Gore v. Alltel Commc'ns, LLC

• Decision Date: 01 March 2012
• Docket Number: No. 11–2089.,11–2089.
• Parties: Christopher L. GORE, Plaintiff–Appellee, v. ALLTEL COMMUNICATIONS, LLC, and Alltel Communications, LLC, as Successor in Interest to Southern Illinois Cellular Corp., doing business as First Cellular Southern Illinois, Defendants–Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

666 F.3d 1027

Christopher L. GORE, Plaintiff–Appellee,

v.ALLTEL COMMUNICATIONS, LLC, and Alltel Communications, LLC, as Successor in Interest to Southern Illinois Cellular Corp., doing business as First Cellular Southern Illinois, Defendants–Appellants.

No. 11–2089.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 31, 2011.Decided Jan. 19, 2012.Rehearing and Rehearing En Banc Denied March 1, 2012.

David B. Helms (argued), Attorney, Lewis, Rice & Fingersh, St. Louis, MO, for Plaintiff–Appellee.

James Hamilton Ferrick, III, Jason L. Ross, Joshua A. Stevens (argued), Attorneys, Greensfelder, Hemker & Gale, P.C., St. Louis, MO, for Defendants–Appellants.

Before KANNE and WILLIAMS, Circuit Judges, and DeGUILIO, District Judge.^*WILLIAMS, Circuit Judge.

Christopher Gore brought this class action against his wireless services provider, Alltel Communications, LLC, for failing to honor the terms of an agreement he previously made with a company Alltel acquired, but Alltel moved to compel arbitration in light of a broad arbitration clause included in its service agreement with Gore. The district court denied that motion, concluding that a genuine dispute existed regarding the scope of the arbitration clause. We disagree. Because Gore's claims are based in part on the products and services he received under the Alltel Agreement, we find that the arbitration clause applies, and so we reverse.

I. BACKGROUND

Gore entered into a long-term wireless service agreement with Southern Illinois Cellular Corporation, d/b/a First Cellular Southern Illinois (“First Cellular”) on October 6, 2005. By that agreement (the “First Cellular Agreement”), First Cellular contracted to provide wireless telephone and other multimedia services to Gore for a two-year period in exchange for Gore paying approximately $40 each month. Gore subscribed to four different wireless lines under the First Cellular Agreement. Three lines used First Cellular's Code Division Multiple Access (“CDMA”) technology, and the other used the company's Global System for Mobile Communications (“GSM”) technology. The First Cellular Agreement did not contain an arbitration clause.

On May 1, 2006, Alltel acquired First Cellular. At the time, the First Cellular Agreement had approximately 17 months remaining before its scheduled expiration. Gore claims that before the First Cellular Agreement expired Alltel began dismantling First Cellular's GSM network, causing the network and its features to be periodically unavailable. Gore's three CDMA lines were fully transitioned to the Alltel network at some point in October 2006. However, Alltel informed Gore that because it “did not use GSM technology, [Gore's GSM line] could not be transitioned to Alltel” until some later date. The GSM line was transitioned in April 2007.

In November 2006, Alltel sent Gore an invoice, dated November 3, 2006, showing a balance of $100.77 and indicating that Gore's credit card would be charged that amount on November 23, 2006. On page 2 of the invoice, under a “General Information” heading, the following text appeared (in approximately size 7 font):

These services are subject to Alltel's terms and conditions, which are found on the back of your customer service agreement and at www. alltel. com. By paying this bill, you acknowledge that you are bound by these terms and conditions.

Page 9 of the ten-page invoice included an “Acceptance” provision that explained:

You accept this Agreement when you do any of the following: (a) give us your written or electronic signature, (b) tell us orally or electronically that you accept, or (c) use or attempt to use any of the Equipment or Services. If you have never used the services before and do not wish to be bound by these Terms and Conditions, do not begin using the Services or Equipment and notify us immediately.

And the last page of the invoice contained the arbitration provision at issue in this case (in approximately size 6 font):

ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR RELATING TO THE SERVICES AND EQUIPMENT MUST BE SETTLED BY ARBITRATION.... ALL CLAIMS MUST BE ARBITRATED INDIVIDUALLY, AND THERE WILL BE NO CONSOLIDATION OR CLASS TREATMENT OF ANY CLAIMS....

(all capitalizations in original).

The invoice made clear, “This ‘Agreement’ includes [the] Terms and Conditions and your Service Order.” It defined “Service(s)” as “any services you have asked us to provide you through this agreement.” And it declared that “Equipment” included “any communication equipment or accessories you purchase or lease from us or use in any manner in connection with your Services.” Gore's credit card was charged, and Alltel took that as Gore's acceptance of described terms and conditions.

When Alltel completed the transition of Gore's lines to the Alltel network, Gore's GSM line was rendered “completely inoperable.” At the time, approximately 6 months remained on the First Cellular Agreement. Alltel informed Gore that he needed to purchase an Alltel-compatible phone and agree to a new wireless service plan or pay a $250 termination fee to disconnect his service. Gore purchased an Alltel phone, entered into a new service contract with Alltel, and agreed to pay $109 per month for a wireless service plan similar to the plan for which he contracted with First Cellular.

Gore initiated this class action suit against Alltel, as First Cellular's successor in interest, in an Illinois state trial court. He asserts a handful of claims against both First Cellular and Alltel. His first claim charges Alltel with breach of contract for rendering his GSM phone and equipment useless, refusing to honor the features and prices of the First Cellular Agreement, and seeking to enforce the early termination provision despite First Cellular's breach. Gore's second claim is for deceptive trade practices under Illinois law; he alleges that First Cellular knowingly and deceptively induced him and other customers to enter into 24–month agreements despite knowing that the services would soon be rendered inoperable. His third claim is for civil conspiracy. It is predicated on an alleged agreement between First Cellular and Alltel to unlawfully breach the First Cellular Agreement after Alltel's acquisition of First Cellular. His next claim seeks to hold First Cellular liable for aiding and abetting Alltel in carrying out the fraudulent scheme. And his final claim is one for unjust enrichment, through which he seeks disgorgement of the profits and revenues that First Cellular obtained as a result of its failure to disclose the acquisition plan and its intent to eliminate the GSM service, and the profits that Alltel made by refusing to honor the First Cellular Agreement.

Alltel removed this case to the Southern District of Illinois under the Class Action Fairness Act, 28 U.S.C. § 1453. It then moved to compel arbitration. The district court denied the motion without prejudice. In doing so, the court found that the parties genuinely disputed whether they entered into an arbitration agreement, when they did so, and whether Gore's causes of action fell within the scope of that agreement. As a result, the court ordered discovery and a trial under section 4 of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq. Alltel moved for reconsideration, and it requested that the court alter or amend its order to make clear that discovery should be limited to the question of whether the parties entered into a valid arbitration agreement. Gore opposed Alltel's motion for reconsideration but agreed to limited discovery. The court denied Alltel's motion for reconsideration and ordered discovery on the merits concurrent with discovery on the arbitration issue. Alltel filed this interlocutory appeal pursuant to section 16 of the FAA. 9 U.S.C. § 16(a)(1)(A) (permitting an appeal to be taken from an order “refusing a stay of action under section 3 of this title”).

II. ANALYSIS

The primary issue on appeal is whether this dispute falls within the scope of the Alltel Agreement's arbitration clause. Alltel argues that the district court erred by denying its motion to compel arbitration. Gore disagrees, and responds that even if the arbitration clause encompasses his claims, applying it to this dispute would be procedurally unconscionable. We address both issues in turn.

A. The Broad Scope of the Arbitration Clause

Title 9, section 2 of the United States Code (section 2 of the FAA) provides, in pertinent part:

A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... 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. This provision embodies both a “liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011) (citations and internal quotation marks omitted). But because arbitration is a matter of contract, “a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (citation and internal quotation marks omitted). Rather, “courts must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms.” Concepcion, 131 S.Ct. at 1745 (citation omitted).

To determine whether a contract's arbitration clause applies to a given dispute, federal courts apply state-law principles of contract formation. Rosenblum v. Travelbyus.com Ltd., 299 F.3d 657, 662 (7th Cir.2002). Once it is clear, however, that the parties have a contract that provides for arbitration of some issues between them, any doubt concerning the scope of the arbitration clause is resolved in favor of...