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McGinn was Attorney for T-Mobile in Contentious Consumer Rights Case

By Josh Feit August 13, 2009


[Editor's note: This was originally posted at 9:30am today, but because of all the action in the comments thread, we're moving it up.]

It turns out that T-Mobile's track record on consumer rights is more relevant to bike riding lefty mayoral candidate Mike McGinn (who PubliCola has endorsed ) than it is to McGinn's primary election rival, T-Mobile executive Joe Mallahan. McGinn was an attorney for T-Mobile in 2005 when the company was accused of screwing over consumers.

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As an attorney, Mike McGinn defended T-Mobile's controversial consumer practices.

Yesterday, we reported on T-Moblie's attempt to prevent consumers from having their day in court (over allegations about hidden phone fees) by forcing dissatisfied T-Mobile customers to go all the way to the U.S. Supreme Court to prove they even had the right to sue. T-Mobile lost that the case in the high court , and now T-Mobile customers are moving forward
with their original class action against the cell phone company.

No, PubliCola isn't Consumer Reports . But T-Mobile has become relevant lately because mayoral candidate Mallahan is a T-Mobile executive, and he's consistently used T-Mobile's brandname to hype his own bona fides. We asked Mallahan's campaign what he thought about T-Mobile's record of running interference on consumers—all the way up to the Supreme Court—and he didn't answer .

But now we have questions for McGinn. When he was an attorney at Stokes Lawrence in 2005, McGinn represented T-Mobile on the case, Jennifer Laster v. T-Mobile, when it was in U.S. District Court in California.

Along with other angry customers in a class action suit, Laster accused T-Mobile of false advertising and bait and switch for charging her sales tax on a phone that was advertised as free. T-Mobile's defense? Laster didn't have the right to bring a class action suit because she signed an arbitration agreement.

T-Mobile's attempt to keep disputes in arbitration and stall a class action suit—or as the court put it, trying to maintain its "superior bargaining power [to carry] out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money ... becomes in practice the exemption of the party ‘from responsibility for [its] own fraud, or willful injury to the person or property of another..."—became the main issue in the case. The court didn't buy T-Mobile's argument that Laster's claim should have been kept in arbitration and ruled against T-Mobile:
With respect to T-Mobile, the one page Service Agreement Laster signed does not include any reference to arbitration or waiver of class action participation. Rather, Laster was theoretically notified of the arbitration clause through T-Mobile's fifty-two page “Welcome Guide”, which was placed inside the sealed box containing her ... new phone. Laster claims she neither signed nor acknowledged the arbitration provision, because she never knew it existed.

Nevertheless, T-Mobile contends Laster accepted the terms of arbitration by activating her phone because she “had time to review and understand” the Welcome Guide and its arbitration provision, and “she was allowed to return her phone and cancel her T-Mobile service within 14 days, with no penalty.” Under these circumstances, Laster had no meaningful opportunity to negotiate the terms of the service contract before purchasing the phone. In other words, she had no opportunity to switch to another competitor until after she purchased the phone. On this record, it appears Laster's ability to “negotiate” depended upon her ability to discover the arbitration provision on her own and then cancel her service within 14 days of purchasing and activating her phone. The manner in which the T-Mobile's arbitration provision was presented to Laster clearly suggests procedural unconscionability at a heightened level.

For these reasons, the Court denies Defendants T-Mobile and Cingular's motion to compel arbitration.

And while the court dismissed the substance of Laster's co-plaintiff's consumer complaint, they didn't rule on Laster's and asked her to amend her complaint and file again. PubliCola asked McGinn about his central role trying to help T-Mobile block its customers from having their day in court. He issued this statement:
I recall this case. I worked on the motion that the judge ruled on. The lead attorney was Jim Grant, but I recall contributing to research and perhaps drafting of the motion. First, just because a complaint alleges that "bait and switch" occurs does not mean that there was any baiting and switching.

That's why courts try cases (and reporters check facts) and don't simply conclude that allegations are true.

In this case the telephone company was collecting a sales tax and paying it to the state authorities, as required by the state even when the phone was free. Hardly any profit motive for the telephone company. At the time (and probably still) courts were confronting the issue of what was more important—the federal policy favoring arbitration as an efficient way to resolve disputes or the judicial benefits of class actions.

Both have their place in the legal system. Class actions can be great tools to hold companies accountable, and they can be phenomenal wastes of time and resources when a lawyer pursues a bad claim. The California legal standard turned on whether there was "a scheme to deliberately cheat large numbers of consumers out of individually small sums of money." Given that the telephone company was collecting sales tax revenues as required by law and giving them to the state, I think there was a perfectly good faith argument that the telephone company wasn't trying to cheat people out of their money, and therefore arbitration was fine.

The court went with the plaintiff, concluding that so long as any allegation of cheating was made that it would not enforce the arbitration clause, and it would not look into the merits of the allegation at this early stage of the case. Even so, it still found that one of plaintiff's' claims deserved to be dismissed outright, and that the plaintiff needed to amend the complaint to properly state a claim of deception. I see that the Supreme Court was asked to review the arbitration question, but that was after my time at Stokes Lawrence.

I hope this helps resolve your questions about my role as a lawyer in this case.

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