DirecTV v. Mattingly

• Decision Date: 31 July 2003
• Docket Number: No. 130,130
• Citation: 829 A.2d 626,376 Md. 302
• Parties: DIRECTV, Inc. v. John A. MATTINGLY, Sr.
• Court: Maryland Court of Appeals

829 A.2d 626

376 Md. 302

DIRECTV, Inc. v. John A. MATTINGLY, Sr.

No. 130, Sept. Term, 2002.

Court of Appeals of Maryland.

July 31, 2003.

James K. Archibald (Marina M. Sabett, Venable, Baetjer and Howard, LLP, Baltimore, Steven E. Bledsoe, Stephen H. McClain, Kimberly Horsley, Kirkland & Ellis, Los Angeles, CA, Patrick J. Attridge, King & Attridge, Rockville, on brief), for petitioner.

John A. Mattingly, Jr. (Baldwin, Briscoe & Mattinly, Chtd., Lexington Park, on brief), for respondent.

Argued before BELL, C.J., and ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ.

CATHELL, J.

This case arises out of a February 1997 subscription contract between DIRECTV, petitioner, a provider of satellite television services, and one of its customers, John A. Mattingly, Sr., respondent. On August 6, 1999, respondent filed suit against petitioner¹ alleging that petitioner improperly charged him an administrative late fee of $2.81. On November 9, 2001, the Circuit Court for St. Mary's County granted petitioner's motion to dismiss² respondent's suit without prejudice. Respondent appealed that judgment to the Court of Special Appeals. On November 4, 2002, that court reversed the trial court's dismissal of respondent's suit against petitioner.³ Mattingly v. Hughes Electronics Corp., 147 Md.App. 624, 810 A.2d 498 (2002). Petitioner then filed a Petition for Writ of Certiorari with this Court, and, on March 12, 2003, we granted the petition. DirecTV v. Mattingly, 373 Md. 406, 818 A.2d 1105 (2003). Petitioner presents two questions for our review:

"1. Whether the Court of Special Appeals erred by holding, contrary to established Maryland law, that a party may avoid an agreed upon contract modification by showing that the modification provisions of the original contract were not followed?

"2. Whether Maryland should join other jurisdictions in holding that modifications to Customer Agreements may be consummated by the customer's acceptance of the services in accordance with the terms of the modified agreement?"

We answer in the negative the first of petitioner's questions and hold that petitioner failed to provide sufficient notice of the changes to the provisions of the initial agreement contained in the subsequent 1997 modified document, which changes included an arbitration provision, because, pursuant to the plain language of petitioner's initial customer agreement with respondent, petitioner did not discuss, mention or even highlight any change in the customer agreement. Under the specific facts of the case sub judice, petitioner's failure to adequately follow the notice provisions of the initial customer agreement that petitioner alone authored, foreclosed respondent's ability to reasonably make an informed decision regarding his subscription for satellite television services. Given our holding with regard to petitioner's first question, it is unnecessary to address petitioner's second question. Similarly, we do not address any of respondent's alternative arguments. Accordingly, we affirm the judgment of the Court of Special Appeals.

I. Facts

Respondent subscribed to petitioner's satellite service in the course of purchasing the necessary satellite television equipment at a Circuit City store in Waldorf, Maryland. On February 20, 1997, respondent made an oral agreement to accept petitioner's satellite television service subject to the terms and conditions of a written customer agreement to be mailed to him thereafter. As a result of respondent's acceptance of the customer agreement petitioner immediately activated respondent's satellite service.

The following day, petitioner mailed respondent an invoice for his purchase of the satellite service. Petitioner included the aforementioned initial customer agreement within the envelope containing that invoice. This customer agreement was entitled, "CUSTOMER AGREEMENT effective as of August 28, 1996, until replaced"⁴ (hereinafter, the "initial customer agreement"). The first provision of the initial customer agreement, "AGREEMENT TO TERMS AND CONDITIONS," stated:

"Customer promises to pay amounts billed by DIRECTV for programming services and related fees, taxes, and charges. Customer authorizes DIRECTV to make inquiries into Customer's credit worthiness, including receipt and review of credit bureau information. Customer's receipt of services constitutes Customer's acceptance of and agreement to all terms and conditions of this Agreement. DIRECTV reserves the right to change these terms and conditions, including the Applicable Fees and Charges. If any changes are made, we will send you a written notice describing the change and its effective date. If a change is not acceptable to you, you may cancel your service. If you do not cancel your service, your continued receipt of any service is considered to be your acceptance of that change. In addition, the individual terms and conditions in this Agreement, whether or not modified, shall survive the cancellation of your service." [Italicized emphasis added.]

The initial customer agreement contains twenty-one other numbered provisions. Within the sixth numbered provision, entitled "FEES AND CHARGES," is a subprovision describing administrative late fees. It states, "If your payment is not received by DIRECTV before your next statement is issued, you may be charged an Administrative Late Fee up to the amount stated in Section 20 below." Section 20 states that an "Administrative Late Fee" is not to exceed $5.00. The initial customer agreement was silent as to arbitration.

On March 18, 1997, within a month of respondent's subscribing to petitioner's satellite service, petitioner mailed another proposed customer agreement (hereinafter, the "1997 modified document") to respondent. On its face it purported to be effective as of March 1, 1997, a date prior to its mailing to respondent. While that document differed from the initial agreement, it was not accompanied by any separate notice of the changes, or by any comparison of the existing agreement and new proposed agreement. While appearing nearly identical to the initial customer agreement, the 1997 modified document differed from its predecessor in that it contained unhighlighted and otherwise undescribed changes, including the addition of a twenty-third provision, entitled "ARBITRATION." The Arbitration provision stated:

"Any controversy, claim, dispute or disagreement arising out of, or relating to, this Agreement or any services provided by DIRECTV which cannot be settled by the parties shall be resolved according to binding arbitration conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The decision of the arbitrator shall be final and binding on the parties and any award of the arbitrator may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, the arbitrator shall not be authorized to award punitive damages with respect to any such controversy, claim or dispute. The cost of any arbitration hereunder, including the cost of the record or transcripts thereof, if any, administrative fees, attorneys' fees and all other fees involved, shall be paid by the party determined by the arbitrator to not be the prevailing party, or otherwise allocated in an equitable manner as determined by the arbitrator."

It is undisputed that no separate description or any explanation of the changes, i.e., the new arbitration provision, was ever sent to respondent; the terms of the new document merely contained the arbitration provision while the initial agreement did not.⁵ Upon receipt of this new modified document, respondent did not cancel his service⁶ with petitioner and thus continued to receive petitioner's satellite services.⁷

In an invoice dated July 17, 1999, respondent was assessed a late fee by petitioner for a total of $2.81 for a "Past Due" amount of $56.12. Respondent paid this late fee and the accompanying outstanding balance. Then, on August 6, 1999, he filed a class action complaint against petitioner⁸ for the purpose of challenging the legality of petitioner's late fee. Respondent's complaint was comprised of four counts.⁹ The complaint alleged, in part, that petitioner "knew or should have known that the due date for the payment of satellite television services was unreasonably and unconscionably short and bore no relation to the standard billing cycles of other similarly situated businesses" and that late fees were "excessive and bore no relationship to the administrative charges incurred in processing late payments." Respondent amended his complaint on September 7, 1999.¹⁰

Petitioner and Hughes sought to remove the case to the U.S. District Court for the District of Maryland, but that court remanded the case because the lawsuit did not satisfy the subject matter jurisdiction requirement that in diversity claims in federal court the amount in controversy must exceed $75,000. See 28 U.S.C. § 1332(a) (2003)(stating, "The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $ 75,000, exclusive of interest and costs, and is between ... (1) Citizens of different States;...."). The case was then returned to the Circuit Court for St. Mary's County. Petitioner and Hughes immediately moved for dismissal of respondent's complaint, alleging that his specific claims should be dismissed, or, in the alternative, that the circuit court proceedings must be stayed and arbitration compelled. The Circuit Court, after a hearing, found that respondent was required to arbitrate his claims against petitioner pursuant to the 1997 modified document and subsequent customer documents. That court then granted petitioner's motion to dismiss without prejudice and respondent appealed to the Court of Special Appeals. As previously mentioned, the Court of Special Appeals reversed the trial court's dismissal of respondent's...