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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386010_0555%3A5

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2007

## Text

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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,
v.

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

i

TABLE OF CONTENTS
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INTEREST OF AMICUS CURIAE ....0.0....0c cece 1
INTRODUCTION AND SUMMARY OF
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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 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).

11

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:

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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

13

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

a

14

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”).

15

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.

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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

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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,

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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

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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*
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386010_0555%3A5. Public record. Not legal advice.