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A federal district court in California has refused to compel arbitration of a dispute after finding a class action waiver in a cell phone contract unconscionable.
In Bradberry v. T-Mobile USA, Inc., No. C 06-6567 CW, 2007 WL 1241936 (N.D. Cal. Apr. 27, 2007), Bradberry purchased cell phone service from an authorized T-Mobile USA, Inc. (T-Mobile) dealer. He was allegedly assigned a "dirty number" – a previously used number that was encumbered with pre-existing monthly subscriptions to services.
Finding himself unable to "unsubscribe" from these services, Bradberry filed suit on behalf of himself and others in a class similarly situated to him. T-Mobile sought to enforce a class action waiver, and have the dispute removed to arbitration.
The Court found the waiver both procedurally and substantively unconscionable. The main procedural problem was that Bradberry did not receive notice of the class action waiver in the Service Agreement or his invoice, the only documents he received. Instead, the waiver was contained in the "Terms and Conditions," where it was located on the first page. Therefore, the Court found this unconscionable because it was a "surprise."
Substantive unconscionability was established by the fact that the dispute allegedly involved "a scheme to deliberately cheat large numbers of consumers out of individually small sums of money." See Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005).
Because the contract contained a clause stating that if a court found the class action waiver to be unenforceable, the arbitration agreement would not apply, the court denied T-Mobile's request to compel arbitration.
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