WASHINGTON - The Supreme Court handed a defeat to T-Mobile USA Inc. Tuesday, rejecting the company's appeal in three cases involving the legal remedies available in millions of cell phone contracts.
The issue in the three cases is the same: whether state laws that limit the ability of companies to prohibit consumers from banding together to pursue class action lawsuits are preempted by federal law.
T-Mobile included a prohibition on class actions in a part of its contracts that also required consumers to resolve any complaints through arbitration. The company's lawyers argued in court papers that federal law, which generally requires that arbitration clauses be enforced, overrules those state laws that limit the ability of companies to ban class actions.
Under contract laws in many states, class-action bans are considered inherently unfair and courts, including those in California, where the dispute originated, can choose to not enforce them.
Companies generally support arbitration because they consider it a faster and cheaper way to resolve disputes than litigation. Clauses requiring arbitration are included in millions of consumer contracts issued by credit card, cell phone and cable companies, among others.
A federal appeals court ruled in one of the cases, T-Mobile v. Laster, last October that courts can refuse to enforce arbitration clauses if they include bans on class actions. The Supreme Court's decision, without comment, lets that decision stand and allows the case to proceed to further litigation.
Consumer groups argue that class action bans are unfair, because in legal disputes over small amounts of money, individuals may not have the incentive to file suits.
Banning class actions, as a result, could essentially allow companies to avoid liability for practices that cost large numbers of people small amounts of money, according to court papers filed in the case by the consumer group Public Citizen.
The T-Mobile v. Laster case began when a woman named Jennifer Laster sued the company after buying a phone and signing up for wireless service in San Diego in 2005.
She alleged that T-Mobile engaged in unfair and deceptive business practices by promising free and significantly discounted phones, while charging sales taxes based on the full price of the phone.
The company responded that they were required to charge sales taxes on the full retail price under California law.
T-Mobile is owned by German telecommunications company Deutsche Telekom AG.
Two companion cases, T-Mobile v. Ford, 07-1103, and T-Mobile v. Gatton, 07-1036, were also turned down by the court.
The issue in the three cases is the same: whether state laws that limit the ability of companies to prohibit consumers from banding together to pursue class action lawsuits are preempted by federal law.
T-Mobile included a prohibition on class actions in a part of its contracts that also required consumers to resolve any complaints through arbitration. The company's lawyers argued in court papers that federal law, which generally requires that arbitration clauses be enforced, overrules those state laws that limit the ability of companies to ban class actions.
Under contract laws in many states, class-action bans are considered inherently unfair and courts, including those in California, where the dispute originated, can choose to not enforce them.
Companies generally support arbitration because they consider it a faster and cheaper way to resolve disputes than litigation. Clauses requiring arbitration are included in millions of consumer contracts issued by credit card, cell phone and cable companies, among others.
A federal appeals court ruled in one of the cases, T-Mobile v. Laster, last October that courts can refuse to enforce arbitration clauses if they include bans on class actions. The Supreme Court's decision, without comment, lets that decision stand and allows the case to proceed to further litigation.
Consumer groups argue that class action bans are unfair, because in legal disputes over small amounts of money, individuals may not have the incentive to file suits.
Banning class actions, as a result, could essentially allow companies to avoid liability for practices that cost large numbers of people small amounts of money, according to court papers filed in the case by the consumer group Public Citizen.
The T-Mobile v. Laster case began when a woman named Jennifer Laster sued the company after buying a phone and signing up for wireless service in San Diego in 2005.
She alleged that T-Mobile engaged in unfair and deceptive business practices by promising free and significantly discounted phones, while charging sales taxes based on the full price of the phone.
The company responded that they were required to charge sales taxes on the full retail price under California law.
T-Mobile is owned by German telecommunications company Deutsche Telekom AG.
Two companion cases, T-Mobile v. Ford, 07-1103, and T-Mobile v. Gatton, 07-1036, were also turned down by the court.
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