Chapter 4 - Constitutional Authority to Regulate Business s2

BLTC-9e Case Problem with Sample Answer Chapter 3: Courts and Alternative Dispute Resolution

3.5 Case Problem with Sample Answer

Kathleen Lowden sued cellular phone company T-Mobile, claiming that its service agreements were not enforceable under Washington state law. Lowden sued to create a class-action suit, in which her claims would extend to similarly affected customers. She contended that T-Mobile had improperly charged her fees beyond the advertised price of service and charged her for roaming calls that should not have been classified as roaming. T-Mobile moved to force arbitration in accord with the arbitration provision in the service agreement. The arbitration provision was clearly explained in the service agreement. The agreement also specified that no class-action suit could be brought, so T-Mobile asked the court to dismiss the class-action request. Was T-Mobile correct that Lowden’s only course of action would be to file arbitration personally? [Lowden v. T-Mobile USA, Inc., 512 F.3d 1213 (9th Cir. 2008)]

Sample Answer:

Based on a recent holding by the Washington state supreme court, the federal appeals court held that the arbitration provision was invalid as unconscionable. Because it was invalid, the restriction on class-action suits was also invalid. The state court held that for consumers to be offered a contract that class-action restrictions placed in arbitrations agreements improperly stripped consumers of rights they would normally have to attack certain industry practices. Such suits are often brought in cases of deceptive or unfair industry practices when the losses suffered by the individual consumer are too small to warrant a consumer bringing suit. That is, the supposed added cell phone fees are small, so no one consumer would be likely to litigate or arbitrate the matter due to the expenses involved. Eliminating that cause of action by the arbitration agreement violates public policy and is void and unenforceable.