Alltel Corp. v. Rosenow

Decision Date18 September 2014
Docket NumberNo. CV-13-995,CV-13-995
Citation2014 Ark. 375
PartiesALLTEL CORPORATION AND ALLTEL COMMUNICATIONS, INC. APPELLANTS v. PETER ROSENOW, INDIVIDUALLY AND ON BEHALF OF A CLASS OF SIMILARLY SITUATED PERSONS APPELLEE
CourtArkansas Supreme Court

APPEAL FROM THE SALINE COUNTY CIRCUIT COURT

[NO. 63CV-06-182-3]

HONORABLE GRISHAM A. PHILLIPS, JUDGE

AFFIRMED ON DIRECT APPEAL; CROSS-APPEAL MOOT.

PAUL E. DANIELSON, Associate Justice

Appellants Alltel Corporation and Alltel Communications, Inc. (collectively, "Alltel"), appeal from the circuit court's second amended order denying Alltel's motion that sought to compel arbitration of a class-action complaint brought by Appellee Peter Rosenow, individually and on behalf of similarly situated persons. Alltel asserts two points on appeal: that the circuit court erred: (1) in finding that Alltel's arbitration agreement lacked mutuality and was thus invalid; and (2) in failing to enforce its valid arbitration agreement. Rosenow cross-appeals, asserting that Alltel waived any right it had to arbitration. We affirm the circuit court's order on direct appeal, which renders the cross-appeal moot.

The litigation began when Rosenow filed a class-action complaint against Alltel, alleging violations of the Arkansas Deceptive Trade Practices Act and unjust enrichment stemming from Alltel's imposition of an early termination fee on its cellular-phone customers.The circuit court denied a motion by Rosenow for class certification, and this court reversed and remanded. See Rosenow v. Alltel Corp., 2010 Ark. 26, 358 S.W.3d 879. On remand, the circuit court granted class certification by its order of December 9, 2010.

On June 15, 2011, Alltel filed a motion to redefine the class to exclude any customers that had been subject to, and bound by, an arbitration provision in their contracts with Alltel. Rosenow countered Alltel's motion, asserting that Alltel, having failed to previously raise or rely on the existence of an arbitration agreement, had waived any consideration of its arbitration clause and its validity. A hearing was held on the motion on September 26, 2011, and the circuit court, by its order of October 10, 2011, denied Alltel's motion without prejudice.

Some two months later, Alltel filed a motion to compel arbitration of those claims by any class member who had received service from Alltel on or after May 1, 2004. In its motion, Alltel claimed that its "Terms and Conditions" had included an arbitration clause stating that all disputes resulting from Alltel's service shall be arbitrated. Alltel further stated that its policies and procedures in place had been designed to ensure that all Alltel customers were on notice that its provision of service was subject to those terms and conditions, including the arbitration clause. In support of its motion, Alltel presented affidavits from its employees, as well as exhibits, which included the apposite versions of the terms and conditions for its wireless contracts. Rosenow claimed that, even assuming that Alltel had a valid basis for its motion to compel arbitration, Alltel had waived arbitration in the instant class-action litigation. Rosenow further asserted that (1) Alltel's motion to compel lackedspecific evidence from which notice to and assent by Alltel's customers could be inferred; (2) the agreement lacked mutuality and was invalid; and (3) Alltel's terms and conditions and the arbitration clause were unconscionable and unenforceable. To counter Rosenow's assertion that Alltel had waived its right to arbitration by waiting too long to assert it, Alltel claimed that the recent decision by the United States Supreme Court in AT&T Mobility, LLC v. Concepcion, 563 U.S. ___, 131 S. Ct. 1740 (2011), had changed the law in this area and that any "wait . . . resulted from the fact that Concepcion was pending . . . at the time of class certification." After several hearings on Alltel's motion to compel, the circuit court entered an order denying that motion. The order denied the motion on several bases, including that (1) Alltel had waived any alleged right to compel arbitration, (2) Alltel's arbitration provision lacked mutuality, (3) its arbitration provision was unconscionable, and (4) Alltel's motion failed on policy grounds.

The circuit court later amended its order, and on October 7, 2013, it entered a second amended order denying Alltel's motion to compel in which it found as follows:

While I do agree with Alltel's position that it did not waive enforcement of its arbitration in this case, its motion to compel arbitration is denied because Alltel never used arbitration as a sword. Thus, it never respected the arbitration provision it sought to enforce here. The Arkansas Supreme Court held that "there is no mutuality of obligation where one party uses an arbitration agreement to shield itself from litigation, while reserving to itself the ability to pursue relief through the court system." Independence County v. City of Clarksville, 2012 Ark. 17, *7. "Thus, under Arkansas law, mutuality requires that the terms of the agreement impose real liability upon both parties." Id. Here, the arbitration provision imposed no real liability upon Alltel. For this reason, Alltel's motion to compel arbitration is denied.

The parties have requested rulings on issues raised by them in their written materials and as presented by them in hearings before the Court. The Court has considered all of the issues raised by both sides, and has denied the Motion to Compel Arbitration for the reasons cited above. To the extent that a ruling on all such issues

not specifically addressed above is required for appellate review, the Court hereby denies each issue and argument raised by the parties and not specifically addressed by this Order as moot.
The previous orders regarding Alltel's motion to compel arbitration and entered on July 15 and 26, 2013, are withdrawn and this Order is substituted in its place.

It is from this order that both parties have timely appealed.

For its first point on appeal, Alltel argues that the circuit court erred in finding that the arbitration agreement at issue lacked mutuality. Alltel asserts that the agreement was, on its face, both unambiguous and mutual. It claims that both it and its customers are equally bound to arbitrate any dispute and that the agreement in no way evidences any reservation of a right by Alltel to pursue judicial remedies while precluding its customers from doing so. Alltel further maintains that the circuit court erred in basing its finding of a lack of mutuality by considering parol evidence, which it claims was inadmissible because the arbitration agreement was unambiguous. Moreover, Alltel contends, even if the circuit court had been permitted to look at parol evidence, the evidence of whether it sued its customers in 2001 or 2002 is irrelevant to determining the mutuality of the agreement in 2004. Alltel avers that the fact that it assessed its customers for late fees and employed the use of collection companies has no bearing on mutuality, because under the agreement both Alltel and its customers remained free to invoke nonjudicial self-help remedies. Finally, Alltel asserts that this court's precedent, which requires an arbitration agreement to be independently mutual, violates the Federal Arbitration Act and should be overruled because Arkansas law does not require independent mutuality for any other contract provision.

Rosenow initially responds that Alltel failed to prove the existence of a contract toarbitrate. He urges that the terms and conditions relied on by Alltel lack any mutuality because Alltel's customers can be held liable for outstanding service and equipment charges, taxes, fees, and surcharges, as well as Alltel's costs and fees incurred to collect unpaid balances, but Alltel's liability cannot exceed a customer's prorated monthly recurring service charge, and Alltel is not liable for any incidental, special, or punitive damages, or attorney's fees. Likewise, Rosenow contends, mutuality is lacking because Alltel has filed suit against its customers and has never relied on or used the very arbitration provision it now seeks to enforce.

With respect to Alltel's argument that the circuit court erroneously relied on parol evidence in finding a lack of mutuality, Rosenow maintains that Alltel failed to raise its argument to the circuit court; therefore, he claims, it is being raised for the first time on appeal and is not preserved for appeal. Nonetheless, he avers, the parol-evidence rule has no application to evidence introduced to explain course of performance or dealings. Finally, Rosenow contends that this court's precedent consistently holds that all contracts, not just arbitration agreements, must be mutual.

This court reviews a circuit court's order denying a motion to compel arbitration de novo on the record. See, e.g., The Money Place, LLC v. Barnes, 349 Ark. 411, 78 S.W.3d 714 (2002). The threshold question to be determined is whether there was a valid arbitration agreement.1 See, e.g., Courtyard Gardens Health & Rehab., LLC v. Quarles, 2013 Ark. 228, 428S.W.3d 437. Although an arbitration provision is subject to the Federal Arbitration Act, courts look to state contract law to decide whether the parties' agreement to arbitrate is valid.2 See DIRECTV, Inc. v. Murray, 2012 Ark. 366, 423 S.W.3d 555. Courts may apply state law to arbitration agreements only to the extent that it applies to contracts in general. See id.

The same rules of construction and interpretation apply to arbitration agreements as to agreements in general. See Alltel Corp. v. Sumner, 360 Ark. 573, 203 S.W.3d 77 (2005). Thus, the essential elements for an enforceable arbitration agreement are (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5) mutual obligation. See id. Furthermore, the construction and legal effect of a written contract to arbitrate are to be determined by the court as...

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    • February 2, 2016
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