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Cell Phone 'Choice of Law' Clause Unlawful, Judge Finds

Tuesday's decision was the first of its kind in a federal court that struck down the choice of law clause, said Harvey Rosenfield, a lawyer with the California-based non-profit Consumer Watchdog and co-counsel for the plaintiffs in the case, Coneff v. AT&T. "The groundbreaking part of this ruling is the federal district court understands the choice of law provision was as anti-consumer as the arbitration provision," he said. "The choice of law provision was designed by AT&T to prevent a national class action and deprive consumers in some states around the country of their right to participate in this class action."A U.S. judge ruled Tuesday that the "choice of law" provision - a clause many cell phone and credit card companies include in their contracts that creates an obstacle for class action lawsuits - is unlawful, potentially opening the door for other courts to rule in favor of consumers trying to file class actions against corporations.

The ruling, by U.S. District Judge Ricardo Martinez in Seattle, also struck down an arbitration provision in AT&T's contract that waives customers' rights to file a class action lawsuit, forcing them to bring their claims individually or go to arbitration.

Tuesday's decision was the first of its kind in a federal court that struck down the choice of law clause, said Harvey Rosenfield, a lawyer with the California-based non-profit Consumer Watchdog and co-counsel for the plaintiffs in the case, Coneff v. AT&T.

"The groundbreaking part of this ruling is the federal district court understands the choice of law provision was as anti-consumer as the arbitration provision," he said. "The choice of law provision was designed by AT&T to prevent a national class action and deprive consumers in some states around the country of their right to participate in this class action."

AT&T spokesman Marty Richter said the company disagrees with the ruling, calling AT&T's arbitration clause "among the most consumer-friendly in the nation." He declined comment on the choice of law clause.

"We're studying this ruling and considering our options," he said.

Rosenfield's group leads a team of consumer advocates and law firms around the nation who represent 16 AT&T Wireless customers who say they were overcharged and received poor service when AT&T and Cingular merged in 2004. Cingular dismantled AT&T's network, forcing former AT&T customers to buy new phone equipment, move to more expensive plans or pay fees to move to another wireless provider.

Martinez has not set a date for trial in the case.

The choice of law clause, now invalidated by Martinez's ruling, requires customers who have a dispute with a company to file the lawsuit in the state in which they live. This can work against consumers because some states are more protective of consumers' rights to a class action suit than other states, Rosenfield said.

Although California has strong consumer protection laws, the plaintiffs attorneys said the ruling was a victory for all AT&T customers because it holds the wireless provider accountable to its customers. California-headquartered companies will be less likely to evade accountability to its customers under this decision, Rosenfield said.

"[The] decision confirms that AT&T does not have unlimited right to immunize itself from accountability under the law," said Kevin Coluccio of Stritmatter, Kessler, Whelan and Coluccio, the Seattle-based law firm representing some of the plaintiffs.

Contact the author at: catherine_ho@dailyjournal.com