Supreme Court Rejects T-Mobile’s Appeal

AP has reported in a dispatch dated May 28 from Washington that Supreme Court has rejected T-Mobile’s appeal in T-Mobile v. Laster case. T-Mobile appealed against Californian High Court’s order in respect of ignoring the arbitration clause laid down in contracts executed by T-Mobile with its consumers.

T-Mobile stipulates in its contracts with consumers that all disputes need to be resolved through arbitration and expressly prohibits any class action lawsuits.

Along with many other states, California, where this class action suit was filed, felt such a restriction is inherently unfair to customers and decided to ignore the arbitration clause stipulated in the contract. T-Mobile thought otherwise and felt arbitration clause comes under the purview of federal laws and should override any other state level statute to the contrary.

Generally companies prefer arbitration over litigation since it is a cheaper and faster alternative to put an end to disputes and T-Mobile smelt danger if the courts chose to ignore the arbitration clause and decided on solving a dispute through properly structured litigation. It apprehended a deluge of costly lawsuits if this takes place. So, it appealed to Supreme Court and tried to impress upon the judiciary the supremacy of a federal law over any state law.

Supreme Court, however, has ruled any state court can choose to ignore arbitration clause if the contract also includes a restriction on class action law suits. It felt by banning class action lawsuits, companies try to escape the liability where each complainant individually suffered a small amount of money but when all such small amounts were added together it totaled to a considerably large sum.
This decision will undoubtedly lit up the faces of numerous consumers who felt they were cheated but could do precious little about it as the money involved was too small to get into the hassles of a protracted legal battle.

(May 29, 2008)