Can Every iPhone User Sue AT&T for $850?

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The AT&T Inc. logo is displayed outside a store in Washington, D.C., U.S., on Monday, July 11, 2011. Photographer: Andrew Harrer/Bloomberg via Getty Images

An out-of-work truck driver from California made headlines on Friday when he turned the tables on AT&T, and stuck it to the phone giant in small claims court.

A judge in Simi Valley awarded Matt Spaccarelli $850 after finding that AT&T had choked data on his iPhone even though his contract promised unlimited downloading. Other Americans are in a similar position and some reports say they are also in a position to cash in. Here’s a primer:

So Just How Did This Guy Beat AT&T?

Spaccarelli sued AT&T in small claims court for $10,000 and the judge gave him $850—a figure reportedly based on $85 a month for 10 months of Spaccarelli’s contract. AP, which broke the story, has more details here but it’s hard to confirm exactly why the judge ruled as he did. The ruling was from the bench and there’s no written decision that explains his reasons.

(MORE: How Apple’s iPhone Actually Hurts AT&T, Verizon and Sprint)

Will He Really Get $850?

AT&T has already said it will appeal the ruling so it will be months until Spaccarelli finds out if he can collect.

What Happens at the Appeal?

Under California law, a judge from the same court will hear the appeal like it’s a brand new case. The only difference is that the parties can use lawyers this time around. AT&T has an army of them but this may not make a difference because the appeal procedure is based on the same simple, streamlined rules of small claims court. If AT&T loses a second time, the decision is technically final though AT&T can still file a hail mary request for review to a higher court (which almost never review small claims decisions). Fans of civil procedure can learn more from this guide for judges.

If Spaccarelli Wins, Other Customers Cash in Too, Right?

Sorry, it’s not that easy. A judge’s decision in small claims court doesn’t create a legal precedent that others must follow. Ordinarily this type of case would lead to a class action suit (allowing everyone to sue at once), but AT&T short-circuited that option by banning these type of lawsuits in its customer contracts. This is a controversial tactic, but a divided Supreme Court agreed it was legal last year.

(MORE: Don’t Make These Mistakes at Your New Job)

What If I want to Sue AT&T Too?

Every state has a small claims court system like California’s. Although the maximum amount you can claim varies by state, they all offer the chance to get in court quickly for a modest filing fee such as $41 in Idaho or $75 in Connecticut (you will typically get the fee back if you win but you might have to pay AT&T’s fee if you lose).

What Does this mean for AT&T?

AT&T’s “no class action” rule helped to stifle consumer lawsuits, but a wave of small claims filings could open a new can of worms. To stop this, the company will likely go all out to shut down Spaccarelli as a way to deter others. The phone giant could, in theory, also seek to amend its Customer Agreementby eliminating the smal claims court option, and forcing all claims into arbitration (which would also make it easier to keep legal setbacks out of the media). The bottom line is that new lawsuits are for now likely to be a trickle rather than a flood. This could change if Spaccarelli wins the appeal.

Republished with permission from paidContent, which writes about the transformation of the media-and-entertainment industries in the digital era, with a focus on emerging-business models and technologies.

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