G&G Closed Circuit Events, LLC v. Jaime F. Castillo, Maria A. Castillo, & El Bajio Enters., Inc.

• Decision Date: 22 March 2017
• Docket Number: Case No. 14-CV-02073
• Parties: G&G CLOSED CIRCUIT EVENTS, LLC, Plaintiff, v. JAIME F. CASTILLO, MARIA A. CASTILLO, and EL BAJIO ENTERPRISES, INC., Defendants. JAIME F. CASTILLO, MARIA A. CASTILLO, and EL BAJIO ENTERPRISES, INC., on behalf of themselves and others similarly situated, Counter-Plaintiffs, v. G&G CLOSED CIRCUIT EVENTS, LLC, Counter-Defendant. JAIME F. CASTILLO, MARIA A. CASTILLO, and EL BAJIO ENTERPRISES, INC., on behalf of themselves and others similarly situated, Third-Party Plaintiffs, v. DIRECTV INTERNATIONAL, INC., DIRECTV, LLC, and THE DIRECTV GROUP, Third-Party Defendants. JAIME F. CASTILLO, MARIA A. CASTILLO, and EL BAJIO ENTERPRISES, INC., on behalf of themselves and others similarly situated, Third-Party Plaintiffs, v. LAW OFFICES OF THOMAS P. RILEY, Third-Party Defendant.
• Court: U.S. District Court — Northern District of Illinois

G&G CLOSED CIRCUIT EVENTS, LLC, Plaintiff, v. JAIME F. CASTILLO, MARIA A. CASTILLO,and EL BAJIO ENTERPRISES, INC., Defendants.

JAIME F. CASTILLO, MARIA A. CASTILLO,and EL BAJIO ENTERPRISES, INC.,on behalf of themselves and others similarly situated, Counter-Plaintiffs, v. G&G CLOSED CIRCUIT EVENTS, LLC, Counter-Defendant.

JAIME F. CASTILLO, MARIA A. CASTILLO,and EL BAJIO ENTERPRISES, INC.,on behalf of themselves and others similarly situated, Third-Party Plaintiffs, v. DIRECTV INTERNATIONAL, INC., DIRECTV, LLC,and THE DIRECTV GROUP, Third-Party Defendants.

JAIME F. CASTILLO, MARIA A. CASTILLO,and EL BAJIO ENTERPRISES, INC.,on behalf of themselves and others similarly situated, Third-Party Plaintiffs, v. LAW OFFICES OF THOMAS P. RILEY, Third-Party Defendant.

Case No. 14-CV-02073

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 22, 2017

Judge Joan B. Gottschall

MEMORANDUM OPINION AND ORDER

For nearly three years, the parties have been sparring over alleged violations of the Communications Act of 1934 ("the Communications Act"), 47 U.S.C. § 605, and the Cable and Television Consumer Protection and Competition Act of 1992, as amended, 47 U.S.C. § 553. The plaintiff, G&G Closed Circuit Events, LLC ("G&G"), filed a two-count complaint alleging that Jaime Castillo ("J. Castillo"), Maria Castillo, and El Bajio Enterprises, Inc., doing business as La Pena Restaurante ("La Pena") (collectively "the Castillos") showed a pay-per-view boxing match at La Pena on April 20, 2013, without proper authorization from G&G. (See ECF No. 1 ¶¶ 17-29.) As the pleadings stand now, the Castillos assert class action counterclaims against G&G and a third-party class action against an attorney who has represented G&G, Law Offices of Thomas P. Riley ("Riley"), alleging violations of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 ILCS 505/1 et seq., and the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c). The Castillos also received leave to bring a third-party class action complaint alleging ICFA violations against DirecTV International, Inc.; DirecTV, LLC; and the DirecTV Group, Inc. (collectively "DirecTV"). (ECF No. 180.)

A number of motions are before the court, but only one is a contender right now: DirecTV's motion to compel arbitration of the Castillos' third-party claims against it. For the following reasons, the court grants that motion and stays this action pending arbitration.

I. FACTUAL AND PROCEDURAL BACKGROUND

In their counterclaims and third-party claim against Riley, the Castillos claim that Aaron Lockner ("Lockner"), an investigator subcontracted by a private investigative agency with which Riley contracted, entrapped J. Castillo into turning on the pay-per-view fight at La Pena by specifically asking him to change the channel to the fight by specifying a channel number. (See 3d Am. Class Action Countercl. ¶¶ 18-26, ECF No. 178.) J. Castillo, Lockner, and the other patrons present could see the fight on Showtime without a pay-per-view warning because DirecTV had, according to the Castillos, "intentionally set up an improper residential account in a commercial establishment." (Id. ¶ 28.) The Castillos claim that G&G, Riley, and their agentsoperate a scheme whereby they exploit the fact that DirecTV sets up many minority-owned businesses with residential accounts without the owners' knowledge. G&G, Riley, and their agents then send demand letters, wearing the owner down, in the hope of winning a large, unjustified settlement.

That is what the Castillos claim occurred in their case. In their third-party claim against DirecTV and their class action allegations, the Castillos trace the origin of their dispute with G&G to the installation of J. Castillo's DirecTV service at La Pena. J. Castillo alleges the installation occurred in or around November 2011, though DirecTV disputes that date. In their first amended third-party complaint, the Castillos plead that no one could mistake La Pena for a residence, yet the third-party installer who installed J. Castillo's DirecTV service told him that the federal employer identification number he provided "was not working" and asked for J. Castillo's personal information. (ECF No. 180 ¶ 15.) J. Castillo "thought nothing of the request" and gave the installer his personal credit card number and driver's license. (Id. ¶ 16.) He "did not know, and had no reason [to] suspect, that the DirecTV representative had created a residential and not a commercial account." (Id. ¶ 17.) The third-party complaint also alleges that J. Castillo was not provided a copy of a Customer Agreement for his account. (Id. ¶ 20.) He first learned he had a residential, rather than commercial, account over a year after G&G sued him, according to the third-party complaint. (Id. ¶ 22.) As the third-party complaint states, "Lockner [the investigator] was only able to trick Jaime into turning on the Fight, and the Fight was only visible in La Pena because DirecTV had intentionally set up an improper residential account in a commercial establishment." (Id. ¶ 42.)

The Castillos acknowledge two changes to J. Castillo's DirecTV service during the relevant timeframe. First, J. Castillo ordered an "upgraded receiver" on or around March 30,2013, but it came with bundled channels, including Showtime, that he neither wanted nor needed. (Id. ¶ 26). J. Castillo also contacted DirecTV in May 2013 "prior to learning of the instant claims by G&G . . . to discuss 'canceling premiums' because he was interested in more and better sports programming." (Id. ¶ 44.)

Here is how the case stands. This case was referred to the assigned magistrate judge for discovery supervision and settlement conference pursuant to Local Rule 72.1 and 28 U.S.C. § 636(b). (See ECF Nos. 38, 39.) On November 2, 2016, the magistrate judge eventually set March 1, 2016, as the deadline for completing all discovery. (ECF No. 61 at 1.) The magistrate judge denied a motion to extend discovery filed by the Castillos, and they have moved to set the magistrate judge's order aside pursuant to Federal Rule of Civil Procedure 72.

This court granted the Castillos leave to file their most recent round of live pleadings on April 27, 2016. (ECF No. 169 at 1.) They filed their live pleadings on May 11, 2016. (ECF Nos. 178-80.) DirecTV moved to compel arbitration on May 26, 2016. (ECF No. 183.)

G&G then moved to knock out the Castillos' counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 214.) The Castillos countered with a motion for summary judgment on G&G's Communications Act claim. (ECF No. 229.) Meanwhile, Riley moved to dismiss the third-party complaint against him under Rule 12(b)(6). (ECF No. 219.) In September 2016, G&G filed a motion for sanctions against the Castillos and their counsel, arguing that the Castillos' third amended counterclaim made inappropriate allegations in light of the discovery that had occurred. (ECF No. 235.) G&G followed up with a motion for summary judgment on the Castillos' liability to it under the Communications Act. (ECF No. 251.)

II. MOTION TO COMPEL ARBITRATION

Invoking the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1-16, DirecTV moves to compel the Castillos to arbitrate their third-party claims pursuant to their Customer Agreement (e.g., Decl. of Ivy S. Rankin Ex. 5, ECF No. 185) and for a stay. The Castillos respond that: (1) DirecTV has produced insufficient evidence that it sent J. Castillo a copy of the Customer Agreement before his claims arose; (2) this dispute falls into an exclusion in § 9(d) of the Customer Agreement; and (3) the Customer Agreement is procedurally and substantively unconscionable. The court addresses the scope of the arbitration clause first because the Castillos argue that regardless of whether they are bound by the clause, this dispute lies beyond its scope.

A. Legal Standard

Under the FAA, a written arbitration agreement "shall be 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. The FAA "places arbitration contracts 'on equal footing with all other contracts;'" no more, no less. DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468 (2015) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 340 (2011) (quoting same source). Once the court is "satisfied that issue involved in [a] suit is referable to arbitration," the court must, "on application of one of the parties stay the trial of the action until such arbitration has been had." 9 U.S.C. § 3; accord Achey v. BMO Harris Bank, N.A., 64 F. Supp. 3d 1170, 1175 (N.D. Ill. 2014) (citing Van Tassell v. United Mktg. Grp., LLC, 795 F. Supp. 2d 770, 786 (N.D. Ill. 2011)).

Three elements must be present before a court can compel arbitration: "[1] a written agreement to arbitrate, [2] a dispute within the scope of the arbitration agreement, and [3] arefusal to arbitrate." Pearson v. United Debt Holdings, LLC, 123 F. Supp. 3d 1070, 1073 (N.D. Ill. 2015) (quoting Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005)) (brackets in original). Analysis of whether these elements exist "mirrors summary judgment analysis." Id. (citing Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002)); see also 9 U.S.C. § 4; Johnson v. Orkin, LLC, 928 F. Supp. 2d 989, 1001 (N.D. Ill. 2013) ("[T]he party opposing compelled arbitration will fail if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." (internal quotation marks, ellipsis, and citation omitted)).

B. The Third-Party Claim Falls Within the Scope of the Arbitration Clause

When evaluating the scope of an arbitration clause, arbitration must be compelled "unless it may be said with positive assurance that the arbitration clause is not susceptible of an...