the leading

organization representing the interests of people aged 50 and older, AARP has a

keen interest in stopping the many unfair and deceptive practices perpetrated by a

wide range of companies because many of them have a disproportionate impact on

older people. Millions of Americans, including older consumers, increasingly rely

on wireless telephone service. The growing popularity of such services, however,

has coincided with increased problems for consumers. Due to the growing number

of older wireless subscribers, who frequently use their cell phones primarily for

security purposes, AARP has a particular interest in the practices of providers and

has conducted several studies and surveys regarding consumer experiences with

wireless service. See, e.g., Christopher A. Baker, AARP Pub. Pol’y Inst.,

Breaking Up Is Hard to Do: Consumer Switching Costs in the U.S. Marketplace

for Wireless Telephone Service (Oct. 2007), available at http://assets.aarp.org/

2

rgcenter/consume/2007_18_wireless.pdf; Christopher A. Baker, AARP Pub. Pol’y

Inst., Cell Phones for Safety and Security in Case of an Emergency, Fact Sheet

(June 2006), available at http://assets.aarp.org/rgcenter/consume/fs131_

emergency.pdf ; Christopher A. Baker, AARP Pub. Pol’y Inst., Key Elements for

Informed Choice and Consumer Protection in the Wireless Telecommunications

Marketplace (Mar. 2005), available at http://assets.aarp.org/rgcenter/consume/

m_1_wireless.pdf.

These research findings inform AARP’s advocacy for laws and regulations

to promote informed choice and consumer protection in the wireless market, as

well as litigation to ensure that consumers benefit from such protections and can

obtain redress when they are harmed by provider practices. For example, AARP

attorneys represent a class of consumers alleging that early termination fees

charged by wireless service providers constitute unlawful liquidated damages in

violation of California’s Unfair Competition Law and Consumer Legal Remedies

Act. In re Cellphone Termination Fee Cases, JCCP 4332 (Ca. Super. Ct. Alameda

County. compl. filed July 23, 2003). AARP also has filed amicus curiae briefs in

cases involving the rights of wireless service consumers. See, e.g., Nat’l Ass’n of

State Util. Consumer Advocates v. FCC, 457 F.3d 1238, modified on denial of

reh’g, 468 F.3d 1272 (11th Cir. 2006), cert. denied, Sprint Nextel Corp. v. Nat’l

3

Ass’n of State Util. Consumer Advocates, 128 S. Ct. 1119 (2008); Cellco P’ship v.

Hatch, 431 F.3d 1077 (8th Cir. 2005), cert denied, 127 S. Ct. 433 (2006).

The ability of these wireless consumers to seek redress is, however, being

severely restricted, if not eliminated, by contracts containing arbitration clauses

with class action bans. This has the untoward effect of exculpating providers from

liability for their exploitative practices. AARP is concerned about the deceptive

and unfair practices that affect older people in connection with wireless services, as

well as those perpetrated by corporations providing other products and services.

While many people lose large amounts of money to such practices, many others,

like the Appellants here, lose relatively small amounts or seek relief under laws

that provide low statutory damages. These losses nevertheless are significant to

these individuals, and thus their ability to obtain adequate relief through private

litigation is critical. Yet, access to justice is being severely curtailed by

corporations that impose binding arbitration and do not merely prevent individual

consumers from bringing court suits, but also preclude class action lawsuits and

class-wide arbitration. This makes it virtually impossible for many consumers to

seek relief and effectively immunizes corporations from liability. AARP has filed

amicus curiae briefs in some of the leading cases challenging these bans and in

other cases seeking to preserve class actions. See, e.g., Ting. v. AT&T, 319 F.3d

4

1126 (9th Cir. 2003), cert. denied, 540 U.S. 811, 124 S. Ct. 53 (2003); Vasquez-

Lopez v. Beneficial Oregon, Inc., 210 Or. App. 553, 152 P.3d 940 (Ct. App. 2007);

Scott v. Cingular Wireless, 160 Wash. 2d 843, 161 P.3d 1000 (2007); Discover

Bank v. Super. Ct., 36 Cal. 4th 148, 113 P.3d 1100 (2005); McKenzie Check

Advance of Fla., LLC v. Betts, Nos. 4D08-493 & 4D08-494 (Fla. Dist Ct. App.

brief filed Apr. 28, 2008).

AARP is interested in the Court’s ruling because of the impact it will have if

Florida consumers, particularly those with small claims, are forced to forfeit the

option of bringing class actions and thus effectively forgo any remedy. AARP is

concerned that this would allow corporations such as Appellee AT&T Mobility

(“ATTM”) to continue engaging in unfair and deceptive practices without fear of

liability. AARP likewise is interested in the ruling’s implications for its members

and other consumers throughout Florida who may be victimized by other corporate

practices and for whom class actions represent the only realistic way to obtain legal

redress. AARP thus respectfully urges the Court to certify to the Florida Supreme

Court the question of whether ATTM’s class action ban is unenforceable because it

violates Florida’s public policy or, in the alternative, to reverse the district court

and hold that the ban is unenforceable under Florida law.

5

SUMMARY OF ARGUMENT

The U.S. Supreme Court and numerous other courts have recognized the

critical role that class actions play in allowing people, particularly those with

relatively small claims, to vindicate their statutory rights. In fact, in many

instances, “aggrieved persons may be without any effective redress unless they

may employ the class-action device.” Deposit Guar. Nat’l Bank v. Roper, 445 U.S.

326, 338-39, 100 S. Ct. 1166, 1174 (1980). Yet, numerous corporations are using

class action bans in arbitration clauses to close the door to justice for millions of

consumers around the country. In response, federal and state courts, applying

generally applicable state contract law, are refusing to enforce class action bans on

grounds that they are against public policy or unconscionable where the factual

evidence shows that they exculpate corporations from liability.

The wireless customers involved in this appeal are just like the consumers

who sought redress from deceptive and unfair practices in the numerous cases

discussed below, in which federal and state courts recognized that without a class

action, they had no way to pursue their claims, in court or in arbitration. Despite

this, the district court failed to conduct the careful analysis performed by other

courts and, unless reversed, its decision will immunize Appellee AT&T Mobility

(“ATTM”) from liability and leave its customers with no recourse.

6

For the reasons set forth below, and in Appellants’ Opening Brief, AARP

respectfully submits that the Court should certify to the Florida Supreme Court the

question whether ATTM’s class action ban is unenforceable because it violates

public policy, or reverse and rule that the class action ban is unenforceable under

Florida law.

ARGUMENT

I. CLASS ACTION BANS THAT EXCULPATE CORPORATIONSFROM LIABILITY SHOULD NOT BE ENFORCED.

A. Class Actions Provide the Only Effective Legal Recourse forConsumers With Small Claims.

Class actions often are the only effective way to stop corporate wrongdoing

and obtain relief for victims. When many individuals are harmed by the same

corporation in identical ways, the corporation essentially is immune from

individual suits because recoveries will be too small to justify litigation. Thus,

corporations escape scrutiny, keep the profits from their wrongdoing, and have

little, if any, incentive to change their unlawful practices. Class actions are

particularly appropriate in consumer cases where damages or amounts in dispute

are small for each individual but which, in the aggregate, involve substantial

amounts, often many millions of dollars.

7

The U.S. Supreme Court repeatedly has recognized the value of class

actions:

The use of the class-action procedure for litigation ofindividual claims may offer substantial advantages fornamed plaintiffs; it may motivate them to bring cases thatfor economic reasons might not be brought otherwise. . . .Where it is not economically feasible to obtain relief withinthe traditional framework of a multiplicity of smallindividual suits for damages, aggrieved persons may bewithout any effective redress unless they may employ theclass-action device.

Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 338-39, 100 S. Ct. 1166, 1174

(1980) (footnote omitted). See also Eisen v. Carlisle and Jacquelin, 417 U.S. 156,

161, 94 S. Ct. 2140, 2144 (1974) (stating that a “critical fact” in the case is that

“petitioner’s individual stake in the damages award is only $70. . . . . Economic

reality dictates that petitioner’s suit proceed as a class action or not at all.”);

Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 809, 105 S. Ct. 2965, 2973 (1985)

(“Class actions also may permit the plaintiffs to pool claims which would be

uneconomical to litigate individually. For example, this lawsuit involves claims

averaging about $100 per plaintiff; most of the plaintiffs would have no realistic

day in court if a class action were not available.”).

Many state courts have likewise noted the importance of class actions. For

example, New Mexico’s Supreme Court recently stated:

8

The opportunity to seek class relief is of particularimportance to the enforcement of consumer rights becauseit provides a mechanism for the spreading of costs. Theclass action device allows claimants with individually smallclaims the opportunity for relief that would otherwise beeconomically infeasible because they may collectivelyshare the otherwise prohibitive costs of bringing andmaintaining the claim.

Fiser v. Dell Computer Corp., 144 N.M. 464, 188 P.3d 1215, 1219 (2008).

According to the New Jersey Supreme Court, “the merits of the class-action

procedure have been acknowledged many times in the context of court litigation.

‘By permitting claimants to band together, class actions equalize adversaries and

provide a procedure to remedy a wrong that might otherwise go unredressed.’”

Muhammad v. County Bank of Rehoboth Beach, Del., 189 N.J. 1, 16, 912 A.2d 88,

97 (2006) (citation omitted). Similarly, West Virginia’s highest court recognized

that “[c]lass action relief . . . is often at the core of the effective prosecution of

consumer, employment, housing, environmental, and similar cases.” State ex rel.

Dunlap v. Berger, 211 W. Va. 549, 562, 567 S.E.2d 265, 278 (2002). See also

Maffei v. Alert Cable TV, 316 N.C. 615, 620, 342 S.E.2d 867, 871 (1981)

(recognizing “that one of the basic purposes of class actions is to provide a forum

whereby claims which might not be economically pursued individually can be

aggregated in an efficient and economically reasonable manner.”); Vasquez v.

Superior Court of San Joaquin County, 4 Cal. 3d 800, 808, 484 P.2d 964, 968

9

(1971) (stating that “[i]ndividual actions by each of the defrauded consumers is

often impracticable because the amount of individual recovery would be

insufficient to justify bringing a separate action; thus an unscrupulous seller retains

the benefits of its wrongful conduct.”).

Federal courts similarly have recognized the important role played by class

actions. The Third Circuit affirmed that a class action was superior to other means

of handling litigation, where the trial court had “examined the relatively modest

size of individual claims and the sheer volume of those claims in the aggregate,

and concluded a class action presented the ‘only rational avenue of redress for

many class members.’” In re Prudential Ins. Co. of Am. Sales Practice Litig., 148

F.3d 283, 316 (3d Cir. 1998) (quoting 962 F. Supp. 450, 523 (D.N.J. 1997)).

Connecticut’s federal court found a class action the superior means of adjudicating

Fair Debt Collection Practices Act claims, rejecting the defendant’s argument that

15,000 individual actions

would somehow provide for greater fairness and efficiencythan the streamlined procedure of a class action. Defendantwould no doubt benefit from such a result, as the vastmajority, if not all, of those potential plaintiffs would failto pursue what this Court has already determined aremeritorious claims. But defendant’s desire to limit itsexposure in damages cannot be a criteria for assessing theappropriateness of a class action. . . . If only thoserecipients of the [collection] letter with significantdamages, and thus incentive to sue, brought actions to

10

challenge its legality, the FDCPA would not have thedeterrent and curative effect of eliminating abusivecollection practices intended by Congress.

Macarz v. Transworld Sys., Inc., 193 F.R.D. 46, 55 (D. Conn. 2000) (citations

omitted).

In addition, because many consumers are unaware that they have been

harmed by a corporation’s unlawful practices and thus cannot seek redress, class

actions fulfill an important role beyond obtaining compensation for victims;

namely, class counsel and class representatives serve as private attorneys general to

vindicate cumulative wrongs and obtain significant injunctive relief and

disgorgement of unlawfully obtained profits. See, e.g., Deposit Guar. Nat’l Bank,

445 U.S. at 338, 100 S. Ct. at 1174 (noting “the financial incentive that class

actions offer to the legal profession is a natural outgrowth of the increasing

reliance on the ‘private attorney general’ for the vindication of legal rights . . . .”);

U.S. Parole Comm’n v. Geraghty, 445 U.S. 388, 403, 100 S. Ct. 1202, 1212 (1980)

(recognizing that “the right to have a class certified if the requirements of the Rules

are met . . . is more analogous to the private attorney general concept . . . .”). See

also Alba Conte & Herbert B. Newberg, 6 Newberg on Class Actions § 21:30 (4th

ed. 2002) (“The desirability of providing recourse for the injured consumer who

would otherwise be financially incapable of bringing suit and the deterrent value of

While some of these have involved a different version of the arbitration clause,2

the class action ban itself -- the term at issue in this case -- has remainedsubstantively unchanged. Furthermore, even those courts that reviewed the currentversion found that purported “consumer friendly” revisions, such as the potentialavailability of attorney’s fees to prevailing consumers, did not remedy the defectsthat rendered the class action ban exculpatory and unenforceable.

11

class litigation clearly render the class action a viable and important mechanism in

challenging fraud on the public.”).

Given these and many other iterations of the importance of class actions, it is

not surprising that the trend among courts is to find class action bans in arbitration

clauses unenforceable as against public policy or substantively unconscionable

where they would exculpate a corporation from liability.

B. Courts Have Refused to Enforce Class Action Bans in Arbitration Clauses When They “Close the Door of Justice” for Consumers.

Numerous courts have applied generally applicable state contract law to the

context of particular cases to find class action bans in arbitration clauses

substantively unconscionable or against public policy and therefore unenforceable.

Many of these courts note that these bans have the effect of depriving injured

consumers, employees, and others of any means by which to vindicate their rights,

and thus serve as exculpatory clauses that allow corporations to violate the law

without fear of liability. Many of these decisions concerned the same class action

ban at issue in this appeal. For example, the Supreme Court of Washington2

The Court subsequently decided the merits of the case. No. 06-1325Z, 2007 WL3

3407137 (W.D. Wash. Nov. 9, 2007).

12

refused to enforce the exact class action ban at issue in this case, finding it violated

public policy and was substantively unconscionable. Scott v. Cingular Wireless,

160 Wash. 2d 843, 161 P.3d 1000 (2007). The subscribers alleged the company

overcharged them between $1 and $45 per month, and the court found the ban on

class actions deprived them of

a forum to vindicate the consumer protections guaranteedby Washington law and effectively exculpates its drafterfrom liability for a broad range of wrongful conduct.Where many customers of the same company have thesame or similar complaint and each is damaged a smallamount, class action litigation or arbitration is the onlypractical remedy available.

Id. at 1009. The court noted that “on its face, the class action waiver does not

exculpate Cingular from anything; it merely channels dispute resolution into

individual arbitration proceedings or small claims court. But in effect, this

exculpates Cingular from legal liability for any wrong where the cost of pursuit

outweighs the potential amount of recovery.” Id. at 1007.

A Washington federal court likewise declared that a class action ban was

“unilateral and excessively favors Cingular, and is therefore substantively

unconscionable.” Riensche v. Cingular Wireless, LLC, No. C06-1325Z, 2006 WL

3827477, at *12 (W.D. Wash. Dec. 27, 2006). The ban “effectively prevents3

13

consumers from seeking redress whenever the monetary value of the claim is so

small that it is not worth the time or money to pursue in small claims court or

arbitration, while allowing Cingular to allegedly ‘cheat large numbers of

consumers out of individually small sums of money.’” Id. at *12 (citation

omitted). The ban “does not affect Cingular because there is no circumstance

under which Cingular would bring a class action against consumers. But it

deprives consumers of an important means for enforcing their rights under the

[Consumer Protection Act].” Id. The court relied on its prior decision in Luna v.

Household Fin. Corp. III, 236 F. Supp. 2d 1166, 1179 (W.D. Wash. 2002), where

it found an arbitration clause banning class actions was substantively

unconscionable “because it was being used ‘as a sword to strike down access to

justice instead of a shield against prohibitive costs.’” (citation omitted). See also

Lowden v. T-Mobile, USA, Inc., No. C05-1482P, 2006 WL 1009279, at *6 (W.D.

Wash. Apr. 13, 2006) (finding class action ban “deprive[d] Plaintiffs of the means

to effectively vindicate their rights under the [Consumer Protection Act],” and was

“effectively one-sided because there is no conceivable set of facts under which

T-Mobile would bring a class action against its customers.”).

A California federal court also refused to enforce the class action ban in

ATTM’s revised arbitration clause, finding it served to exculpate the company

14

from liability with respect to allegedly hidden charges. Stiener v. Apple Computer,

Inc., 556 F. Supp. 2d 1016 (N.D. Cal. 2008). The court noted it was bound to

follow Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976 (9th Cir.

2007), which refused to enforce the ban in the prior version of the arbitration

clause, and noted ATTM’s modified version failed to comply with Shroyer.

In order for AT&T’s new class action arbitration waiver tosurvive an analysis under Shroyer, it must address theNinth Circuit’s concern that “when the potential forindividual gain is small, very few plaintiffs, if any, willpursue individual arbitration or litigation, which greatlyreduces the aggregate liability a company faces when it hasexacted small sums from millions of consumers.” In otherwords, it needs to show its Arbitration Agreement functionsas well as a class action would, such that it has notinsulated itself from hundred of thousands, if not millions,of iPhone users seeking recovery of the hidden $114.95 inannual battery-changing and related charges.

Stiener, 556 F. Supp. 2d at 1029.

The court rejected ATTM’s contention that the addition to its arbitration

clause of a “Premium” for customers and an “Attorney Premium” would induce

customers to individually dispute the charges. Rather, the Premium was illusory

because it was only available if ATTM settled a claim in full and ATTM need not

do so with all or most customers. The Premium thus was “an insufficient

inducement for individuals to pursue arbitration or a small claims action, such that

AT&T’s class arbitration waiver operates to immunize it from liability for claims

15

amendable [sic] to class action.” Id. at 1031. Likewise, the “Attorney Premium

does little to nothing to induce any attorney to take on a $114.95 dispute,” where it

too appeared illusory and “[did] not mitigate the exculpatory nature of the class

action waiver.” Id. at 1031, 1032.

The Illinois Supreme Court made a similar ruling in a case alleging that a

$150 early termination fee was an illegal penalty. The class action ban was

substantively unconscionable where Cingular used it “to insulate itself from

liability to a potential class of customers . . . where the cost of vindicating the

claim is so high that the plaintiff’s only reasonable, cost-effective means of

obtaining a complete remedy is as either the representative or a member of a class.”

Kinkel v. Cingular Wireless LLC, 223 Ill. 2d 1, 42, 857 N.E.2d 250, 274-75 (2006).

The court noted that access to class actions was particularly important in a case,

like this one, where the typical consumer would be unaware that a valid claim

existed. Many claims “are not likely to be recognized, let alone successfully

argued in court or arbitration, without the aid of an attorney.” Id. at 268. The

court explained that while a consumer may feel that an early termination fee is

unfair,

only with the aid of an attorney will the consumer be awarethat he or she may have a claim that is supported by law,and only with the aid of an attorney will such a consumerbe able to make the merits of such a claim apparent in

16

arbitration or litigation. Thus, when considering the “cost-price disparity” factor of substantive unconscionability, wemust consider that the cost to plaintiff of attempting tovindicate her $150 claim, in the absence of the ability tobring a class claim, would be $125 plus her attorney fees.As a result, if she were to prevail on the merits of her claimand be awarded $150 in damages, it is an absolute certaintythat she would not be made whole.

Id. (citation omitted). See also Winig v. Cingular Wireless LLC, No. C 06 4297

MMC, 2006 WL 2766007, at *5 (N.D. Cal. Sept. 27, 2006) (finding class action

ban rendered arbitration clause unenforceable, rejecting claims that cost and

attorney’s fee provisions rendered arbitration clause “‘exceptionally consumer

friendly’”); Stern v. Cingular Wireless Corp., 453 F. Supp. 2d 1138, 1149 & n.10

(C.D. Cal. 2006) (finding class action ban in various versions of arbitration clause

operates as exculpatory clause that “functions to exempt defendants from

responsibility for wrongdoing,” where recovery of approximately $9 per month

“cannot compensate for the costs -- both in time and money of arbitrating the

claims individually.”); In Re Cingular Cases, No. D047604, 2007 WL 93229, at

*2 (Cal. Ct. App. Jan. 16, 2007) (affirming trial court’s finding that class action

ban “deterred consumers from resolving disputes and operated to insulate Cingular

from liability.”); Merritt v. Cingular Wireless LLC, No. B178747, 2006 WL

2744357, at *6 (Cal. Ct. App. Sept. 27, 2006) (finding class action ban “operates as

an exculpatory clause in Cingular’s favor where, as here, the customer complaint

17

involves allegations of a business practice that results in small losses to individual

customers but huge profits to the company. . . . Even with Cingular paying the fees

for arbitration or a small claims action, the vast majority of customers are not

likely to take the time and trouble necessary to pursue either one for such a small

sum.”); Lee v. AT&T Wireless Servs., Inc., No. B186240, 2006 WL 1452936, at

*4, 5 (Cal. Ct. App. May 26, 2006) (affirming that class action ban operated as an

exculpatory clause due to unlikelihood that “each individual consumer overcharged

$15 would . . . find a lawyer and take a day off from work to attend arbitration in

order to get $15 back.”); Paton v. Cingular Wireless, No. A108816, 2006 WL

1413537 (Cal. Ct. App. May 23, 2006) (affirming that prohibition of classwide

arbitration rendered arbitration clause unenforceable); Wing v. Cingular Wireless,

LLC, No. A105906, 2005 WL 2417640, at *5 (Cal. Ct. App. Oct. 3, 2005) (finding

“class arbitration ban effectively operates to exculpate AT&T Wireless from

responsibility for its own willful injury to a large class of consumers . . . .”);

Parrish v. Cingular Wireless, LLC, No. A105518, 2005 WL 2420719 (Cal. Ct.

App. Oct. 3, 2005) (same); Meoli v. AT&T Wireless Servs., Inc., Nos. A106061,

A106340, 106341, 2005 WL 2404427 (Cal. Ct. App. Sept. 30, 2005) (same); Bucy

v. AT&T Wireless Servs., Inc., No. A105910, 2005 WL 2404424 (Cal. Ct. App.

Sept. 30, 2005) (same).

Many of the leading cases on this issue involve the application of California4

contract law, which Florida courts have found instructive. See, e.g., Hialeah Auto.,LLC v. Basulto, No. 3D07-855, 2008 WL 4568067, at *4 (Fla. Dist. Ct. App. Oct.15, 2008) (citing Broughton v. Cigna Healthplans of Cal., 21 Cal. 4th 1066, 988P.2d 67 (1999) and Cruz v. PacifiCare Health Sys., Inc., 30 Cal. 4th 303, 66 P.3d1157 (2003), concerning arbitrator’s authority to grant injunctive relief); S.D.S.Autos, Inc. v. Chrzanowski, 976 So. 2d 600, 610 n.16 (Fla. Dist. Ct. App. 2007)(citing Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976 (9th Cir. 2007)and Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003), both of which applied Californialaw, and Discover Bank v. Super. Ct., 36 Cal. 4th 148, 113 P.3d 1100 (Cal. 2005),among numerous courts declining to enforce bans on class relief in consumercontracts); Global Travel Mktg. v. Shea, 908 So. 2d 392, 401-02 (Fla. 2005) (citingDoyle v. Giuliucci, 62 Cal. 2d 606, 401 P.2d 1 (1965), concerning parent’sauthority to bind minor child to arbitration clause in medical service contract); Am.Online, Inc. v. Pasieka, 870 So. 2d 170, 171 (Fla. Dist. Ct. App. 2004) (citing Am.Online v. Super. Ct., 90 Cal. App. 4th 1, 108 Cal. Rptr. 2d 699 (2001), involvingrefusal to apply forum selection clause designating Virginia which does not permitclass actions to enforce consumer protection statutes thus denying Californiaresidents a comparable remedy to what was available in their home state); Romanoex rel. Romano v. Manor Care, Inc., 861 So. 2d 59, 62 (Fla. Dist. Ct. App. 2003)(citing Armendariz v. Found. Health Psychare Servs., Inc., 24 Cal. 4th 83, 6 P.3d669 (2000), concerning “balancing approach” courts follow to determine degree of procedural and substantive unconscionability necessary to find contract termunconscionable).

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These cases followed the test laid out by the California Supreme Court when

it held that a credit card issuer’s contractual ban on class actions was an

unconscionable exculpatory clause. Discover Bank v. Super. Ct., 36 Cal. 4th 148,4

113 P.3d 1100 (2005). The court held that, while such terms “are not, in the

abstract, exculpatory clauses,” they can be in effect because “damages in consumer

cases are often small and because ‘“[a] company which wrongfully exacts a dollar

from each of millions of customers will reap a handsome profit; the class action is

19

often the only effective way to halt and redress such exploitation.”’” Id. at

1108-09 (citation omitted). While “‘styled as a mutual prohibition,’” the waiver

was “indisputably one-sided.” Id. at 1109 (quoting Szetela v. Discover Bank, 118

Cal. Rptr. 2d 862, 867 (Ct. App. 2002)). The Szetela court expressed this concern

more forcefully:

It is the manner of arbitration, specifically, prohibiting classor representative actions, we take exception to here. Theclause is not only harsh and unfair to Discover customerswho might be owed a relatively small sum of money, but italso serves as a disincentive for Discover to avoid the typeof conduct that might lead to class action litigation in thefirst place. . . . Discover has essentially granted itself alicense to push the boundaries of good business practices totheir furthest limits, fully aware that relatively few, if any,customers will seek legal remedies, and that any remediesobtained will only pertain to that single customer withoutcollateral estoppel effect. The potential for millions ofcustomers to be overcharged small amounts without aneffective method of redress cannot be ignored.

118 Cal. Rptr. 2d at 868.

Court decisions examining other clauses are illustrative, as well. In another

case decided the same day that the Washington Supreme Court struck down

ATTM’s class ban in Scott, it also refused to enforce a forum selection clause that

designated Virginia, which does not allow class actions for consumer protection

lawsuits such as the one at issue. Dix v. ICT Group, Inc., 160 Wash. 2d 826, 161

P.3d 1016 (2007). The underlying lawsuit in Dix alleged that individual class

20

members suffered damages ranging from $23.90 to less than $250.00, and the court

found that “a forum selection clause that seriously impairs the plaintiff’s ability to

go forward on a claim of small value by eliminating class suits in circumstances

where there is no feasible alternative for seeking relief violated public policy and is

unenforceable.” Id. at 1022. This policy was not undercut by the fact the

consumer protection law did not contain an express class action antiwaiver

provision.

It is clear that the legislature’s addition of the private rightof action to enforce [the Consumer Protection Act] wasintended to encourage individuals to enforce the act andfight restraints of trade, unfair competition, and unfair,deceptive, and fraudulent acts or practices. This publicpolicy is violated when a citizen’s ability to assert a privateright of action is significantly impaired by a forumselection clause that precludes class actions incircumstances where it is otherwise economicallyunfeasible for individual consumers to bring theirsmall-value claims.

Id. at 1023-24.

The Washington Supreme Court subsequently made similar findings in a

case in which long-distance phone service customers challenged city utility

surcharges and usurious late fees totaling less than $20 per month. The court noted

that the “class action waiver has nothing to do with a valid agreement to arbitrate.

Class actions are often arbitrated. . . . Courts will not be so easily deceived by the

21

unilateral stripping away of protections and remedies, merely because provisions

are disguised as arbitration clauses.” McKee v. AT&T Corp., 164 Wash. 2d 372,

394, 191 P.3d 845, 857 (2008) (citations omitted). While the court was

commenting on the arbitration clause’s other restrictions, such as limited damages

and shortened statutes of limitations, as well as the class action waiver, it found

that where, as here, the individual claims are extremely small, “[w]ithout access to

class-wide relief, competent counsel would not be available to redress many

meritorious claims. . . . The agreement allows for small claims court actions, but

even the availability of small claims court or low-cost arbitration does not make it

practicable for an individual to pursue such small amounts.” Id. at 858.

In a class action challenging a bank’s debt collection practices, a Wisconsin

court affirmed that “the arbitration clause was substantively unconscionable

because it prevents the plaintiffs from obtaining any of the relief they seek . . . and

because it unfairly prohibits class-wide relief.” Coady v. Cross Country Bank, 299

Wis. 2d 420, 448, 729 N.W.2d 732, 745 (Ct. App. 2007). The court noted the

growing number of courts to find that

a waiver of class-wide relief is a significant factor (and inat least one instance a determinative factor) in invalidatingan arbitration provision as unconscionable. These courtshave recognized that the availability of class-wide relief isoften the only means of vindicating consumer rights. . . . Inaddition, the prospect of class-wide relief “ordinarily has

22

some deterrent effect on a manufacturer or serviceprovider,” . . . but any such effect is eviscerated byarbitration clauses like Cross Country’s.

Id. at 746-47 (citations and footnotes omitted).

In Missouri, wireless phone customers sought class certification of claims that

their provider violated state law by deceptively implying that a monthly charge was

governmentally mandated. An appeals court affirmed that a class action prohibition

rendered an arbitration clause substantively unconscionable. Whitney v. Alltel

Commc’ns, Inc., 173 S.W.3d 300 (Mo. Ct. App. 2005). Any customers

wishing to challenge the eighty-eight cent charge wouldface the same economic hurdle. Yet because of the manycustomers affected, Alltel would be entitled to retainmillions and millions of dollars from what were allegedlyimproper and deceptive charges. Moreover, since no singlecustomer could undertake a case against Alltel, thecompany could continue its improper and deceptive chargesad infinitum since none of its customers would have apractical remedy to bring about a stop to the conduct.

Id. at 314.

West Virginia’s highest court ruled that prohibitions on class actions and

punitive damages made an arbitration clause unconscionable and unenforceable in a

case involving modest damages.

A pre-dispute agreement to use arbitration as an alternativeto litigation in court may be enforced pursuant to the FAAonly when arbitration, although a different forum withsomewhat different and simplified rules, is nonetheless one

23

in which the arbitral mechanisms for obtaining justicepermit a party to fully and effectively vindicate their rights.

State ex rel. Dunlap v. Berger, 211 W. Va. 549, 556, 567 S.E.2d 265, 272 (2002)

(citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)).

The court explained that the small insurance charges ($8.46) at issue in Dunlap

were “precisely the sort of small-dollar/high volume (alleged) illegality that class

action claims and remedies are effective at addressing. In many cases, the availability

of class action relief is a sine qua non to permit the adequate vindication of consumer

rights.” Id. at 278. Thus, the court held, in adhesive contracts “so commonly

involved in consumer and employment transactions, permitting the proponent of such

a contract to include a provision that prevents an aggrieved party from pursuing class

action relief would go a long way toward allowing those who commit illegal activity

to go unpunished, undeterred, and unaccountable.” Id. at 278-79.

New Jersey’s highest court found a class action ban unconscionable in a case

challenging payday loans in which the alleged damages “are small on an

individual-by-individual basis, but are substantial when aggregated into a class claim.”

Muhammad v. County Bank of Rehoboth Beach, Del., 189 N.J. 1, 6, 912 A.2d 88, 91

(2006). The ban had the effect of acting as an exculpatory clause where permitting

“the defendants to contest liability with each claimant in a single, separate suit, would,

in many cases give defendants an advantage which would be almost equivalent to

24

closing the door of justice to all small claimants.” Id. at 99. This was similar to an

earlier New Jersey court ruling striking a bank’s arbitration clause as unconscionable

where “the only purpose of the provision purporting to prevent class-wide litigation

is to effectively remove the only legitimate remedy for cardholders with small

claims.” Discover Bank v. Shea, 362 N.J. Super. 200, 210, 827 A.2d 358, 365 (Law

Div. 2001).

While Discover can use the provision to preclude classactions and therefore, effectively immunize itselfcompletely from small claims, individual cardholders gainnothing, and in fact, are effectively deprived of their smallindividual claims. Discover can completely avoidaccountability whenever the harm to each class member issmall enough. . . . This type of power cannot be thepurpose of arbitration. . . .

Id. at 366-67.

In Illinois, a class action ban could not withstand scrutiny in a case challenging

a manufacturer’s failure to honor a rebate used to induce customers to buy computer

equipment. The court expressed concern about “not only the plaintiff’s ability to

vindicate his claim,” but also “the right of all potential Illinois class members,” where

the plaintiff’s claim was for $500 and many other class members might have claims

as low as $250. Wigginton v. Dell, Inc., 382 Ill. App. 3d 1189, 1197, 890 N.E.2d 541,

548 (App. Ct. 2008). The court noted that “the cost of vindicating a claim is likely to

exceed the potential recovery for most if not all potential Illinois class members. We

25

thus conclude that enforcing the class arbitration waiver against Illinois consumers

violates the public policy of this state.” Id. at 549.

A long line of federal courts have made similar rulings. One of the earliest was

the Ninth Circuit’s affirmance of a lower court’s finding that the class action ban in

an arbitration provision violated California’s contract law relating to

unconscionability. As the trial court explained:

It would not have been economically feasible to pursue theclaims in these cases on an individual basis, whether thecase was brought in court or in arbitration. . . . The actualdamages sought by the named plaintiffs are relativelyinsubstantial. [T]he prohibition on class action litigationfunctions as an effective deterrent to litigating many typesof claims . . . and, ultimately, would serve to shield AT&Tfrom liability even in cases where it has violated the law.

Ting v. AT&T, 182 F. Supp. 2d 902, 918 (N.D. Cal. 2002), aff’d in relevant part, 319

F.3d 1126, 1150 (9th Cir. 2003), cert. denied, 540 U.S. 811, 124 S. Ct. 53 (2003).

More recently, the First Circuit held that a class arbitration ban was invalid

because it prevented consumers from vindicating their statutory rights. Kristian v.

Comcast Corp., 446 F.3d 25 (1st Cir. 2006). “The bar on class arbitration threatens

the premise that arbitration can be ‘a fair and adequate mechanism for enforcing

statutory rights.’” Id. at 54 (citation omitted). The court emphasized the need to look

at the ban’s real world effect of making it difficult, if not impossible, to challenge

widespread practices. “‘[C]lass actions and arbitrations are, particularly in the

The Vasquez court rejected defendant’s argument that the ban applied equally to5

both parties, stating: “Although the arbitration rider with majestic equality forbidslenders as well as borrowers from bringing class actions, the likelihood of thelender seeking to do so against its own customers is as likely as the rich seeking tosleep under bridges,” 152 P.3d at 950, a reference to the statement of a character inAnatole France’s The Red Lily, that “the majestic equality of the laws . . . forbid[s]rich and poor alike to sleep under the bridges, to beg in the streets, and to stealtheir bread.’” Id. at 949-50.

26

consumer context, often inextricably linked to the vindication of substantive rights.”

Id. at 60 (quoting Discover Bank, 113 P.2d at 1109). Further, “[i]f the class action

mechanism prohibition here is enforced, Comcast will be essentially shielded from

private consumer antitrust enforcement liability, even where it has violated the law.

Plaintiffs will be unable to vindicate their statutory rights.” Id. at 61.

Oregon’s federal court recently found an arbitration clause that banned class

actions in arbitration and court substantively unconscionable in a case involving

statutory penalties of $200 per class member. The court considered “the small

recoveries at issue, and the resulting disincentive to litigate individual claims” to find

that the ban “‘gives defendant a virtual license to commit, with impunity, millions of

dollars’ worth of small-scale fraud.’” Creighton v. Blockbuster, Inc., No. 05-482-KI,

2007 WL 1560626, at *3 (D. Or. May 25, 2007) (quoting Vasquez-Lopez v. Beneficial

Oregon, Inc., 210 Or. App. 553, 572, 152 P.3d 940, 951 (Ct. App. 2007)). A5

Missouri federal court similarly declared a class action ban substantively

unconscionable in a case involving $2.00 monthly service fees charged on gift cards.

27

The court explained that the term “forces customers to individually arbitrate claims

that only amount to a few dollars and pay the accompanying fees. Few plaintiffs

would likely undertake such a scheme if not allowed to join in a class action.”

Doerhoff v. Gen. Growth Props., No. 06-04099-CV-C-SOW, 2006 WL 3210502, at

*6 (W.D. Mo. Nov. 6, 2006). The court noted that neither the Federal Arbitration Act

nor any policy favoring arbitration gives “a party carte blanche to eliminate the ability

of consumers to challenge provisions of an unconscionable contract.” Id. at *7.

In another case challenging payday loans made at annual percentage rates in

excess of 400%, Arizona’s federal court held that a class action ban in an arbitration

clause was against public policy and substantively unconscionable. “Arizona

recognizes that consumer protection statutes are necessary ‘to counteract the

disproportionate bargaining power which is typically present in consumer

transactions.’” Cooper v. QC Fin. Servs., Inc., 503 F. Supp. 2d 1266, 1286 (D. Ariz.

2007) (citation omitted). Arizona courts also recognize “that when individual

recoveries are relatively small, a class action is the only possible device which would

afford relief to numerous plaintiffs with such claims.” Id. Moreover,

“[i]ndividualizing each claim absolutely and completely insulates and immunizes

Defendant from scrutiny and accountability for its business practices and ‘“also serves

28

as a disincentive for [Defendant] . . . to avoid the type of conduct that might lead to

class action litigation in the first place.”’” Id. at 1288 (citations omitted).

Finally, a Michigan federal court refused to enforce a class action ban in a case

alleging cell phone overcharges of approximately $20 per customer, finding

“Defendant’s contract protects it from any sort of class action, and thus allows

Defendant to overcharge its customers without substantial risk of liability.” Wong v.

T-Mobile USA, Inc., No. 05-73922, 2006 WL 2042512, at *1 (E.D. Mich. July 20,

2006). The court noted that a class action “is certainly necessary for the effective

vindication of statutory rights, at least under the facts of this case.” Id. at *5.

Discussing the defendant’s claim that its contribution toward a customer’s arbitration

costs ameliorated the problem, the court said

in order for arbitration to be feasible, the amount at issuemust also exceed the value in time and energy required toarbitrate a claim. Defendant is alleged to have bilked itscustomers out of millions of dollars, though only a fewdollars at a time. Plaintiff’s damages are a paltry $19.74,hardly enough to make arbitration worthwhile.

Id.

This merely is a sample of the increasing number of courts holding class

action bans in arbitration clauses unenforceable. The lower court’s decision is at

odds with this persuasive analysis and reasoning, and should be reversed.

29

CONCLUSION

Amicus curiae AARP respectfully urges the Court to certify the question of the

enforceability of ATTM’s class action ban to the Florida Supreme Court or, in the

alternative, to apply generally applicable Florida contract law to reverse the lower

court and find the class action ban unenforceable.

December 12, 2008 Respectfully submitted,

________/s/____________Deborah M. ZuckermanAARP Foundation

Michael Schuster

AARP601 E Street, N.W.Washington, D.C. 20049(202) 434-2060

Counsel for AARP

30

CERTIFICATE OF COMPLIANCE

This brief complies with the type-volume limitations of Fed. R. App. P. 29(d)

and Fed. R. App. P. 32(a)(7)(B). The brief contains 6906 words, excluding the parts

of the brief exempted by Fed. R. App. P. 32(a)&(B)(iii). This brief complies with the

typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of

Fed. R. App. P. 32(a)(6). It has been prepared in a 14-point proportionally spaced

typeface using Corel WordPerfect 12.

DATED: December 12, 2008

By:______/s/________________ Deborah M. Zuckerman Counsel for AARP

31

CERTIFICATE OF SERVICE

I hereby certify that, on this 12th day of December, 2008, an original and six

(6) copies of the foregoing Brief Amicus Curiae of AARP in Support of Appellants

in Support of Certification or Reversal was served by overnight delivery to the Clerk

of the Court and a copy was served via overnight delivery upon the following:

Evan M. Tager Albert L. Frevola., Jr.Archis Parasharami Adorno & Yoss, LLPJack L. Wilson 350 E. Las Olas Blvd., Suite 1700Mayer Brown LLP Fort Lauderdale, FL 333011909 K Street, N.W.Washington, DC 20016

F. Paul Bland, Jr. Scott Wm. WeinsteinAmy Radon Morgan & Morgan, P.A.Public Justice, P.C. 12800 University Drive, Suite 6001825 K Street, NW, Suite 200 Fort Myers, FL 33907Washington, D.C. 20006

Leslie A. BaileyPublic Justice, P.C.555 12th Street, Suite 1620Oakland, CA 94607

By:_______/s/___________________ Deborah M. Zuckerman Counsel for AARP