Commentary

Web Users, Wireless Customers Feel Impact Of Supreme Court Ruling

This April, the U.S. Supreme Court ruled that AT&T was entitled to uphold a clause in its terms of service requiring consumers to resolve disputes in arbitration. At the time, observers predicted that the ruling could have a far-reaching impact on class-action lawsuits on behalf of consumers.

Now it looks like those predictions are coming true. Earlier this month a federal judge in California granted gaming developer Zynga's request to send a lawsuit by Web user Rebecca Swift to arbitration. Swift alleged that ads in Zynga games on Facebook duped users by purporting to offer "free" trial subscriptions, but then refusing cancellation requests.

This week a federal appeals court arrived at a similar ruling in a case against Verizon Wireless. The company was sued by consumers who alleged fraudulent billing. Verizon said its contract with users prohibited class-actions and required them to bring disputes to an arbitrator. Last year a federal appellate court sided with the consumers, ruling that they could proceed in court. But this week the appeals court reversed itself and said the consumers had to file individual claims in arbitration.

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As a practical matter, however, consumers aren't nearly as likely to find lawyers willing to bring individual cases in arbitration rather than pursue class-actions. Largely that's because judges are able to award attorneys who win class-actions hefty attorneys' fees.

Many businesses understandably cheer this prospect, but class-actions can play a large role in protecting Web users. This appears especially true when it comes to disputes over net neutrality, given that the Federal Communications Commission's power to enforce neutrality principles was severely curtailed last year by a federal appellate court.

In that case, the court ruled that the FCC lacked jurisdiction to sanction Comcast for violating neutrality principles. Nonetheless consumers who had sued Comcast for throttling traffic were able to proceed with their case alleging that the broadband provider broke its contract with consumers by preventing them from using peer-to-peer applications. Comcast eventually agreed to a $16 million settlement.

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