Court Rules AT&T; Policies Violate State Laws

Long-distance telephone giant AT&T; Corp. cannot force California customers to use private judges to resolve disputes, the U.S. 9th Circuit Court of Appeals ruled Tuesday.

The justices sided with a consumer group that claimed AT&T;’s customer service agreements violated California law by requiring people to settle disputes through arbitration and placing other restrictions on their legal rights.

The ruling comes as AT&T; raises some consumer calling rates to help reverse falling sales. AT&T;, with 50 million residential long-distance customers, had a 20% drop in fourth-quarter sales to $2.7 billion.

The ruling by the San Francisco-based court, however, is at odds with one from the 7th Circuit, which is based in Chicago, and the issue could be reviewed by the U.S. Supreme Court.

A federal judge in California halted AT&T; from enacting the new customer rules in 2001 after finding that they violated state law and were disclosed in notices that AT&T;’s own research showed were designed to ensure that few customers would read.

AT&T; appealed the ruling. The case was first brought by Consumer Action on behalf of 7 million AT&T; residential customers in California.

In arbitration, disputes are taken to retired judges or outside experts who, at company expense, hold hearings, conduct investigations and issue rulings that are often binding.

AT&T; rules prevent consumers from banding together to file lawsuits and limit the amount of money they can recover.

Shares of AT&T; fell 7 cents to $17.81 on the New York Stock Exchange composite trading.