Judge throws out AT&T’s private resolution system

The Associated Press
Friday January 18, 2002

SAN FRANCISCO — A federal judge has denounced AT&T’s private system of resolving disputes as an “illegal and unconscionable” attempt to deprive telephone customers of their legal rights. 

On Wednesday, U.S. Magistrate Judge Bernard Zimmerman found that AT&T’s arbitration system puts long-distance customers at a disadvantage. Binding arbitration is a quasi-legal process of resolving disputes without laws, juries or constitutional rights. 

Zimmerman’s ruling strikes down AT&T’s attempt in August to impose rules on California customers that would have barred them from joining in class-action suits, limited damages for fraud and other intentional wrongdoing and made filing complaints in certain cases prohibitively expensive. 

“It is not just that AT&T wants to litigate in the forum of its choice — arbitration,” Zimmerman wrote. “It is that AT&T wants to make it very difficult for anyone to effectively vindicate her rights, even in that forum.” 

AT&T spokesman Gordon Diamond said Thursday that binding arbitration is a quick and convenient way to resolve disputes and that AT&T settles the overwhelming majority of its disputes over the phone. 

“This is a process that’s widely used in the wireless industry, the credit card industry, it’s not something that’s unique to AT&T,” Diamond said. AT&T plans to appeal the decision, he said. 

Zimmerman’s decision came a day after the U.S. Supreme Court ruled that an arbitration agreement could not block a federal agency from seeking damages in court for victims of employment discrimination. 

Together, the cases indicate a potential shift in the consistent support from federal courts for corporate policies that force employees, stockholders, patients and other consumers into binding arbitration.