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In AT\&T Mobility LLC v Concepcion, 563 US 333 (2011) wireless phone customers brought a class-action lawsuit against AT\&T Mobility LLC (AT\&T Wireless) in a California federal district court. They alleged that the company's offer of a free phone to anyone who signed up for its service was fraudulent to the extent the company charged the new subscriber sales tax on the retail value of each free phone. The alleged fraud was because there was no sales tax due under California law if the item was free, thus the sales tax charged did not get paid to the state as taxes but was retained as "sales revenue" by AT\&T. Quite simply, the customers argued that the \$27 charged to them was a lie and a hidden fee for the supposedly free phone. It was estimated that AT\&T charged this fraudulent fee to 1.2 million customers in California resulting in fraudulent profits of $32.4 million. AT\&T essentially agreed that all of these facts were true. However, AT\&T argued that the wireless service agreement signed by the customers when they received their phone required arbitration of all disputes individually, and not as a class action. Thus, each customer could only file an arbitration action for his or her \$27 without the assistance or cost-sharing of doing so together in a class action. AT\&T even hinted that it would not defend and would refund the full amount for any customers who filed the arbitration. AT\&T knew that only a small percentage of customers would go through this effort for $27 and thus they would be able to keep most of the $32.4 million. In Discover Bank v Superior Court, 36 Cal 4th 148 (2005) the California Supreme Court held that class action waivers in arbitration clauses for consumers were illegal and fraudulent "when the waiver is found in a consumer contract of adhesion ... in which dispates between the contracting parties predictably involve small amounts of damages, and when ... the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money ... Under these circumstances, such waivers are unconscionable under California law and should not be enforced." Id. In Discover Bank v Superior Court, 36 Cal 4th 148 (2005) the California Supreme Court held that class action waivers in arbitration clauses for consumers were illegal and fraudulent "when the waiver is found in a consumer contract of adhesion ... in which disputes between the contracting parties predictably involve small amounts of damages, and when ... the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money ... Under these circumstances, such waivers are unconscionable under California law and should not be enforced." /d., at 162-163 Based on this precedent, both the trial court and the court of appeals ruled in favor of the wireless customers declaring the class action ban in the arbitration clause unconscionable and not enforceable. AT\&T appealed to the United States Supreme Court and in AT\&TMObility LLCV Concepcion, 563 US 333 (2011) the supreme court held that under the Federal Arbitration Act passed in 1925, a company has the absolute right to compel consumers to waive their rights to a class action as a condition of doing business, even if in doing so it carries out a scheme that is fraudulent and intentional. " [C]lass arbitration greatly increases risks to defendants" of incurring legal fees to defend what has become commonplace business practice. Id at 348 After all, consumers had the choice to not do business with AT\&T and the free market necessarily will control any abuses by businesses. What are your thoughts on the case? Before you answer with "It's only \$27." Did you know that almost all of the "taxes and fees" (on average - 21% ) on your cell phone bill each month aren't taxes at all, but rather payments to the company to pay its taxes on the profits it makes from you? (Check your bill's fine print) What is meant by the words adhesion and unconscionable in Discover Bank? What type of unconscionability is this? Who is right, the California Supreme Court in Discover Bank, or the US Supreme Court in AT\&T Mobility LLC? Should class