Consumers won a landmark ruling on January 15, 2002 in a class action lawsuit on behalf of seven million Californians against AT&T.

In a detailed 75-page decision, San Francisco Federal Judge Bernard Zimmerman found that AT&T had effectively tried to eliminate its long distance customers' rights by inserting a broad new mandatory arbitration provision in its form contract with them.

The decision in Ting v. AT&T concludes, "AT&T sought to shield itself from liability ... by imposing Legal Remedies Provisions that eliminate class actions, sharply curtail damages in cases of misrepresentation, fraud, and other intentional torts, cloak the arbitration process with secrecy and place significant financial hurdles in the path of a potential litigant. It is not just that AT&T wants to litigate in the forum of its choice -- arbitration; it that AT&T wants to make it very difficult for anyone to effectively vindicate her rights, even in that forum. That is illegal and unconscionable and must be enjoined."

"This decision confirms what we have said all along: AT&T is trying to abuse the arbitration process to eliminate its long distance customers' rights," said Trial Lawyers for Public Justice (TLPJ) attorney F. Paul Bland, Jr., co-lead counsel in the case.

"The court's opinion vindicates the rule of law. AT&T and other companies cannot use mandatory arbitration to destroy Californians' and other Americans' right to their day in court. "

The suit, Ting v. AT&T, is a class action on behalf of all AT&T long distance telephone customers in California. The named plaintiffs in the case are Darcy Ting, an AT&T customer who lives in Berkeley, and Consumer Action, a San Francisco-based, national public interest organization that has previously challenged mandatory, predispute arbitration clauses and that conducts an annual survey of long distance rates.

The Court held that AT&T's mandatory arbitration provision is unlawful under California's Consumer Legal Remedies Act and Unfair Competition Law, and gave the plaintiffs until January 31, 2002, to file a proposed permanent injunction that prevents the arbitration and limitation on liabilities provisions of AT&T's contract from taking effect.

"The Court held that consumers have to be able to hold this communications giant accountable," said co-lead counsel James C. Sturdevant. "AT&T doesn't deserve special treatment that trumps the basic consumer rights under California law - your right to a fair hearing; your right to tell the press about your dispute and its resolution; your right to join with other wronged consumers in a class action that doesn't cost you more than your claim is worth; and your right to an appropriate amount of damages necessary to compensate the consumers and punish corporate misconduct."

The Court held that AT&T's "ban on class actions is substantively unconscionable." Pointing to a rich factual record, the opinion states that this prohibition "will prevent class members from effectively vindicating their rights in certain categories of claims." The Court held that this provision would "serve to shield AT&T from liability even in cases where it has violated the law."

Noting that the language of AT&T's service agreement would prohibit arbitrators from awarding punitive and other damages provided by California law, the Court found that these provisions are both illegal and unconscionable.

In addition, the Court declared illegal AT&T's provision seeking to impose a two-year limitations period for customers to file any claim in arbitration, even though nearly all California consumer protection laws allow consumers to file claims for at least three or four years from the time of injury. The Court also held that "[b]ased on plaintiffs' showing, it is apparent that in a number of situations, large arbitration costs will preclude class members from effectively vindicating their legal rights." Among other facts, the Court noted that the average rate of arbitrator compensation in Northern California is $1,899 per day.

The Court also found that "the implications of [AT&T's secrecy provision] to society are troubling." The Court noted that this secrecy "puts AT&T in a vastly superior legal posture since as a party to every arbitration it will know every result and be able to guide itself and take legal positions accordingly, while each class member will have to operate in isolation and largely in the dark." The Court noted that "the terms and conditions of [AT&T's contract] were imposed on the class members without an opportunity for negotiation, modification or waiver." It said that "[c]ustomers did not have any meaningful choice with respect to the Legal Remedies Provisions because the carriers who service 2/3 of the California market all include substantially similar dispute resolution provisions in their contracts."

The Court also held that "AT&T's methods of communicating [the agreement to customers] downplayed the material changes presented by the Legal Remedies Provisions."

"While presenting the [contract] as a non-event may have helped AT&T retain its customers, it also made customers less alert to the fact that they were being asked to give up important legal rights and remedies."