Amicus Curiae Brief — T-Mobile USA, Inc. v. Laster (No. 07-976)

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FEB 25 208

No. @). OFFICE OF THE at

IN THE

Supreme Court of the United States

T-MOBILE USA, INC., ET AL.,

| Petitioners,

JENNIFER L. LASTER, ET AL.,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

BRIEF FOR AMICUS CURIAE

CTIA - THE WIRELESS ASSOCIATION

IN SUPPORT OF PETITIONERS

MICHAEL F.. ALTSCHUL IAN HEATH GERSHENGORN*

CTIA — THE WIRELESS DONALD B. VERRILLI, JR.

ASSOCIATION MICHELLE A. GROMAN

1400 Sixteenth St., N.W. JENNER & BLOCK LLP

Suite 600 601 Thirteenth St., N.W.

Washington, DC 20036 Washington, DC 20005

(202) 785-0081 (202) 639-6000

February 25, 2008 * Counsel of Record

TABLE OF CONTENTS

TABU OF AUTRES orasiscscnssincsnsssersesscssasessacssesnan’ li

INTEREST OF AMICUS CURIAE ....0.0....0c cece 1

INTRODUCTION AND SUMMARY OF

PE ER bss iscsissisniiscreneaaiaidaade sets cadlaads 2

REASONS FOR GRANTING THE PETITION........... 5

I. The Court Should Grant Review to

Clarify the Scope of Permissible State

Court Interference with Arbitration

be AEE SOP De NT Oe TI, LE HONE 5

II. The Court Should Grant Review Because

the Ninth Circuit’s Decision Will Have a

Sweeping Negative Impact on _ the

Wireless Communications Industry and

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TABLE OF AUTHORITIES

CASES

Allied-Bruce Terminix Cos. v. Dobson, 513

I 8,17

Connecticut Department of Income

Maintenance v. Heckler, 471 U.S. 524

as saeseekdaubppunssbiieaide 7

Discover Bank v. Superior Court, 113 P.3d

I I ois os <acscésnidenivadaccasienibate 10, 18

Doctor's Associates, Inc. v. Casarotto, 517

ETL Rem ese swears Preep aante ae 9

Gay v. CreditInform, 511 F.3d 369 (3d Cir.

EEE SES IR SARC a Ee TET aaa 2,6

Gilmer v. Interstate/Johnson Lane Corp.,

Ne BE POND wi cacscnisceves sanenesennasiincncies 6, 7, 18

Johnson v. West Suburban Bank, 225 F.3d

i ic Js cadcaaicesGutenusionsaceaes 18

Lowden v. T-Mobile USA, Inc., 512 F.3d

pe By Ee i.) a ee 13

Meinhold v. Sprint Spectrum L.P., No. 07-

0456, 2007, WL 1456141 (E.D. Cal. May

atic eck uc indaliecenistunquveaubscyunenbuctekevensss 15

Meinhold v. Sprint Spectrum, L.P., No. 07-

0456, 2007 WL 2904003 (E.D. Cal. Oct. 2,

lids Ie ial ra Adsaniakbusyaaseniaavouateondoananes 15

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614 (1985) ................ 6

iil

Moses H. Cone Memorial Hospital uv.

Mercury Construction Corp., 460 U.S. 1

National Railroad Passenger Corp. uv.

Consolidated Rail Corp., 892 F.2d 1066

CE Ge adits dX ctiratsabis tidincenaiicccstainvbiniens 8

Perry v. Thomas, 482 U.S. 483 (1987)................0. 9

Preston vu. Ferrer, No. 06-1463, 2008 WL

440670 (U.S. Feb 20, 2008) .....................08 9,14

Scherk v. Alberto-Culver Co., 417 U.S. 506

ie aks 6

Snowden v. CheckPoint Check Cashing, 290

Pek GS) CAGE Cir, BOD aivsaiescccnssnnticrsccedssccisess 18

Supak & Sons Manufacturing Co. v. Pervel

Industries, Inc., 593 F.2d 135 (4th Cir.

Ting v. AT&T, 182 F. Supp. 2d 902 (N.D.

Cal. 2002), affd in part & rev'd in part,

319 F.3d 1126 (9th Cir. 2003) ...................0000 16

Volt Information Sciences, Inc. v. Board of

Trustees, 489 U.S. 468 (1989)...................c000 5-6

Zuni Public School District No. 89 v.

Department of Education, 127 S. Ct. 1534

adits carncdincrhthcnoicwidincinitiscannnaeeenaciencutusacadinsaanBins 9

STATUTES

eRe itieisiieuslessstvans dcscsiecathaiuibctvlaiaesosdwadsiittetetebien 5, 7

Cal. Code Regs. tit. 18, § 1585(b)(3) ........e.ceseeee- 14

LEGISLATIVE MATERIALS

H.R. Rep. No. 97-542 (1982), as reprinted in

BOE CI ERCAC.ALIN. TGD ........0200.sccsrcsscosssccosssese 13

MISCELLANEOUS

In re Annual Report and Analysis of

Competitive Market Conditions With

Respect to Commercial Mobile Services,

FCC 08-28, WT Docket No. 07-71 (Feb. 4,

Fed. Trade Comm’n, Resolving Consumer

Disputes: Mediation and Arbitration,

http://www. ftc.gov/bcp/edu/pubs/consume

r/general/gen05.shtm (last visited Feb.

BE, RAISES Ee g ORICA A OPO NATO 17

First. Am. Compl., Laster v. T-Mobile USA,

Inc., No. 05-1167 (S.D. Cal. filed Aug. 12,

Harris Interactive, Arbitration: Simpler

Cheaper, and Faster Than Litigation

(Apr. 2005) (conducted for U.S. Chamber

Institute for Legal Reform), available at

http://www. instituteforlegalreform.com/is

sues/docload.cfm?docld=489..................066 16-17

Kirk D. Jensen, Can Financial Institutions

Be Required to Arbitrate on a Class-Wide

Basis Notwithstanding Provisions That

Prohibit Class Arbitration?, 122 Banking

Nice. Sate RR 2s oi ance es ster Gonna bncntadstdegasinaaline 16, 18

Litman v. Cellco Partnership, No. 07-4886

RP ccssishinciieintlaDigcsielenGhintuaiestnadbebinis 14

Sprint Nextel, Terms & Conditions,

http://nextelonline.nextel.com/ef/legal/leg

al_terms_privacy_popup.shtml (last

VREIROE, FOR. BE, Di sss vvcnssvecscncccesescevesess 11,12

Verizon Wireless, Customer Agreement,

http://www.verizonwireless.com/b2c/inde

x. html (last visited Feb. 22, 2008) ................. 11

Wesley A. Sturges, A Treatise on

Commercial Arbitrations and Awards

EE bi ad ial i cisieidi tls tachuvatwansiiaseraiabecaadane 7,8

INTEREST OF AMICUS CURIAE'

CTIA — The Wireless Association (“CTIA”) is the

international organization of the wireless

communications industry for wireless carriers and

their suppliers. CTIA regularly advocates on behalf

of its members in judicial, legislative, and regulatory

matters.

Like petitioner T-Mobile USA, Inc. (“T-Mobile”) —

itself a CTIA member — CTIA members generally

provide wireless communications services pursuant

to uniform nationwide agreements. Those

agreements regularly incorporate alternative dispute

resolution provisions that rely on _ individual

arbitration to resolve customer disputes, helping

wireless carriers to continue to offer products and

services at reduced rates and providing wireless

consumers a quick and cost-effective method for

resolving their disputes.

The decision of the Ninth Circuit in this case

threatens to alter dramatically the way CTIA

members conduct their business. By blessing the

efforts of California and other States to advance anti-

arbitration policies in contravention of federal law,

' The parties have consented to the filing of this brief. Counsel

for all parties have been given notice of the amicus curiae’s

intention to file this brief as required by Supreme Court Rule

37.2(a). No counsel for a party authored this brief in whole or

in part, and no counsel or party made a monetary contribution

intended to fund the preparation or submission of this brief. No

person other than amicus curiae, its members, or its counsel

made a monetary contribution to its preparation or submission.

the Ninth Circuit has undermined the utility of

arbitration agreements and has cast uncertainty on

the provisions contained in the contracts of hundreds

of millions of wireless customers. The result will be

higher costs and uncertainty for CTIA members and

the threat of correspondingly higher rates for their

customers. Accordingly, CTIA has a strong interest

in making sure that this Court reviews, and

ultimately reverses, the Ninth Circuit’s decision

here.

INTRODUCTION AND SUMMARY OF

ARGUMENT

The Ninth Circuit’s decision undermines the

Federal Arbitration Act (“FAA”) and fosters a climate

of hostility toward arbitration, imposing substantial

and unnecessary costs on the hundreds of millions of

customers that rely on wireless communications

services. CTIA thus urges this Court to grant T-

Mobile’s petition.

I. The Ninth Circuit’s decision is directly at odds

with the FAA. As the Third Circuit correctly held in

Gay v. CreditInform, 511 F.3d 369 (3d Cir. 2007), a

categorical prohibition on individual arbitration

provisions is inconsistent with the purposes of the

FAA. Moreover, the text and history of the FAA

make clear that Congress never intended for state

policy judgments about what is substantively unfair

to provide a ground for invalidating an otherwise

proper arbitration clause. This case provides the

Court with an opportunity not only to resolve the

conflict between Gay and the decision below, but also

to clarify the limited role of state law in assessing

the validity of arbitration clauses generally. If an

arbitration clause is “valid” and “enforceable” once

properly formed in a contract, then post-formation

state law doctrines, such as _ substantive

unconscionability, are expressly preempted by the

FAA.

II. The Ninth Circuit’s decision will have a

sweeping impact on the wireless communications

industry and on consumer businesses generally.

First, virtually all members of the wireless industry

— like those of many other industries — rely on

alternative dispute resolution mechanisms to resolve

disputes efficiently and to reduce costs for their

customers. Individual arbitration clauses appear in

hundreds of millions of subscriber contracts

throughout the United States, and virtually all of

those arbitration provisions are called into question

if the Ninth Circuit’s decision survives.

Second, the Ninth Circuit’s decision will generate

substantia] and unnecessary litigation. The Ninth

Circuit’s decision directly conflicts with the Third

Circuit's decision in Gay, and is sure to create

widespread uncertainty and confusion. Wireless

carriers will be forced to litigate Circuit by Circuit

and State by State to determine when, under the

FAA, state unconscionability law renders individual

arbitration provisions unenforceable. Moreover, in

those States in which individual arbitration clauses

are foreclosed, class action litigation will multiply,

and carriers will be forced to defend what are often

frivolous lawsuits that could be handled more

efficiently and effectively through arbitration.

Third, the Ninth Circuit’s decision unnecessarily

ousts efficient market solutions. Wireless carriers

operate in a highly competitive marketplace,

resulting in better services at lower prices for

consumers. In that market, there is a premium on

maintaining customer loyalty — carriers have a

substantial economic incentive to avoid losing

customers. For that reason, most customer disputes

are settled at the customer service level, and

subscribers who take advantage of individual

arbitration procedures are ordinarily satisfied with

the outcome. Customers are happy, and the costs of

dispute resolution are kept low. The Ninth Circuit’s

decision, however, forces carriers to abandon

arbitration in favor of class action litigation. The

result will be higher costs for carriers and c: stomers

alike, leaving the plaintiffs’ bar as the only

beneficiary.

Finally, the Ninth Circuit’s intrusion is

particularly inappropriate here, because wireless

competition has generated arbitration clauses that

provide substantial protections to customers.

Wireless service contracts frequently contain

arbitration cost-sharing mechanisms, permit

consumers to elect to litigate in small claims court,

and allow prevailing plaintiffs to pursue awards of

attorneys’ fees. Given these provisions, there is little

likelihood that meritorious claims will be ignored or

that wireless carriers will unjustifiably escape

liability.

For all these reasons, review by this Court is

urgently needed.

REASONS FOR GRANTING THE PETITION

I. The Court Should Grant Review to Clarify

the Scope of Permissible State Court

Interference with Arbitration Clauses.

This Court should grant review not only to

resolve the direct conflict between the decision below

and the Third Circuit’s opinion in Gay, but also to

clarify the limited scope of the FAA’s savings clause

— which the Ninth Circuit plainly misconstrued.

As the Third Circuit correctly held in Gay, a

categorical prohibition on individual arbitration

provisions is inconsistent with the purposes of the

FAA. Indeed, the text and history of the FAA make

clear that Congress never intended for state policy

judgments about what is substantively unfair to

provide a ground for invalidating an otherwise

proper arbitration clause. The Ninth Circuit's

decision is wrong: state policy regarding the

substantive unfairness of contracts that require

resort to individual arbitration proceedings cannot

trump federal policy embodied in the FAA.

The FAA provides that, as a matter of federal

law, agreements to arbitrate are “valid, irrevocable,

and enforceable . . . save upon such grounds as exist

at law or in equity for the revocation of any contract.”

9 U.S.C. §2. As this Court has made abundantly

clear, the “primary purpose” of the FAA is to

“ensur(e] that private agreements to arbitrate are

enforced according to their terms.” Volt Info.

Sciences, Inc. v. Bd. of Trs., 489 U.S. 468, 479 (1989);

see also Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24 (1983) (noting that the

FAA reflects “a liberal federal policy favoring

arbitration agreements”).

California's categorical prohibition on individual

arbitration provisions cannot be reconciled with the

FAA’s text or policy. The Ninth Circuit concluded

otherwise, suggesting that the California courts had

invoked general principles of contract law in holding

that the use of individual arbitration provisions was

substantively unconscionable. But that is the very

reasoning the Third Circuit rejected in Gay:

although the state court cases “are written ostensibly

to apply general principles of contract law, they hold

that an agreement to arbitrate may _ be

unconscionable simply because it is an agreement to

arbitrate.” Gay, 511 F.3d at 395; see also id. (noting

that the state court decisions impermissibly “rely on

the uniqueness of an agreement to arbitrate as a

basis for a state-law holding that enforcement would

be unconscionable” (citation and internal quotation

marks omitted)). As the Third Circuit recognized,

the hostility to arbitration that the Ninth Circuit

condoned is exactly what Congress prohibited when

it passed the FAA. See Gilmer v. Interstate / Johnson

Lane Corp., 500 U.S. 20, 24 (1991); Scherk v. Alberto-

Culver Co., 417 U.S. 506, 510-11 (1974); see also

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614, 626-627 (1985) (“[W]e are well

past the time when judicial suspicion of the

desirability of arbitration and of the competence of

arbitral tribunals inhibited the development of

arbitration as an alternative means of dispute

resolution.”).

The Ninth Circuit’s approach is, moreover,

particularly misguided because the FAA forecloses

all reliance on substantive unconscionability as a

basis for invalidating an arbitration provision.

Section 2 of the FAA provides that arbitration

agreements “shall be valid, irrevocable, and

enforceable” as a matter of federal law unless state

law provides grounds for “revocation.” 9 U.S.C. § 2.

Given Section 2’s distinctive use of “revocation,” on

the one hand, and “valid[ity]” and “enforce{ment]” on

the other, it must be assumed that the terms have

different meanings. See Conn. Dep’t of Income

Maint. v. Heckler, 471 U.S. 524, 530 n.15 (1985) (“It

is a familiar principle of statutory construction that

courts should give effect, if possible, to every word

that Congress has used in a statute.”).

In this instance, the term “revocation” in the

savings clause must be read to provide a defense to

defects in contract formation, not a license for a

State’s unbridled consideration of substantive

unfairness. Thus understood, the FAA sensibly

incorporates the criticism of the common-law

reluctance to enforce contractual provisions that

“oust the courts of their jurisdiction.” See Wesley A.

Sturges, A Treatise on Commercial Arbitrations and

Awards § 15, at 45 (1930) (noting the common law

rule); see also Gilmer, 500 U.S. at 24 (explaining that

the purpose of the FAA “was to reverse the

longstanding judicial hostility to arbitration

agreements that had existed at English common law

and had been adopted by American courts”).

That is, although many courts prior to the FAA

had refused to enforce arbitration provisions, other

courts had held that contracts to arbitrate should be

enforced absent evidence that the agreement was

“induced by fraud, or overreaching, or entered into

unadvisedly through ignorance, folly or undue

pressure” — i.e., agreements to arbitrate should be

enforced absent procedural unconscionability that

calls into question the validity of their formation.

See Sturges, supra, § 15, at 47 (quoting President of

Delaware & Hudson Canal Co. v. Pennsylvania Coal

Co., 50 N.Y. 250 (1872)). It was this approach to

arbitration agreements that the FAA made binding

federal law. Cf. Allied-Bruce Terminix Cos. v.

Dobson, 513 U.S. 265, 281 (1995) (“What States may

not do is decide that a contract is fair enough to

enforce all its basic terms (price, service, credit), but

not fair enough to enforce its arbitration clause. The

[FAA] makes any such state policy unlawful . . . .”);

Natl R.R. Passenger Corp. v. Consol. Rail Corp., 892

F.2d 1066, 1070 (D.C. Cir. 1990) (“[TJhe language of

[Section] 2 . . . indicates that Congress created an

exception to the general rule (that an arbitration

clause will be enforced by its terms) only when there

is a flaw in the formation of the agreement to

arbitrate.”); Supak & Sons Mfg. Co. v. Pervel Indus.,

Inc., 593 F.2d 135, 137 (4th Cir. 1979) (explaining

that Section 2 preempts any law of judicial or

statutory origin that “restrict{s] the validity or

enforceability of arbitration agreements,” but “does

not displace state law on the general principles

governing formation of the contract itself”).

That is the only sensible reading of the Act. It

would make little sense for Congress to guarantee

that arbitration agreements “shall be _ valid,

irrevocable, and enforceable” as a matter of

substantive federal law, yet simultaneously permit

the survival of state judicial or statutory law that

relies on a distrust of arbitration to eliminate all of

the substantive benefits that arbitration provides.

See Zuni Publ. Sch. Dist. No. 89 v. Dep’t of Educ.,

127 S. Ct. 1534, 1545 (2007) (explaining that a

statute should be construed in accordance with its

“basic purpose and history”); see also Preston uv.

Ferrer, No. 06-1643, 2008 WL 440670, at *1 (U.S.

Feb. 20, 2008) (reaffirming that the FAA “establishes

a national policy favoring arbitration when the

parties contract for that mode of dispute resolution”

and “calls for the application . .. of federal

substantive law regarding arbitration”).

In sum, the FAA precludes reliance on

California’s law of substantive unconscionability to

nullify T-Mobile’s agreement to arbitrate, and the

? Neither Perry v. Thomas, 482 U.S. 483 (1987), nor Doctor’s

Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), is to the

contrary. The Court in Perry expressly declined to address the

unconscionability arguments raised in that case, see 482 U.S. at

492 n.9, and the Court in Doctor’s Associates had its focus

trained on procedural concerns, not substantive fairness, 517

U.S. at 687 & n.3. Indeed, this Court has never since the

passage of the FAA upheld the invalidation of a contractual

arbitration provision on the basis of state substantive

unconscionability law.

Ninth Circuit was wrong to conclude otherwise. If

the Ninth Circuit’s decision below remains the law,

Section 2’s robust pronouncements regarding the

enforcement of arbitration clauses will be rendered

meaningless in a large swath of the Country.

II. The Court Should Grant Review Because

the Ninth Circuit’s Decision Will Have a

Sweeping Negative Impact on the Wireless

Communications Industry and Its

Customers.

1. Although the Ninth Circuit addressed only

T-Mobile’s customer service agreement, the reach of

its opinion is far broader. Verizon Wireless, Sprint

Nextel, and many other CTIA members employ

individual arbitration clauses akin to the one at

issue here. There are more than 240 million mobile

telephone subscribers nationwide, and the vast

majority have contracts that rely on individual

arbitration proceedings to resolve most customer

claims.’

The “Customer Agreement” used by Verizon

Wireless, for example, contains a “Dispute

Resolution and Mandatory Arbitration” section that

provides as follows:

EXCEPT FOR QUALIFYING SMALL

CLAIMS COURT CASES, ANY

CONTROVERSY OR CLAIM ARISING OUT

> Analogous provisions are common in other industries as well.

See, e.g., Discover Bank v. Super. Ct., 113 P.3d 1100, 1103 (Cal.

2005) (examining individual arbitration clause in bank’s

cardholder agreement).

OF OR RELATING TO THIS AGREEMENT,

. . . OR ANY PRODUCT OR SERVICE

PROVIDED UNDER OR IN CONNECTION

WITH THIS AGREEMENT... , OR ANY

ADVERTISING FOR SUCH PRODUCTS OR

SERVICES, WILL BE SETTLED BY ONE

OR MORE NEUTRAL ARBITRATORS

BEFORE THE AMERICAN ARBITRATION

ASSOCIATION (“AAA”) OR’ BETTER

BUSINESS BUREAU (“BBB”).

Verizon Wireless, Customer Agreement,

http://www.verizonwireless.com/b2c/index.html

(follow “Customer Agreement” hyperlink) (last

visited Feb. 22, 2008). In addition, it limits the

availability of class relief, stating “THIS

AGREEMENT DOESN’T PERMIT CLASS

ARBITRATIONS EVEN IF [ARBITRATION]

PROCEDURES OR RULES WOULD....IF FOR

SOME REASON THE PROHIBITION ON

CLASS ARBITRATIONS .. . IS DEEMED

UNENFORCEABLE, THEN THE AGREEMENT

TO ARBITRATE WILL NOT APPLY.” Jd.

Likewise, the “DISPUTE RESOLUTION”

section of the “Terms & Conditions” used by Sprint

Nextel provides that: “We each agree to finally settle

all disputes [except those brought in small claims

court or before a government agency] only by

arbitration.” Sprint Nextel, Terms & Conditions,

http://nextelonline.nextel.com/en/legal/legal_terms_p

rivacy_popup.shtml (last visited Feb. 22, 2008). It

goes on to limit class relief as follows:

We each agree not to pursue arbitration on a

classwide basis. We each agree that any

arbitration will be solely between you and us

(not brought on behalf of or together with

another individual’s claim). If for any reason

any court or arbitrator holds that this

restriction is unconscionable or

unenforceable, then our agreement to

arbitrate doesn’t apply and the dispute must

be brought in court... . TO THE EXTENT

ALLOWED BY LAW, WE EACH WAIVE

ANY RIGHT TO PURSUE DISPUTES ON A

CLASSWIDE BASIS; THAT IS, TO EITHER

JOIN A CLAIM WITH THE CLAIM OF ANY

OTHER PERSON OR ENTITY, OR ASSERT

A CLAIM IN A REPRESENTATIVE

CAPACITY ON BEHALF OF ANYONE

ELSE IN ANY LAWSUIT, ARBITRATION

OR OTHER PROCEEDING. —

Id.

The harm caused by the Ninth Circuit’s decision

is thus truly industry-wide and nation-wide, as

carriers across the country face substantial

uncertainty as to the enforceability of critical

provisions of hundreds of millions of customer

contracts. The very breadth of the Ninth Circuit's

ruling is a powerful reason for this Court’s review.

2. The Ninth Circuit’s sweeping decision also

merits review because it is certain to generate

substantial volumes of costly and_ entirely

unnecessary litigation. First, wireless carriers no

longer know the preemptive scope of the FAA. It is

bad enough that carriers are now subject to

unconscionability analysis that varies from State to

State within the Ninth Circuit. See, e.g., Lowden v.

T-Mobile USA, Inc., 512 F.3d 1213, 1221 (9th Cir.

2008) (holding that the FAA does not preempt

Washington’s law of unconscionability). But carriers

now face additional uncertainty: outside the Ninth

and Third Circuits, they do not even know whether

federal law or state law will govern the validity of

their individual arbitration clauses, much less how

individual States will resolve challenges to those

provisions on the merits. Without this Court’s

intervention, carriers will have to litigate — Circuit

by Circuit and State by State — simply to determine

applicable law.

Second, in jurisdictions (such as California and

Washington) in which state law governs and forbids

resort to individual arbitration proceedings under

the FAA, CTIA members will be forced into lengthy

and costly class action litigation, thus losing the

well-recognized benefits of arbitration. See, e.g., H.R.

Rep. No. 97-542, at 13 (1982), as reprinted in 1982

U.S.C.C.A.N. 765, 777 (“The advantages of

arbitration are many: it is usually cheaper and faster

than litigation; it can have simpler procedural and

evidentiary rules; it normally minimizes hostility

and is less disruptive of ongoing and future business

dealings among the parties; it is often more flexible

in regard to scheduling of times and places of

hearings and discovery devices . . . .”).

Worse, many of the class claims are baseless,

making the costs of forced class litigation a

particularly bitter pill to swallow. The instant

litigation makes that all too clear. Respondents

contend that T-Mobile’s advertising was misleading

because it advertised cell phones as free or heavily

discounted, but did not disclose that sales tax would

be calculated on the full retail price. Yet, it was

California law that required sales tax to be

calculated on the unbundled price of the phone, see

Cal. Code Regs. tit. 18, § 1585(b)(3), and plaintiff

Laster does not contest that her receipt set forth the

$28.22 sales tax accurately and even indicated that

“(bly law, some states impose a tax based on the

retail price or cost of our product instead of the

discounted price.” First. Am. Compl., Laster v. T-

Mobile USA, Inc., No. 05-1167 4 23 (S.D. Cal. filed

Aug. 12, 2005); Pet. App. 9a. Over two and a half

years later, this meritless litigation continues.

Unfortunately, T-Mobile’s experience is by no

means unique. Verizon Wireless, for example,

currently faces claims challenging the imposition of a

small administrative charge that was authorized

under plaintiffs’ contracts with Verizon, and for

which plaintiffs received advance notification. See

generally Litman v. Cellco Partnership, No. 07-4886

(D.N.J.). That case, which was commenced prior to

the Third Circuit’s decision in Gay, has subjected

Verizon Wireless to months of litigation in federal

court that its individual arbitration provision was

designed to avoid. See Preston, 2008 WL 440670, at

*2 (recognizing that arbitration “long delayed [is] in

contravention of Congress’ intent”).

Similarly, in Meinhold v. Sprint Spectrum, L.P.,

No. 07-0456, 2007 WL 2904003 (E.D. Cal. Oct. 2,

2007), plaintiff brought a class action claiming that

she had relied on certain representations by Sprint,

even though (as soon became clear) she had never

seen, much less relied upon, the _ alleged

misrepresentations before changing her position. Id.

at *4-*5. The district court ultimately dismissed her

class action allegations and remanded her individual

claims to state court, but not before Sprint was

forced to endure months of litigation. Id. at *5; see

also Meinhold v. Sprint Spectrum L.P., No. 07-0456,

2007 WL 1456141, at *6 (E.D. Cal. May 16, 2007)

(granting motion to dismiss with leave to amend).

In the wake of the Ninth Circuit's decision, such

costly and meritless litigation is certain to multiply.

3. That increase in _ litigation, unwelcome

generally, is particularly so here, given the

competitive conditions in which wireless carriers

operate. As the Federal Communications

Commission recently confirmed, “competition in

mobile telecommunications markets is flourishing,”

to the benefit of the industry's more than 240 million

subscribers. In re Annual Report and Analysis of

Competitive Market Conditions With Respect to

Commercial Mobile Services, FCC 08-28, WT Docket

No. 07-71 94 290-291 (Feb. 4, 2008). As their use of

mobile phones continues to grow in response to

“(rlelatively low prices,” wireless communications

customers benefit from improved call quality and

experience better customer care performance. See id.

q{ 225, 290.

In such a competitive industry, “churn” — “the

percentage of current customers an operator loses

over a given period of time” — is a major concern.

Id. {4 186-187. By increasing customer loyalty (that

is, reducing churn), wireless carriers increase their

profits, as well as the rate at which their revenues

accrue. Jd. | 187. Wireless carriers therefore have

every incentive to keep their customers happy.

Service quality and price are vital to attracting

and retaining customers. Jd. 4188. Resolving

customer disputes via individual arbitration

proceedings is the mechanism the market has

adopted to maintain customer satisfaction while

keeping costs low. Most small claims are resolved at

the customer service level, cf. Ting v. AT&T, 182 F.

Supp. 2d 902, 917 (N.D. Cal. 2002) (finding it

“unlikely that the typical customer dispute about

service or under $1000 will be resolved through

arbitration; it most likely will be resolved by

[defendant]’s customer care representatives or their

supervisors”), affd in part & rev’d in part, 319 F.3d

1126 (9th Cir. 2003), and, when claims do result in

individual arbitration, most customers are satisfied

with the process, see, eg., Kirk D. Jensen, Can

Financial Institutions Be Required to Arbitrate on a

Class-Wide Basis Notwithstanding Provisions That

Prohibit Class Arbitration?, 122 Banking L.J. 328,

336 (2005) (“[S]tudies have shown that individuals

believe they are treated fairly in arbitration.”);

Harris Interactive, Arbitration: Simpler Cheaper,

and Faster Than Litigation 5 (Apr. 2005) (conducted

for U.S. Chamber Institute for Legal Reform, Apr.

2005), available at

http://www. instituteforlegalreform.com/issues/docloa

d.cfm?doclId=489 (“Most participants are very

satisfied with the arbitrators’ performance, the

confidentiality of the process and its length.”); see

also Allied-Bruce, 513 U.S. at 280 (“{Alrbitration’s

advantages often would seem helpful _ to

individuals ...complaining about a product, who

need a less expensive alternative to litigation.”); Fed.

Trade Comm’n, Resolving Consumer Disputes:

Mediation and Arbitration (Aug. 1998),

http://www.ftc.gov/bcp/edu/pubs/consumer/general/ge

n05.shtm (informing consumers that arbitration “can

be quicker, cheaper, and less stressful than going to

court”).

The Ninth Circuit’s decision displaces the

efficient market solution reached by the carriers and

their customers, replacing it with a far more costly

method for resolving complaints. And given the

competitive conditions that drive the wirelvss

industry to provide better service at lower prices, the

beneficiaries of the Ninth Circuit’s largesse are

certainly not consumers, who have indicated no

desire to pay higher fees for the ability to air minor

complaints through class actions. Instead, the

principal beneficiaries are the legions of_ plaintiffs’

lawyers eager for class action fees. 3

4. The Ninth Circuit’s intervention is

particularly unfortunate because robust competition

in the wireless industry has resulted in arbitration

clauses that are fully protective of consumers. CTIA

members’ arbitration clauses, for example, allow

customers to pursue claims in small claims court,

provide for arbitration fee sharing, and permit a

prevailing plaintiff to recover attorneys’ fees.

Such arbitration clauses provide ample avenues

for customers to seek relief, particularly becaus: , as

elsewhere, lawyers will likely remain willing to

pursue claims where “laJjttorneys’ fees are

recoverable.” Johnson v. W. Suburban Bank, 225

F.3d 366, 374 (3d Cir. 2000); see Snowden uv.

CheckPoint Check Cashing, 290 F.3d 631, 638 (4th

Cir. 2002) (rejecting argument that individual

arbitration provision was unconscionable where

prevailing plaintiff could recover attorneys’ fees); see

also Gilmer, 500 U.S. at 32 (noting adequacy of

individual arbitration where alternate enforcement

mechanisms were available); Jensen, supra, at 337

(“[EJmpirical evidence indicates that individual

arbitration provides manifold benefits to

consumers.”).

Arbitration clauses such as those used by CTIA

members thus do not threaten to “insulate a party

from liability that otherwise would be imposed.”

Discover Bank v. Super. Ct., 113 P.3d 1100, 1109

(Cal. 2005). To the contrary, they provide cost-

effective, easy-to-navigate dispute resolution

mechanisms that help customers and carriers alike.

See id. at 1121 (Baxter, J., concurring and

dissenting) (observing that “the majority exaggerates

the difficulty of pursuing modest claims where class

treatment is unavailable and overlooks the many

other means by which [the defendant] could be called

to account for [its alleged conduct]”). The Ninth

Circuit’s decision to permit California to categorically

foreclose such mechanisms merits this Court’s

review.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

MICHAEL F. ALTSCHUL IAN HEATH GERSHENGORN*