T-Mobile's appeal in high court loses out

WASHINGTON — The U.S. Supreme Court handed a defeat Tuesday to T-Mobile USA, rejecting the Bellevue company's appeal in three cases involving the legal remedies available in millions of cellphone contracts.

The issue in all three is the same: whether federal law pre-empts state laws that limit the ability of companies to bar consumers from banding together to pursue class-action lawsuits.

T-Mobile, which is owned by German telecommunications company Deutsche Telekom, included a prohibition on class actions in a part of its contracts that also required consumers to resolve complaints through arbitration.

The company's lawyers argued in court papers that federal law, which generally requires that arbitration clauses be enforced, overrules state laws that limit the ability of companies to ban class actions.

Under contract laws in many states, class-action bans are considered inherently unfair and courts, including those in California, where the dispute originated, can choose not to enforce them.

Companies generally like arbitration; they consider it a faster and cheaper way to resolve disputes than litigation.

Clauses requiring arbitration are included in millions of contracts issued by credit-card, cellphone and cable companies, among others.

In October, a federal appeals court ruled in one of the cases, T-Mobile v. Laster, that courts can refuse to enforce arbitration clauses if they include bans on class actions.

The Supreme Court's decision, without comment, lets that decision stand and allows the case to proceed.

Consumer groups say class-action bans are unfair because individuals may not have the incentive to sue in legal disputes over small amounts of money.

Banning class actions could allow companies to avoid liability for practices that cost large numbers of people small amounts of money, consumer group Public Citizen said in court papers filed in the case.

The T-Mobile v. Laster case began when Jennifer Laster sued after buying a phone and signing up for wireless service in San Diego in 2005.

She alleged T-Mobile engaged in unfair and deceptive business practices by promising free and significantly discounted phones, while charging sales taxes based on the full price of the phone.

The company responded that it was required to charge sales taxes on the full retail price under California law.

Two companion cases, T-Mobile v. Ford, and T-Mobile v. Gatton, were also turned down by the court.