Healy v. Cox Commc'ns, Inc. (In re Cox Enters., Inc. Set-Top Cable Television Box Antitrust Litig.)

• Decision Date: 24 June 2015
• Docket Number: No. 14–6158.,14–6158.
• Citation: 790 F.3d 1112
• Parties: In re COX ENTERPRISES, INC. SET–TOP CABLE TELEVISION BOX ANTITRUST LITIGATION. Richard Healy, Plaintiff–Appellee, v. Cox Communications, Inc., Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

790 F.3d 1112

In re COX ENTERPRISES, INC. SET–TOP CABLE TELEVISION BOX ANTITRUST LITIGATION.

Richard Healy, Plaintiff–Appellee

v.Cox Communications, Inc., Defendant–Appellant.

No. 14–6158.

United States Court of Appeals, Tenth Circuit.

June 24, 2015.

Margaret M. Zwisler, Latham & Watkins LLP, Washington, D.C. (Jennifer L. Giordano, Latham & Watkins, Washington, D.C.; D. Kent Meyers, Crowe & Dunlevy, Oklahoma City, OK; Alfred C. Pfeiffer, Jr., Latham & Watkins LLP, San Francisco, CA; and Robert G. Kidwell, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo P.C., Washington, D.C., with her on the briefs), for Defendant–Appellant.

Todd M. Schneider, Schneider Wallace Cottrell Brayton & Konecky, LLP, San Francisco, CA (Rachel Lawrence Mor, Rachel Lawrence Mor, P.C., Oklahoma City, OK; Michael J. Blaschke, Michael J. Blaschke, P.C., Oklahoma City, OK; S. Randall Sullivan, Randall Sullivan, P.C., Oklahoma City, OK; A. Daniel Woska, Woska, Hasbrook & Dowd, Oklahoma City, OK; Allan Kanner and Cynthia St. Amant, Kanner & Whiteley, LLC, New Orleans, LA; Jason Kim, Schneider Wallace Cottrell Brayton & Konecky, LLP, San Francisco, CA; Garrett W. Wotkyns, Schneider Wallace Cottrell Brayton & Konecky, LLP, Scottsdale, AZ, Joe R. Whatley, Jr., Whatley Drake & Kallas, LLC, New York, N.Y.; W. Tucker Brown, Whatley Kallas, LLP, Birmingham, AL; and Henry C. Quillen, Whatley Kallas, LLP, Portsmouth, NH, with him on the brief) for Plaintiff–Appellee.

Before LUCERO, MURPHY, and McHUGH, Circuit Judges.

Opinion

LUCERO, Circuit Judge.

Cox Enterprises (“Cox”) is currently the defendant in a class-action antitrust suit. Shortly before trial was set to begin—and after extensive discovery, class certification, potentially dispositive motions, and a petition to this circuit—Cox moved to compel arbitration. The district court determined that Cox's assertion of its right to arbitrate was overly late and inconsistent with its conduct in litigating the case, and thus held that Cox waived its right to compel arbitration.

Our circuit has a well-established procedure for determining whether a party has waived its right to compel arbitration. Under our precedent in Peterson v. Shearson/Am. Express, Inc., 849 F.2d 464 (10th Cir.1988), we consider six factors. Applying the Peterson factors, we conclude that Cox did waive its right to compel arbitration. Accordingly, exercising jurisdiction over this appeal from an interlocutory order under 9 U.S.C. § 16(a)(1), we affirm the decision of the district court.

I

This case stems from class-action litigation against Cox by subscribers to its cable service. In 2009, subscribers in several jurisdictions filed actions against Cox alleging that the company illegally tied its premium cable service to rental of a Cox set-top box.¹ These actions were consolidated as a multidistrict litigation and transferred to the U.S. District Court for the Western District of Oklahoma. Cox then moved to dismiss. During the pendency of its motion, Cox began inserting mandatory arbitration clauses into the contracts of some customers, including putative class members. One such clause reads as follows:

Except as otherwise prohibited by law, you and Cox agree to arbitrate—rather than litigate in court—any and all claims or disputes between us that arise out of or in any way relate to: (1) this Agreement; (2) services that Cox provides to you in connection with this Agreement; (3) products that Cox provides to you under this Agreement; and (4) bills that Cox sends to you or amounts that Cox charges you for services or goods provided under this agreement.

There is no record evidence that Cox notified the district court about its insertion of these clauses. Cox also added arbitration clauses to contracts for high-speed Internet service. These clauses purported to cover all Cox services, including the cable service involved in the tying dispute, and read: “You and Cox agree that all claims or disputes between you and Cox will be arbitrated individually, and that there will be no class, representative, or consolidated actions in arbitration.”

Ultimately, plaintiffs' attempt to certify a nationwide class failed. They instead sought to certify several classes for specific geographic regions, and the actions were again consolidated and transferred to the Western District of Oklahoma. The case at bar was originally brought in the Western District of Oklahoma in April 2012 on behalf of certain individuals who “reside in Cox's Oklahoma City market.” In September 2012, Cox moved unsuccessfully to dismiss the case for failure to state a claim. Cox did not mention the arbitration agreements in that motion. After the motion to dismiss was denied, the parties agreed to stay the other cases, proceed with discovery in only two of those cases, and use the Oklahoma case as a bellwether.

The parties then engaged in extensive pretrial discovery, issuing interrogatories, submitting declarations, exchanging tens of thousands of documents, locating and hiring experts, and deposing witnesses. In September 2013, named plaintiff Healy moved to certify a class. Cox opposed the motion and moved to exclude the testimony of Healy's experts in support of the motion. Nowhere in its answer did Cox inform the district court of its arbitration agreements or raise the presence of these agreements as an impediment to the alleged numerosity, typicality, and commonality of the class.

During the pendency of the motion for class certification, the parties continued to engage in discovery. Cox also filed a surreply in opposition to the motion for certification, which again did not mention the arbitration provisions. In January 2014, in an order that extensively addressed Cox's arguments relating to the requirements for certification, the court granted class certification. Cox moved for reconsideration on several grounds, but the impact of the arbitration clauses was not among them. That motion was denied. See In re Cox Enters., Inc. Set–Top Cable Television Box Antitrust Litig., No. 14–601, slip op. at 2 (10th Cir. Mar. 10, 2014) (unpublished) ( “Cox I ”). In March 2014, Cox sought permission from this court to appeal the certification decision, arguing that the district court erred in analyzing the Federal Rule of Civil Procedure 23 factors. It did not mention arbitration in that petition, which was denied. See id. In April 2014—two years into the litigation—Cox moved to compel arbitration. That same day, it also moved for summary judgment. In its original motion to compel, Cox suggested that it sought to compel arbitration against both the absent class and named plaintiff Healy, and attached his arbitration agreement to the motion. It was not until its reply brief that Cox firmly clarified that it was not seeking to arbitrate Healy's claims.

The district court denied the motion to compel arbitration on the basis that Cox's prior conduct in this litigation constituted waiver. Cox now appeals the district court's denial of its motion to compel.

II

It is axiomatic that “the right to arbitration, like any other contract right, can be waived.”Reid Burton Constr., Inc. v. Carpenters Dist. Council of S. Colo., 614 F.2d 698, 702 (10th Cir.1980). We review de novo a district court's determination that the right to compel arbitration has been waived. 1mage Software, Inc. v. Reynolds & Reynolds Co., 459 F.3d 1044, 1055 (10th Cir.2006). However, we review the findings of fact on which the district court based its decision for clear error. MidAmerica Fed. Sav. & Loan Ass'n v. Shearson/Am. Express, Inc., 886 F.2d 1249, 1259 (10th Cir.1989). “The findings of the trial court on the defendants' conduct must be accepted unless they are clearly erroneous.” Reid Burton, 614 F.2d at 703.

Under the Federal Arbitration Act (“FAA”), agreements to arbitrate are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. As such, the FAA “strongly favors enforcement of agreements to arbitrate.” Hill v. Ricoh Ams. Corp., 603 F.3d 766, 777 (10th Cir.2010). Were we to have any “doubts concerning the scope of arbitrable issues,” we should resolve them “in favor of arbitration.” Nat'l Am. Ins. Co. v. SCOR Reinsurance Co., 362 F.3d 1288, 1290 (10th Cir.2004) (quotation omitted). This is true “whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

Our circuit has established a six-factor test to determine if the right to arbitrate has been waived. Peterson, 849 F.2d at 467–68. We consider:

(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.

Id. at 467–68 (quotations omitted). Applying this six-factor test, the district court concluded that Cox, through its actions and omissions, waived its right to compel arbitration.

In employing the Peterson factors, we do not apply a “mechanical process in which each factor is assessed and the side with the greater number of favorable factors prevails.” Hill, 603 F.3d at 773. “Rather, these factors reflect certain principles that should guide courts in determining whether it is appropriate to deem that a party has waived its right to...