Directv, Inc. v. Murray ex rel. an Ark. Class Persons

• Citation: 423 S.W.3d 555,2012 Ark. 366
• Decision Date: 04 October 2012
• Docket Number: No. 11–1061.,11–1061.
• Parties: DIRECTV, INC., Appellant v. Jo MURRAY, Individually and on Behalf of an Arkansas Class of Similarly Situated Persons, Appellee.
• Court: Arkansas Supreme Court

2012 Ark. 366

423 S.W.3d 555

DIRECTV, INC., Appellant

v.Jo MURRAY, Individually and on Behalf of an Arkansas Class of Similarly Situated Persons, Appellee.

No. 11–1061.

Supreme Court of Arkansas.

Oct. 4, 2012.

Friday, Eldredge & Clark, LLP, Little Rock, by: Robert S. Shafer and William A. Waddell, Jr.; Haltom & Doan, by: Darby V. Doan; and Kirkland & Ellis LLP, by: Melissa D. Ingalls and Robyn E. Bladow, for appellant.

Emerson Poynter LLP, by: Scott E. Poynter, Christopher D. Jennings, William T. Crowder, Little Rock, Corey D. McGaha, and John G. Emerson, Little Rock; and Arnold, Batson, Turner & Turner, P.A., by: Todd Turner, Arkadelphia, and Dan Turner, for appellee.

DONALD L. CORBIN, Justice.

Appellant, DIRECTV, Inc., appeals the orders of the Miller County Circuit Court denying DIRECTV's motion to compel arbitration and granting the motion of Appellee, Jo Murray, for class-action certification. Both orders are immediately appealable pursuant to Ark. R.App. P.-Civ. 2(a)(9) & (12) (2012). We find no reversible error and affirm both orders.

In March 2010, Murray initiated this putative class-action lawsuit against DIRECTV and Pro Sat and Home Entertainment (Pro Sat). Murray later sought the dismissal with prejudice of Pro Sat. In her first amended complaint, Murray sought damages for herself individually and on behalf of other former DIRECTV subscribers who paid an early cancellation fee to DIRECTV after they terminated DIRECTV's service. Murray alleged that DIRECTV's enforcement and collection of its early cancellation fee was deceptive and unconscionable in violation of the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code Ann. §§ 4–88–101 to–804 (Repl.2011). Murray moved to certify the litigation as a class action pursuant to Ark. R. Civ. P. 23 (2012).

DIRECTV moved to dismiss or stay court proceedings and to compel Murray to arbitration in accordance with the arbitration provision in the customer agreement that DIRECTV alleged had been mailed with Murray's first billing statement. In opposition, Murray challenged the adequacy of DIRECTV's proof of the customer agreement and argued further that the arbitration provision in the customer agreement, as well as the customer agreement as a whole, lacked mutuality of obligation.

The circuit court held a hearing on both the motion to compel arbitration and the motion for class certification, taking both motions under advisement at the conclusion of the hearing. The circuit court later entered a written order denying the motion to compel arbitration and striking some of the proof DIRECTV had offered in support of its motion. On the same day, the circuit court entered a separate order granting Murray's motion for class certification. DIRECTV has timely appealed both orders.

I. Arbitration

We first consider DIRECTV's appeal from the order denying its motion to dismiss or stay proceedings and compel arbitration. It is significant to note at the outset that, as acknowledged by both parties during oral argument and as reflected in the motion itself, DIRECTV's motion to compel arbitration was filed with respect to Murray only and not to the putative class members. For reversal, DIRECTV argues that it presented uncontroverted proof that Murray had received and accepted the customer agreement, which contained the parties' arbitration provision, and that the circuit court erred in ruling otherwise on the adequacy of its proof and striking the proof it offered. DIRECTV assigns further error to the circuit court's independent and alternative rulings on the unenforceability of the arbitration provision and the customer agreement as a whole due to a lack of mutuality of obligation.

A. Standard of Review

This court reviews a circuit court's order denying a motion to compel arbitration de novo on the record, with the entire case being open for review. See BDO Seidman, LLP v. SSW Holding Co., 2012 Ark. 1, 386 S.W.3d 361. The customer agreement containing the arbitration provision at issue here states that the arbitration provision is governed by the Federal Arbitration Act (FAA). Murray does not dispute that interstate commerce is involved. State and federal courts have concurrent jurisdiction to enforce an arbitration agreement pursuant to the terms of the FAA. Walton v. Lewis, 337 Ark. 45, 987 S.W.2d 262 (1999).

Although an arbitration provision is subject to the FAA, courts looks to state contract law to decide whether the parties' agreement to arbitrate is valid. See Barker v. Golf U.S.A., Inc., 154 F.3d 788 (8th Cir.1998) (citing Perry v. Thomas, 482 U.S. 483, 493–94 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987)). Courts may apply state law to arbitration agreements only to the extent that it applies to contracts in general. Id. at 788 (citing Allied–Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)). The Barker court put this another way, stating “[W]e may not invalidate an arbitration agreement under any state law applicable only to arbitration provisions; instead, we may apply only a state's general contract defenses.” Id. at 791 (citing Doctor's Assocs. v. Casarotto, 517 U.S. 681, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)).

According to Arkansas law, arbitration is a matter of contract between the parties, and the question of whether a dispute should be submitted to arbitration is a matter of contract construction. Independence Cnty. v. City of Clarksville, 2012 Ark. 17, 386 S.W.3d 395. The same rules of construction apply to arbitration agreements as apply to agreements generally, thus this court seeks to give effect to the intent of the parties as evidenced by the arbitration agreement itself. Id. The construction and legal effect of an agreement to arbitrate are to be determined by this court as a matter of law. Id.

B. Adequacy of Proof Offered

DIRECTV raises three challenges to the circuit court's rulings on the adequacy of its proof in support of its motion to compel Murray to arbitration. DIRECTV contends that (1) the circuit court misapplied this court's case law, specifically Alltel Corp. v. Sumner, 360 Ark. 573, 203 S.W.3d 77 (2005); (2) the circuit court misapplied the Arkansas Rules of Evidence; and (3) the circuit court misapplied Arkansas law on contract formation. Murray responds that DIRECTV failed to meet its burden of proof that the parties made a valid agreement to arbitrate.

In support of its motion to compel arbitration, DIRECTV offered the affidavit and supplemental affidavit of Valerie W. McCarthy, Senior Manager in Customer Care for DIRECTV. DIRECTV emphasizes that because Murray did not offer any proof in opposition to its motion to compel, DIRECTV's proof in support was uncontroverted.

In her affidavits, McCarthy attested to some general information about DIRECTV and its policies, explaining that it provides digital television service to consumers nationwide and that potential subscribers obtain the equipment necessary to receive DIRECTV's satellite signal either directly from DIRECTV or from a retailer. Once the equipment is installed and the potential customer selects a package of programming services, McCarthy explained that DIRECTV then activates the customer's service and the customer begins to receive programming. McCarthy stated that the relationship between DIRECTV and its customers is governed by its customer agreement, which is available on the company's website and is mailed to each customer along with the first billing statement. According to McCarthy, since 1994, the vendor responsible for mailing DIRECTV's billing statements is DST Output. McCarthy stated in her affidavit that she had visited the DST Output operating center in Hartford, Connecticut, where the billing statements were prepared and mailed, and that she was familiar with the procedures by which DST Output performs its services. McCarthy explained that those procedures include a method for DIRECTV to dictate the specific items to be included with the bill, in addition to automated equipment to print, insert, and mail the bill statements from the data that DIRECTV provides.

In her affidavits, McCarthy also attested to some specific information relating to Murray's relationship with DIRECTV. McCarthy averred that Murray signed up for DIRECTV service on January 25, 2007, through DirectHD.TV, a retail dealer in Texarkana, Arkansas. As a new customer, McCarthy averred that Murray received free installation and was allowed to lease four standard receivers and all of the equipment necessary to receive DIRECTV service; Murray also received a $12 credit per month on programming services. According to McCarthy, Murray activated her DIRECTV service on January 26, 2007, and in so doing agreed to maintain a certain level of programming for twelve months. McCarthy proclaimed that DIRECTV's records reflected that DST Output mailed Murray's first billing statement to her at 327 Meadowridge Circle, Texarkana, Arkansas 71854–9579, on or about January 27, 2007, and included with that first statement a copy of the DIRECTV customer agreement then in effect, which McCarthy defined as the customer agreement “effective as of May 1, 2006, until replaced.” McCarthy explained that the front page of Murray's billing statement reminded Murray of the programming term that Murray agreed to when she activated her receiving equipment, and that she could be charged an early cancellation fee if she chose not to fulfill her programming term. McCarthy asserted that “[a]fter receiving the Customer Agreement, Ms. Murray did not call DIRECTV to dispute any terms or conditions in the agreement, and did not immediately cancel her DIRECTV services.” McCarthy stated, however, that Murray did cancel her services on February 5, 2007. Because Murray cancelled services before the end of her programming commitment, McCarthy explained, DIRECTV assessed a prorated early cancellation fee. McCarthy proclaimed that “[a] true and correct copy of Ms. Murray's Customer...