Phone companies can't ban class action in Wash.

The state Supreme Court has unanimously ruled that class-action lawsuit waivers in phone company contracts aren't valid in Washington state because they violate state law.

The high court's decision was similar to a ruling it made last year in a case against Cingular Wireless.

In Thursday's case, Michael McKee sued AT&T over Wenatchee city taxes that showed up on his bill after he got long distance service in 2002. McKee actually lived outside Wenatchee city limits, but AT&T told him it charged the tax according to zip code - even though his zip code extended to people living outside the city.

A late fee of 1.5 percent applies if the customer does not pay all charges on time. The charges McKee challenged amounted to less than $20 a year, but he argued that after many years, and customers, it adds up.

The Supreme Court affirmed the Chelan County Superior Court, which found the dispute resolution part of AT&T's contract unconscionable and denied the company's motion to send the dispute to arbitration.

"AT&T's Consumer Services Agreement is substantively unconscionable and therefore unenforceable to the extent that it purports to waive the right to class actions, require confidentiality, shorten the Washington Consumer Protection Act statute of limitations, and limit availability of attorney fees," Justice Tom Chambers wrote for the court.

AT&T, which is headquartered in San Antonio but incorporated in New York, wanted to apply New York law to the case. The court noted AT&T's limited ties to New York, but said that since New York law allows waivers to class-action cases, it "conflicts with our state's fundamental public policy to protect consumers through the availability of class action."

The court also rejected the company's attempt to force arbitration in the case, saying "courts, not arbitrators, decide the validity of arbitration agreements."

McKee's attorney called the ruling "an enormous victory for consumers."

"The broader point is that companies like AT&T can't cheat people out of small sums of money and get away with it," Paul Bland, attorney with Public Justice, a Washington D.C.-based public interest law firm.

AT&T spokesman Marty Richter said the company is reviewing the decision and considering its options.

"It's important to remember that this decision is based on an old arbitration clause," Richter said in a written statement. "We've since revised our arbitration clause to make it more consumer friendly, and other courts have upheld it. We continue to believe a consumer is better off pursuing a claim under our arbitration clause rather than pursuing a class action."

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The case is McKee v. AT&T Corp., docket number 81006-1.

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On the Net:

Supreme Court of Washington: http://www.courts.wa.gov