Observing that California had no more than a minimal interest in a cell phone dispute between T-Mobile and individual residents of other states, a California federal district court has refused to invalidate a class action waiver under California law, and instead enforced the waiver under the laws of the individuals' domicile states.

In In re Jamster Mktg. Litig., MDL No. 1751, No. 05-CV-0819 JM(CAB), 2008 WL 4858506 (S.D. Cal. Nov. 10, 2008), Maryland resident Hall, Mississippi resident Chunn, and Illinois residents Giles and Harmon alleged wrongful charges on their T-Mobile accounts. The customers brought a class action suit against T-Mobile for damages. T-Mobile moved to compel individual arbitration of the claims in accordance with the parties' agreements. The customers opposed, alleging that the class action waiver was unconscionable.

The Court acknowledged that the enforceability of the class action waiver turned on the parties' choice of law. The parties' agreements contained a choice of law provision selecting the law of each individual's state of residence. The customers maintained that California law should instead control.

In a California court, choice of law enforceability is governed by the standard in Restatement (Second) of Conflict of Laws § 187, whereby the chosen law is governing unless it is "contrary to a fundamental policy of a state which has a materially greater interest [in the issue] than the chosen state." Here, the parties agreed that the state of residence was reasonably selected as controlling, but disagreed as to whether California had a materially greater interest in the dispute than the individuals' domicile states.

The Court concluded that the residence states of Maryland, Mississippi, and Illinois had a materially greater interest in the dispute, noting that contracting, performance, and the alleged wrong all occurred in those individual residence states. "It is difficult to see that California has anything other than a minimal interest in applying its laws to…alleged wrongs occurring outside its territory," observed the Court.

The Court then determined that the class action waiver was enforceable under all three states' laws. See Walther v. Sovereign Bank, 872 A.2d 735, 750 (Md. 2005) (class action waivers are not so one-sided as to make them unconscionable under Maryland law); Steed v. Sanderson Farms, Inc., 2006 WL 2844546, at *10 (S.D. Miss. Sept. 29, 2006) (similar preclusion of multi-party arbitrations by contract is not unconscionable in Mississippi); Crandal v. AT&T Mobility, LLC, 2008 WL 2796752, at *5 (S.D. Ill. July 18, 2008) (combination of limited costs to consumer and availability of cancellation period after notice of class action waiver vitiated unconscionability in Illinois).

Accordingly, the Court enforced the class action waiver, ordered individual arbitration of the claims, and dismissed the suits without prejudice.