Reversing a lower district court decision, the Ninth Circuit ruled that an arbitration clause appearing in service contracts signed by Cingular Wireless subscribers is “unconscionable” under California state law. The appellate court action concerns a class action complaint that stems from the merger of Cingular and AT&T Wireless (ATTW) in 2004. (Since AT&T Inc.—formed from the 2005 union of AT&T Corp. and Cingular’s parent, SBC Communications—acquired BellSouth last year, Cingular has been renamed as “AT&T Mobility.”) The complaint, filed by a former ATTW subscriber on behalf of other ATTW customers, states that, as a consequence of the 2004 merger, ATTW customers were forced to sign new contracts with Cingular—at higher rates—as a condition for receiving handset chips that would improve wireless service quality. The contract in question also includes a clause, contested by the class action litigants, that requires Cingular and its subscribers to “agree to arbitrate all disputes and claims . . . arising out of or relating to this agreement” and that bars customers from bringing class action claims against the company. Asserting that they suffered harm as a result of the 2004 merger, the class action litigants filed suit, charging that, for the purpose of increasing profits, Cingular deliberately forced thousands of ATTW subscribers to sign new agreements on the false premise that service would be improved. A U.S. district court in California, however, dismissed the case in favor of compelling arbitration, upon finding the Cingular arbitration clause to be valid and enforceable. In an opinion handed down last Friday, the Ninth Circuit declared that class action waivers are unconscionable in cases where a party with “superior bargaining power” is alleged to have carried out a plan to deny large numbers of consumers from collecting individually small sums of money. Countering Cingular’s claim that the class action members failed to prove the absence of “meaningful alternatives” to the terms offered by Cingular, the court further observed that, if the party with “substantially greater bargaining power presents a ‘take-it-or-leave-it’ contract to a customer,” the contract can be found procedurally unconscionable under state law, even if substitute arrangements are available to that customer.