The US Supreme Court handed a defeat to T-Mobile USA, rejecting the company's appeal in three cases involving the legal remedies available in millions of mobile phone contracts, an Associated Press report said.
The issue in the three cases is the same: whether state laws that prevent companies from prohibiting consumers from banding together to pursue class action lawsuits are preempted by federal law, the report said.
T-Mobile included a prohibition on class actions in a part of its contracts that also required consumers to resolve any complaints through arbitration.
The company's lawyers argued in court papers that federal law, which generally requires that arbitration clauses be enforced, overrules those state laws that limit the ability of companies to ban class actions.
Under contract laws in many states, class-action bans are considered inherently unfair and courts, including those in California, where the dispute originated, can choose to not enforce them.
Companies generally support arbitration because they consider it a faster and cheaper way to resolve disputes than litigation. Clauses requiring arbitration are included in millions of consumer contracts issued by credit card, cell phone and cable companies, among others.
Consumer groups argue that class action bans are unfair, because in legal disputes over small amounts of money, individuals may not have the incentive to file suits.
Banning class actions, as a result, could essentially allow companies to avoid liability for practices that cost large numbers of people small amounts of money, according to court papers filed in the case by the consumer group Public Citizen.
T-Mobile is owned by German telecommunications company Deutsche Telekom.