Retroactive arbitration contracts may defeat class action against Cricket

A federal judge was noncommittal Wednesday on whether he will certify a class of customers suing Cricket Wireless for allegedly duping them into purchasing overpriced phones and service plans by lying about the reach of its 4G coverage.

U.S. District Judge William Alsup pressed both sides on questions relating to the validity and retroactivity of arbitration agreements that might defeat class certification and whether customers relied on Cricket's alleged misrepresentations when they bought their phones and plans.

The lawsuit was filed in 2019 by customers from several states alleging that Cricket charged them premium prices for 4G-capable smartphones with high priced service plans while concealing from them that it didn't have the ability to provide such coverage in most areas.

After losing multiple bids to dismiss the complaint, the wireless carrier now owned by AT&T faces claims that it violated the Racketeer Influenced and Corrupt Organizations Act, better known as RICO. Cricket developed a program referred to as "4G in non-4G markets" in internal company documents, and directed its network of dealers to aggressively market its 4G reach despite knowing that its service fell short of providing such coverage to most customers, the plaintiffs' attorneys argued.

The lawsuit seeks to represent a class of at least 700,000 customers who bought smartphones and service plans from November 2012 to September 2014. Cricket potentially faces hundreds of millions of dollars in liability if it is found to have been in the wrong, because RICO claims result in mandatory triple damages plus attorney fees.

A trial is scheduled to start in December. Thomas v. Cricket Wireless LLC, 19-cv-07270 (N.D. Cal., filed Nov. 4, 2019).

During a telephonic hearing, defense attorney Matthew D. Ingber urged the judge not to certify the class because most potential class members didn't purchase their phones and service plans for the 4G coverage. He argued that they might have bought in because they wanted unlimited talk and text or the newest smartphone.

"If the plaintiff didn't rely on any alleged misrepresentations or look at any ads, then there's no injury," the Mayer Brown LLP partner said. "In order to figure out who was deceived and who wasn't, we need to delve into questions of what motivated their purchase."

Alsup responded that Cricket "raises a good point" and asked plaintiffs' attorney Jonathan E. Taylor of Gupta Wessler PLLC about what issues are common across the class.

Taylor replied that all potential class members were overcharged regardless of why they bought the phones and service plans.

"It's kind of like an antitrust class action over a scheme to fix the price of smartphones," he said. "If some plaintiffs can prove a scheme existed, it doesn't matter if a particular consumer would be willing to pay what they actually paid for the phone. They still suffered a financial injury from the scheme if the price they paid was unlawfully inflated."

Taylor argued that plaintiffs don't have to prove that particular members of the class relied on Cricket's misrepresentations about the reach of its 4G coverage, because they were all intended targets of the alleged scheme.

"Cricket knew how valuable 4G was," he said.

Alsup also considered the existence and enforceability of arbitration agreements that some class members might have signed waiving their rights to pursue their claims in court.

Ingber noted three arbitration agreements, including one that customers agreed to by activating their phones and another that Cricket sent to 3.4 million customers through a text message in 2014, that all apply retroactively.

Taylor disputed the validity of the contracts and whether they exist at all because he said Cricket failed to keep a log of identifying customers that consented.

The judge took the matter under submission.