A lawsuit alleging that AT&T's mobile phone customers received inferior service after the company's wireless division was sold to Cingular Wireless can proceed as a class action, a federal appeals court ruling, quoted by an Associated Press report said.

The Associated Press report said at issue was a clause in old Cingular contracts that forced customers to litigate their grievances independently, instead of grouping together for a class action lawsuit.

A three-judge panel in the 9th U.S. Circuit Court of Appeals ruled that the contract was a violation of California law.

The ruling is further condemnation of so-called "class action waivers," which other courts have ruled illegally shield companies engaged in potentially harmful conduct, the report said.

The court took a "clear position protecting consumers and their right to pursue class action relief," Bill Weinstein, one of the plaintiffs' lawyers, was quoted by the report as saying.

The case was filed as a national class action lawsuit in 2006 by Kennith Shroyer of Porterville, California, the report said.

Shroyer had switched his AT&T cell phone accounts to Cingular after Atlanta-based Cingular's $41 billion acquisition of AT&T Wireless Services in October 2004.

Shroyer claimed Cingular let AT&T's service deteriorate in a scheme to force AT&T customers to switch to Cingular under less favorable contract terms.

The US District Court for the Central District of California ordered the case into individual arbitration last year because of the class action waiver in Shroyer's contract, the report added.

The company said the ruling is based on language in an old contract, but didn't provide details as to how its new contracts differed.