Court Bars AT&T; Plan on Dispute Resolution

A federal court in California has struck down AT&T; Corp.’s 5-month-old requirement that consumers refer all disputes to arbitration, saying the company was illegally trying to limit its liability by restricting a consumer’s right to sue.

U.S. Magistrate Judge Bernard Zimmerman said AT&T; was “disingenuous” in arguing that its mandatory-arbitration provision was designed to give consumers a broad range of options to resolve disputes. “I find AT&T;’s principal purpose was to put sufficient obstacles in the path of litigants to effectively deter many claims from being pursued,” Zimmerman said in a ruling made public Wednesday.

The ruling was issued by the U.S. District Court for the Northern District of California and applies to 7 million AT&T; customers in California. Arbitration experts said Wednesday that the decision could have broad implications for consumers and companies across the country, as mandatory-arbitration provisions have been adopted in recent years by a growing number of firms, including banks, retailers, computer makers and health maintenance organizations.

Arbitration experts said Zimmerman’s ruling was significant, partly because it upholds arbitration in general.

At the same time, “it provides additional guidance to businesses that want to include arbitration provisions in their contracts with consumers,” said Washington lawyer Eric Mogilnicki.

AT&T; said Wednesday that it planned to appeal Zimmerman’s ruling.