161 P.3d 1000 (Wash. 2007), 77406-4, Scott v. Cingular Wireless

Docket Nº:77406-4.
Citation:161 P.3d 1000, 160 Wn.2d 843
Opinion Judge:CHAMBERS, J.
Party Name:Doug SCOTT, a married man; Loren R. Tabasinske and Sandra K. Tabasinske, husband and wife; Patrick H. Oishi and Janet Oishi, husband and wife; and all others similarly situated, Petitioners, v. CINGULAR WIRELESS, a corporation doing business in the State of Washington; John Does I-XX, Respondents.
Attorney:Douglas S. Dunham, Crane Dunham PLLC, Stephen Joel Crane, Steven Gary Rosen, Seattle, WA, Leslie A. Bailey, Trial Lawyers for Public Justice, Oakland, CA, F. Paul Bland, Trial Lawyers for Public Justice, Washington, DC, for Petitioners., Neal S. Berinhout, Cingular Wireless, Atlanta, GA, Evan M. ...
Case Date:July 12, 2007
Court:Supreme Court of Washington
 
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Page 1000

161 P.3d 1000 (Wash. 2007)

160 Wn.2d 843

Doug SCOTT, a married man; Loren R. Tabasinske and Sandra K. Tabasinske, husband and wife; Patrick H. Oishi and Janet Oishi, husband and wife; and all others similarly situated, Petitioners,

v.

CINGULAR WIRELESS, a corporation doing business in the State of Washington; John Does I-XX, Respondents.

No. 77406-4.

Supreme Court of Washington, En Banc.

July 12, 2007

Argued Feb. 28, 2006.

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[Copyrighted Material Omitted]

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Douglas S. Dunham, Crane Dunham PLLC, Stephen Joel Crane, Steven Gary Rosen, Seattle, WA, Leslie A. Bailey, Trial Lawyers for Public Justice, Oakland, CA, F. Paul Bland, Trial Lawyers for Public Justice, Washington, DC, for Petitioners.

Neal S. Berinhout, Cingular Wireless, Atlanta, GA, Evan M. Tager, David M. Gossett, Mayer, Brown, Rowe & Maw LLP, Washington, DC, David Biderman, Perkins Coie LLP, Santa Monica, CA, Sally Lorraine Morgan, David John Burman, Seattle, WA, Stephanie Vititoe Kornblum, Microsoft Corp., Redmond, WA, for Respondents.

Bryan Patrick Harnetiaux, Spokane, WA, Amicus Curiae on behalf of Washington State Trial Lawyers Association Foundation.

Shannon E. Smith, Office of the Attorney General, Seattle, WA, Amicus Curiae on behalf of Attorney General of Washington.

Kristopher Ian Tefft, Association of Washington Business, Olympia, WA, Amicus Curiae on behalf of Association of Washington Business.

Harold Malkin, Jordan Gross, Yarmuth Wilsdon Calfo PLLC, Seattle, WA, Robin S. Conrad, Amar Sarwal, National Chamber Litigation Center, Inc., Washington, DC, Aphrodite Kokolis, Schiff Hardin LLP, Chicago, IL, Amicus Curiae on behalf of Chamber of Commerce.

James Condon Grant, Shelley Marie Hall, Stokes Lawrence PS, Kelly Twiss Noonan, Seattle, WA, Amicus Curiae on behalf of The Wireless Association CTIA.

Deborah Zuckerman, AARP Foundation, Washington, DC, David A. Leen, Leen & O'Sullivan PLLC, Seattle, WA, Amicus Curiae on behalf of AARP, Amicus Curiae on behalf of National Association of Consumer Advocates.

John Donahue Wilson Jr., Wilson Smith Cochran Dickerson, Seattle, WA, Amicus Curiae on behalf of AARP, Amicus Curiae on behalf of Intel Corporation, Amicus Curiae on behalf of Amazon.com, Inc., Amicus Curiae on behalf of RealNetworks, Inc.

Edward Crane, Andrew Jarzyna, Skadden ARPS Slate Meagher & Flom LLP, Chicago, IL, Amicus Curiae on behalf of Intel Corporation.

David Thomas McDonald, Kirkpatrick & Lockhart Preston Gates Ell, Seattle, WA, Amicus Curiae on behalf of Microsoft Corporation.

CHAMBERS, J.

[160 Wn.2d 847]¶ 1 The plaintiffs below filed a class action suit against Cingular Wireless (Cingular) alleging that Cingular had overcharged consumers between $1 and around $45 per month by unlawfully adding roaming and hidden charges. The trial court entered an order compelling individual arbitration based on an

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arbitration clause in Cingular's standard subscriber contracts. That arbitration clause contained a provision prohibiting class action litigation or arbitration. Plaintiffs contend that class action waiver is unconscionable and unenforceable.

¶ 2 We took direct review [1 and conclude that the class action waiver is unconscionable because it effectively denies large numbers of consumers the protection of Washington's Consumer Protection Act (CPA), chapter 19.86 RCW, and because it effectively exculpates Cingular from liability for a whole class of wrongful conduct. It is, therefore, unenforceable. Since the arbitration clause itself provides that if any part is found unenforceable, the entire clause shall be void, there is no basis to compel arbitration. Accordingly, we vacate the order compelling arbitration and remand to the trial court for further proceedings consistent with this opinion.

I

¶ 3 Plaintiffs Doug Scott, Loren and Sandra Tabasinske, and Patrick and Janet Oishi (plaintiffs) purchased cellular telephones and calling plans from Cingular. The contracts they all signed were standard preprinted agreements that included a clause requiring mandatory arbitration. That arbitration clause, in turn, contained a provision prohibiting consolidation of cases, class actions, and class arbitration. Cingular also retained the right to unilaterally revise the agreement and, in July 2003, did so. Customers were informed via a monthly "bill stuffer" titled in bold print, "IMPORTANT INFORMATION CONCERNING YOUR [160 Wn.2d 848] CONTRACT." Clerk's Papers (CP) at 355. The revised arbitration clause still prohibited class actions. CP 355-56.2 It also specified that arbitration would be conducted according to American Arbitration Association (AAA) rules; that Cingular would pay the filing, administrator, and arbitration fees unless the customer's claim was found to be frivolous; that Cingular would reimburse the customer for reasonable attorney fees and expenses incurred for the arbitration (provided that the customer recovered at least the demand amount); and that the arbitration would take place in the county of the customer's billing address. It also removed limitations on punitive damages.

¶ 4 The plaintiffs' underlying suit asserts that they were improperly billed for long distance and/or out-of-network "roaming" calls [3 and that as a result of these improper billing practices, individual customers were overcharged up to $45 a month. Plaintiffs filed a class action suit to challenge the legality of these additional charges. While the plaintiffs admit no individual consumer suffered a significant loss, they claim that in the aggregate, Cingular unilaterally overcharged the public by very large sums of money.

¶ 5 Cingular moved to compel individual arbitration. Plaintiffs resisted, arguing that the class action waiver is substantively and procedurally unconscionable and thus [160 Wn.2d 849] unenforceable. Among other things, they assert that the agreement is overly one-sided because it is inconceivable that Cingular would bring a class action suit against its customers. They also argue that the class action waiver, at least when coupled with the attorney fee provision, will prevent meritorious claims from being heard. In support, the plaintiffs submitted a declaration from attorney Sally Gustafson Garratt, who had previously served as the division chief for consumer

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protection in the Washington State attorney general's office. She declared that the attorney general's office did not have sufficient resources to respond to many individual cases and often "relied on [] private class action to correct the deceptive or unfair industry practice and to reimburse consumers for their losses." CP at 1571, 1567-77. The plaintiffs also submitted a declaration of Peter Maier, an attorney in private practice who specialized in consumer law. He explained that the claims against Cingular "are too small and too complex factually and legally" to be adjudicated separately. CP at 1582. Maier declared that he would be unwilling to take on such cases and opined, "it is very unlikely that any other private practice attorney would be willing to do so." CP at 1585.

¶ 6 The trial court granted Cingular's motion, concluding that although Cingular's contract is a contract of adhesion, it is not sufficiently complex, illegible, or misleading to be deemed procedurally unconscionable. The court also found no substantive unconscionability. We accepted review, and received helpful amicus curiae briefs from the American Association of Retired Persons and the National Association of Consumer Advocates; from Amazon.com, Inc., Intel Corporation, Microsoft Corporation, and RealNetworks, Inc.; from the Association of Washington Business; from the Chamber of Commerce of the United States of America; from the Attorney General of Washington; from CTIA--The Wireless Association; and from the Washington State Trial Lawyers Association Foundation.

¶ 7 In essence, plaintiffs and their supporting amici argue Cingular's class action waiver is substantively and [160 Wn.2d 850] procedurally unconscionable. They contend it both denies consumers a meaningful opportunity to prove their cases and undermines the protections of Washington's CPA.

¶ 8 Cingular and its supporting amici argue, however, that the majority of courts (at least at the time they made the argument) addressing the question have found class action waivers enforceable. E.g., Jenkins v. First Am. Cash Advance of Ga., 400 F.3d 868 (11th Cir.2005); Iberia Credit Bureau, Inc. v. Cingular Wireless L.L.C., 379 F.3d 159, 174 (5th Cir.2004); Snowden v. Checkpoint Check Cashing, 290 F.3d 631, 638-39 (4th Cir.2002); Dale v. Comcast Corp., 453 F.Supp.2d 1367, 1377 (D.Ga.2006) (applying Georgia law); Tillman v. Commercial Credit Loans, Inc., 177 N.C.App. 568, 629 S.E.2d 865, 875 (2006); AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 199-200 (Tex.App.2003). Plaintiffs respond that an increasing number of courts have found class action waivers in arbitration clauses substantively unconscionable. E.g., Ting v. AT & T, 319 F.3d 1126, 1150 (9th Cir.2003); Skirchak v. Dynamics Research Corp., 432 F.Supp.2d 175, 181 (D.Mass.2006); Edwards v. Blockbuster Inc., 400 F.Supp.2d 1305, 1309 (E.D.Okla.2005); Luna v. Household Fin. Corp. III, 236 F.Supp.2d 1166, 1178 (W.D.Wash.2002); Lozada v. Dale Baker Oldsmobile, Inc., 91 F.Supp.2d 1087, 1105 (W.D.Mich.2000); Leonard v. Terminix Int'l Co., L.P., 854 So.2d 529, 538 (Ala.2002); Discover Bank v. Superior Court of Los Angeles, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (2005); Powertel, Inc. v. Bexley, 743 So.2d 570, 576 (Fla.Dist.Ct.App.1999); Kinkel v. Cingular Wireless, L.L.C., 223 Ill.2d 1, 47, 857 N.E.2d 250, 306 Ill.Dec. 157 (2006); Whitney v. Alltel Commc'ns,...

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