Grand Wireless, Inc. v. Verizon Wireless, Inc.

• Decision Date: 19 March 2014
• Docket Number: No. 13–1149.,13–1149.
• Citation: 748 F.3d 1
• Parties: GRAND WIRELESS, INC., Plaintiff, Appellee, v. VERIZON WIRELESS, INC.; Erin McCahill, Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

748 F.3d 1

GRAND WIRELESS, INC., Plaintiff, Appellee,

v.VERIZON WIRELESS, INC.; Erin McCahill, Defendants, Appellants.

No. 13–1149.

United States Court of Appeals, First Circuit.

March 19, 2014.

Philip R. Sellinger, with whom David G. Thomas, Zachary C. Kleinsasser, Todd L. Schleifstein and Greenberg Traurig, LLP were on brief, for appellants.

Samuel Perkins, with whom Brody, Hardoon, Perkins & Kesten, LLP was on brief, for appellee.

Before TORRUELLA, RIPPLE^* and THOMPSON, Circuit Judges.

RIPPLE, Circuit Judge.

Grand Wireless, Inc. (“Grand”) brought this action in Massachusetts state court against Verizon Wireless, Inc. (“Verizon”) and Verizon employee Erin McCahill. It alleged a violation of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) against Ms. McCahill, as well as several state law claims against both Ms. McCahill and Verizon. The defendants removedthe case to the United States District Court for the District of Massachusetts and moved for an order compelling arbitration of Grand's claims. Grand opposed the motion. It contended that the arbitration clause should be interpreted narrowly and that, because Ms. McCahill was not a signatory to the contract containing the arbitration clause, the claim against her could not be arbitrated in this case. Adopting Grand's memorandum in opposition to the motion, the district court denied the defendants' motion to compel and also denied their subsequent request for reconsideration.

The defendants timely appealed. They submit that Grand's claims were within the scope of the parties' arbitration agreement and that arbitration of the claims against Ms. McCahill is not barred despite her status as a non-signatory of the arbitration agreement. We agree and therefore reverse the judgment of the district court and remand the case for further proceedings.

IBACKGROUND

A. Facts

In September 2002, Grand and Verizon entered into an Exclusive Authorized Agency Agreement for Commercial Mobile Radio Service (“Agreement”). The Agreement authorized Grand to act as a Verizon sales agent within a defined geographic area. The Agreement governed the business relationship between Grand and Verizon. It required Grand to provide services exclusively for Verizon by offering customers Verizon services, such as sales, installation, warranty service and equipment maintenance. The Agreement also addressed the relationship between Grand, Verizon and subscribers who purchased products and services through Grand. On this point, the Agreement provided that subscriber lists were “the exclusive confidential property of Verizon Wireless.” ¹ The Agreement provided for an initial term of five years; at that point, the Agreement would continue on a month-to-month basis, terminable by either party on thirty days' written notice to the other.

The Agreement contained a provision entitled, “DISPUTE RESOLUTION AND ARBITRATION.” It stated, in pertinent part:

Except to the extent explicitly provided below, ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY PRIOR OR FUTURE AGREEMENT BETWEEN THE PARTIES, SHALL BE SETTLED BY ARBITRATION ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) IN ACCORDANCE WITH THE WIRELESS INDUSTRY ASSOCIATION (“WIA”) RULES OF THE AAA, AS MODIFIED BELOW, AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATORS MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.²

The subsequent paragraphs explicitly stated that the disputes not covered included several intellectual property issues, as well as “[s]eeking to compel arbitration”; ³ “[s]eeking to confirm or challenge any arbitral award”; ⁴ seeking judicial relief for breaches of sections 3.3 and 7 of the Agreement; and seeking emergency injunctive relief pending the appointment of arbitrators. Provisions followed addressing the procedural aspects of commencing and conducting arbitration.

There is no dispute that, under the Agreement, Grand operated retail locations for Verizon products and services beginning in 2002 until the five-year term expired in September 2007. The parties then continued their relationship on a month-to-month basis until July 19, 2011, when Verizon notified Grand of its intent to terminate the relationship. Verizon submits that at Grand's request, Verizon extended the termination date to October 31, 2011, in order to “g[i]ve Grand additional time to attempt to sell certain of its stores to another Verizon Wireless agent.” ⁵

In October 2011, according to Grand's complaint:

[Verizon] mailed an oversized (6? by 11?) color postcard, featuring the picture of an attractive young woman, to the customers of eight remaining Grand Wireless stores, proclaiming that these Grand Wireless stores had “CLOSED.” The mailing provided the customers with the address of the nearest competing Verizon Wireless store.⁶

Grand further alleged that Ms. McCahill had “authorized the mailing and knew when the mailing went out that it was false.” ⁷ Grand stated that it was, at the time of the mailing, in negotiations with another wireless provider, T–Mobile, to become an authorized T–Mobile agent. Further, Grand alleged that Ms. McCahill knew that the mailing “would deal a body blow to Grand Wireless' ability [to] continue in business as a T[-]Mobile outlet” and that the mailing “was a deliberate attempt to eliminate Grand Wireless as a competitor to nearby Verizon stores.” ⁸ Grand alleged that its T–Mobile venture failed and that it has since ceased operations.

B. Procedural History

Grand initially filed the present action in Massachusetts state court. Its complaint alleged that Ms. McCahill had violated RICO, 18 U.S.C. §§ 1961 et seq., by “engag[ing] in a fraudulent scheme that used the United States mails to transmit false representations that ‘GRAND WIRELESS ... HAS CLOSED,’ in violation of the federal mail fraud statute, 18 U.S.C. § 1341.” ⁹ It further alleged that both Ms. McCahill and Verizon had violated a Massachusetts statute prohibiting unfair and deceptive trade practices. Finally, Grand alleged that both Ms. McCahill and Verizon had committed the torts of injurious falsehoods and intentional interference with an advantageous relationship.

The defendants removed the case to the district court, where Verizon and Ms. McCahill moved to compel Grand to arbitrate its claims. Grand opposed the motion for arbitration. It submitted that the motion to compel arbitration should be denied for two reasons: (1) that its claims fell outside of the scope of the arbitration clause; and (2) that Ms. McCahill could not enforce the arbitration clause because she was not a party to the Agreement.

Before the deadline had passed for the defendants to file their reply brief, the district court denied the motion to compel. In ruling, the district court did not issue a written opinion; instead, it simply issued an order stating, “Motion is denied. The court adopts Plaintiff's Memorandum. So ordered.” ¹⁰ The defendants moved for reconsideration. The district court denied their motion in another order, stating, “Court has reconsidered Defendants' Motion to Compel Arbitration and to Dismiss Complaint or stay action pending arbitration and again denies same. So Ordered.” ¹¹ The defendants then brought this timely appeal.¹²

IIDISCUSSION

We have jurisdiction to review an order denying a motion under the Federal Arbitration Act to compel arbitration. See9 U.S.C. § 16(a)(1)(C). Our review of such a denial is de novo because whether a matter is arbitrable is a matter of contract interpretation, and contract interpretation is a matter of law. Combined Energies v. CCI, Inc., 514 F.3d 168, 171 (1st Cir.2008). To compel arbitration, the defendants “must demonstrate that a valid agreement to arbitrate exists, that the[y are] entitled to invoke the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause's scope.” Soto–Fonalledas v. Ritz–Carlton San Juan Hotel Spa & Casino, 640 F.3d 471, 474 (1st Cir.2011) (internal quotation marks omitted). Furthermore, as we also noted in Soto–Fonalledas:

Under Section 2 of the FAA, a written provision in a contract “to settle by arbitration a controversy thereafter arising out of such contract ... 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 Supreme Court has stated that “the FAA was designed to promote arbitration,” and that “Section 2 embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts.”

Id. (quoting AT&T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 1749, 179 L.Ed.2d 742 (2011); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006)).

Here, the parties do not dispute the validity of the Agreement's arbitration clause. Instead, they dispute: (1) whether Grand's claims are within the scope of the arbitration clause; and (2) whether Ms. McCahill is entitled to invoke the arbitration clause. We address each contention in turn.

A. Scope of the Arbitration Clause

We first address whether Grand's claims are within the scope of the arbitration clause. Grand and Verizon agreed to arbitrate “any controversy or claim arising out of or relating to” their Agreement.¹³

As we have noted earlier, the district court simply adopted Grand's memorandum. Therefore, the district court necessarily took that document's view that the Agreement's arbitration clause was narrow. Such a construction, according to that memorandum, would limit application of the arbitration clause to “battles over the Agency Agreement,” i.e., to claims that require interpretation of the Agreement's terms.¹⁴ The memorandum also asserted that narrow arbitration clauses are not entitled to a presumption of arbitrability.

In this appeal, Grand takes the same position that it did in the district court. The defendants...