The 9th Circuit has held that a class action suit against New Cingular Wireless Services, now known as AT&T, can face a jury, finding an arbitration waiver included in the company's standard customer contract is “unconscionable, and, thus, unenforceable.”

In the opinion, Judge Stephen Reinhardt wrote, “We do not hold that all class action waivers are necessarily unconscionable. But when … it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money … by California law, the waiver becomes in practice the exemption of the party 'from responsibility for its own fraud, or willful injury to the person or property of another.'”

Kennith Shroyer filed a class action lawsuit over injury allegedly suffered when the wireless phone company merged with AT&T to become New Cingular Wireless Services. A few months later, Cingular moved to compel arbitration, citing its arbitration clause. The clause states that customers must arbitrate any disputes and claims, and goes on to say, “You and Cingular may bring claims against the other only in your or its individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding,” including consolidated arbitration.

Cingular argued the clause was valid and enforceable under the Federal Arbitration Act. The 9th Circuit cited its opinion in Ting v. AT&T, where the court found class action waivers unconscionable. In Ting, the 9th Circuit explained that “because unconscionability is a generally applicable contract defense, it may be applied to invalidate an arbitration agreement without contravening of the FAA.”

In its ruling the court also struck down Cingular's claim that the risks and inefficiencies of class arbitrations would drive businesses in California to abandon arbitration.

“[Cingular] offers no empirical evidence to support this bold assertion,” Reinhardt wrote. “Hundreds of companies across the nation are currently engaging in and receiving the benefits of class arbitration.”