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Ruling on an issue of first impression, a Superior Court panel has agreed with a Philadelphia common pleas judge’s argument that class litigation preclusion clauses in standard-form contracts are “unconscionable and unenforceable.” Thibodeau v. Comcast involves a proposed class of people who rented cable boxes and remotes from Comcast, allegedly unaware until they did so that those items were not needed in order to receive basic cable. In his strongly worded January opinion in the matter, Judge Mark I. Bernstein concluded that the mandatory individual arbitration clauses found in many contracts of adhesion have served to “immunize large corporations from liability by allowing them to preclude all class action litigation.” Bernstein’s opinion included a prefatory quote from the late-19th/early-20th century French novelist Anatole France: “The law in its majesty prohibits rich and poor alike from sleeping under bridges.” Philip Thibodeau of Pembroke, Mass., was a customer of AT&T Broadband when Comcast acquired that provider in 2002. After the acquisition, the new Comcast customers were sent a customer agreement that included a mandatory arbitration clause. “The old AT&T and new Comcast agreements were virtually identical in terms of style, font size type and layout,” Judge John L. Musmanno wrote on behalf of the three-judge panel in Thibodeau. “The only aesthetic difference between the two agreements was a small icon on the first page. On the Comcast agreement, the Comcast logo replaced the AT&T logo. Despite the fact that [the two] documents appeared at first glance to be almost identical, buried on page eight of the 10-page [Comcast] document was a new and substantially different arbitration clause. “Under these circumstances, we agree with the trial court that the application of this arbitration clause would result in unfair surprise to the consumer.” Musmanno was joined by Judge Richard B. Klein and Senior Judge Patrick R. Tamilia. In a separate memorandum decision also filed last week, the same panel again affirmed Bernstein in a related case. In Afroilan v. AT&T Wireless, the plaintiffs are AT&T cell phone customers who claim they did not know until they signed up for service that they could not use their phones on non-AT&T networks. Bernstein’s January opinion in Thibodeau consolidated both that case and Afroilan; both matters’ defendants had challenged the plaintiffs’ bids for class certification on the grounds that the contracts of adhesion signed by the consumer-plaintiffs included clear individual arbitration provisions. The judges’ opinion in Afroilan did not address the case’s substantive issues. Instead, the members of the panel concluded that AT&T Wireless had failed to preserve those issues for appellate review. But the Thibodeau appeal provided the Superior Court with the opportunity to address the dispute over the use of arbitration clauses in contracts of adhesion involving small consumers. A significant portion of the panel’s 25-page opinion in Thibodeau was a reproduction of Bernstein’s findings and conclusions in his January decision. The judges agreed with Bernstein that the Federal Arbitration Act does not preclude state law from invalidating arbitration agreements. “Upon review of the FAA, it is clear that Congress did not intend to occupy the entire field of arbitration agreements,” Musmanno wrote. “The FAA does not contain any explicit pre-emptive provisions.” They further held that even if, as Comcast has proposed, Massachusetts law was applied in Thibodeau instead of Pennsylvania law, the outcome would be the same. “Pursuant to Massachusetts law, unconscionability is also determined on a case-by-case basis ‘with particular attention to whether the challenged provision could result in oppression and unfair surprise to the disadvantaged party and not to allocation of risk because of superior bargaining power,’” Musmanno wrote, quoting a 1980 opinion from the Supreme Judicial Court of Massachusetts. “In this case,” he added later, “the application of the arbitration clause would result in unfair surprise to Thibodeau.” Attorneys from Williams Cuker Berezofsky in Philadelphia are serving as class counsel in Thibodeau. Mark Cuker said a decision in favor of Comcast would have effectively resulted in a “class action ban” for Pennsylvania consumers seeking individual recovery of minor amounts of money. “We think it’s a great victory for the consumers of Pennsylvania,” Cuker said of the panel’s holding. Comcast is being defended in the matter by Robert Heim and Nory Miller of Dechert. Miller said her client has not yet decided whether or not to appeal the decision. In response to the panel’s reasoning that application of Massachusetts law in the case would yield an outcome no different than that of Pennsylvania law, Miller said her research indicates that no Massachusetts state court has deemed an arbitration clause unconscionable, for any reason, in 75 years. “It’s very different from the Pennsylvania standard,” she said. Neal Jacobs of the Jacobs Law Group – who, along with Cuker, serves as co-class counsel in Afroilan – said he is pleased with the decision in his case. “We’re hopeful that the matter can now proceed in the trial court to a beneficial result for all of the class members,” Jacobs said. AT&T Wireless’ lawyer in Afroilan is Seamus Duffy of Drinker Biddle & Reath; he did not immediately respond yesterday afternoon to calls seeking comment. Walter Swayze of Segal McCambridge Singer & Mahoney, who represents Panasonic, the phone manufacturer-defendant in Afroilan, in that case, said he is reviewing the decision. (Copies of the 25-page opinion in Thibodeau v. Comcast , PICS No. 06-1715, and the 11-page opinion in Afroilan v. AT&T Wireless , PICS No. 06-1714, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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