Henson v. U.S. Dist. Court for the N. Dist. of Cal. (In re Henson), 16-71818

• Decision Date: 05 September 2017
• Docket Number: No. 16-71818,16-71818
• Citation: 869 F.3d 1052
• Parties: IN RE Anthony HENSON and William Cintron, Anthony Henson; William Cintron, Petitioners, v. United States District Court for the Northern District of California, Oakland, Respondent, Turn, Inc., Real Party in Interest.
• Court: U.S. Court of Appeals — Ninth Circuit

869 F.3d 1052

IN RE Anthony HENSON and William Cintron,Anthony Henson; William Cintron, Petitioners,

v. United States District Court for the Northern District of California, Oakland, Respondent,Turn, Inc., Real Party in Interest.

No. 16-71818

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 17, 2017 San Francisco, California

Filed September 5, 2017

Nimish R. Desai (argued) and Michael W. Sobol, Lieff Cabraser Heimann & Bernstein LLP, San Francisco, California; Nicholas Diamand, Lieff Cabraser Heimann & Bernstein LLP, New York, New York; Hank Bates, Carney Bates & Pulliam PLLC, Little Rock, Arkansas; Bradley S. Clanton, Clanton Legal Group PLLC, Jackson, Mississippi; for Petitioners.

Michael H. Rubin (argued), Anthony J. Weibell, and Lauren Gallo White, Wilson Sonsini Goodrich & Rosati, San Francisco, California, for Real Party in Interest.

Scott H. Angstreich and Amelia I.P. Frenkel, Kellogg Huber Hansen Todd & Evans PLLC, Washington, D.C., for Amicus Curiae Cellco Partnership DBA Verizon Wireless.

Before: William A. Fletcher and Richard C. Tallman, Circuit Judges, and Roslyn O. Silver,^* District Judge.

OPINION

PER CURIAM:

We consider whether the defendant, a "middle man" for Internet-based advertisements, may invoke an arbitration provision contained in a contract between the plaintiffs and their wireless service provider.

I. BACKGROUND

Plaintiffs Anthony Henson and William Cintron (collectively, "Henson") are Verizon¹ cellular and data subscribers. Henson and Verizon's contractual relationship is governed by the "My Verizon Wireless Customer Agreement" ("Customer Agreement"), which includes an agreement to arbitrate disputes between them. Defendant Turn, Inc. ("Turn") is a "middle man" for Internet-based advertisements that separately contracts with Verizon to deliver advertisements to Verizon subscribers based on usage data collected from users' mobile devices. The "Turn Audience Platform Agreement" ("TAP Agreement") governs Verizon and Turn's contractual relationship, under which Verizon granted a license to Turn to use its service for targeted advertising in exchange for a percentage of the revenue that Turn received from selling targeted advertising space to its client advertisers.

As a Verizon subscriber, each of Henson's wireless transmissions contained a Verizon Unique Identifier Header ("UIDH"). Turn attached tracking cookies² to Verizon subscribers' UIDHs to collect and send their web-browsing and usage data to Turn's servers. Subscribers were allegedly unable to detect, delete, or block these "zombie" cookies attached to their UIDHs.³ Henson filed a putative class action in the United States District Court for the Northern District of California on behalf of all Verizon subscribers residing in New York against Turn for its alleged use of these "zombie" cookies, claiming that Turn (1) engaged in deceptive business practices in violation of New York General Business Law § 349, and (2) committed trespass to chattels by intentionally interfering with the use and enjoyment of Verizon subscribers' mobile devices.

Henson alleged that Turn exploited users' UIDHs to install its "zombie" cookies, recreated those cookies after users deleted them, collected data about Verizon users without their knowledge, used that data to create profiles that it marked with its own identifier ("Turn ID"), stored those Turn IDs on users' mobile web browsers, and auctioned off users' collected data so that advertisers could place targeted advertisements on their mobile phones. Because Turn works with Google, Facebook, and hundreds of other well-recognized brands, Henson argued Turn's practices had a harmful and wide impact.

Turn moved to dismiss Henson's claims and sought to compel arbitration by invoking the arbitration provision in the Customer Agreement between Henson and Verizon. The Customer Agreement requires Henson and Verizon to arbitrate any disputes arising out of their contract. However, Turn is not a signatory to the Customer Agreement and does not otherwise have an arbitration agreement with Henson. The separate TAP Agreement, between Turn and Verizon, provides that the parties "are independent of each other"; that "nothing in th[e] Agreement creates any partnership, joint venture, ... or other similar relationship"; and that "neither party shall have the authority to bind the other in any way."⁴ Nonetheless, Turn asked the district court to compel arbitration under the doctrine of equitable estoppel because it provided a service to Henson that was closely connected to Henson's Verizon wireless service.

Without conducting a choice-of-law analysis, the district court granted Turn's motion to compel arbitration under New York's equitable estoppel doctrine and stayed the action. Henson timely filed this writ of mandamus to vacate the district court's order compelling arbitration.

II. ANALYSIS

We have jurisdiction to issue writs of mandamus pursuant to the All Writs Act. 28 U.S.C. § 1651. A writ of mandamus is a "drastic and extraordinary" remedy. Ex parte Fahey , 332 U.S. 258, 259, 67 S.Ct. 1558, 91 L.Ed. 2041 (1947). To determine whether a writ of mandamus is warranted, we weigh the Bauman factors:

(1) whether the petitioner has other adequate means, such as a direct appeal, to attain the relief he or she desires; (2) whether the petitioner will be damaged or prejudiced in a way not correctable on appeal; (3) whether the district court's order is clearly erroneous as a matter of law; (4) whether the district court's order makes an "oft-repeated error," or "manifests a persistent disregard of the federal rules"; and (5) whether the district court's order raises new and important problems, or legal issues of first impression.

In re Van Dusen , 654 F.3d 838, 841 (9th Cir. 2011) (quoting Bauman v. U.S. Dist. Court , 557 F.2d 650, 654–55 (9th Cir. 1977) ). Although satisfying the third Bauman factor—clear error—is necessary for granting the writ, a petitioner need not satisfy all five factors at once. Douglas v. U.S. Dist. Court for Cent. Dist. of Cal. , 495 F.3d 1062, 1066 (9th Cir. 2007) (per curiam). Here, the majority of the Bauman factors weigh heavily in favor of granting the writ.

A. Direct Appeal is Unavailable

A writ of mandamus "is not available when the same review may be obtained through contemporaneous ordinary appeal." Snodgrass v. Provident Life and Accident Ins. Co. , 147 F.3d 1163, 1165 (9th Cir. 1998) (quoting Clorox Co. v. U.S. Dist. Court for N. Dist. of Cal. , 779 F.2d 517, 519 (9th Cir. 1985) ). An order staying proceedings and compelling arbitration is not a final decision that is subject to ordinary appeal under 28 U.S.C. § 1291. See 9 U.S.C. § 16(b) ; Johnson v. Consumerinfo.com, Inc. , 745 F.3d 1019, 1021–23 (9th Cir. 2014). Because "contemporaneous ordinary appeal" is unavailable, the first Bauman factor supports issuance of the writ.

B. Prejudice Not Correctable on Appeal

The second Bauman factor also weighs in favor of granting mandamus relief. We generally examine the first and second factors together because the second is closely related to the first. Douglas , 495 F.3d at 1068 n.3. Here, the Customer Agreement does not allow Henson to arbitrate his dispute in a representative capacity or on behalf of a class. If Henson is forced to arbitrate, he "has no other adequate means" of ensuring that he can continue as the class representative, and this would prejudice him "in a way not correctable on appeal." See Bauman , 557 F.2d at 654. If Henson wins the arbitration, then his individual claims in this action would be rendered moot because they would fully be satisfied, and Henson would lose his status as class representative because he would no longer have a concrete stake in the controversy. See Douglas , 495 F.3d at 1068–69. It is doubtful that Henson would be able to avoid mootness by moving to vacate the arbitration award solely because he wanted to continue as the class representative. See id. And, it is "doubtful that he could appeal the district court's order confirming an award that fully satisfied his individual claim[s]." Id. at 1069. He thus would "have no opportunity to challenge the district court's order compelling the arbitration in the first place." Id.

If Henson loses the arbitration, it is also doubtful that he would successfully bring an appeal to this court. If he brings suit in the district court to vacate the arbitration award and to seek a damage award from the district court, Turn could make an offer of settlement that would be very hard to refuse. Until the arbitration award is actually vacated by order of the district court, Henson could represent only himself and would thus have no legal or ethical obligation to refuse the offer.

C. Clear Error

Although clear error is a highly deferential standard of review in the mandamus context, Van Dusen , 654 F.3d at 841, an "order is clearly erroneous for purposes of a mandamus petition if we are left with the definite and firm conviction that a mistake has been committed." United States v. Ye , 436 F.3d 1117, 1123 (9th Cir. 2006) (quotation omitted). Here, the district court committed clear error by applying New York's equitable estoppel doctrine, rather than California's, and by failing to apply California law correctly.

Because we are left with a definite and firm conviction that a mistake has been committed, the third Bauman factor strongly favors granting the writ.

The Federal Arbitration Act ("FAA") provides that arbitration agreements "shall be valid, irrevocable, and enforceable." 9 U.S.C. § 2. Turn attempts to invoke the arbitration agreement between Henson and Verizon to compel arbitration, but Henson and Turn do not have an arbitration agreement with each other. "[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT&T Techs., Inc. v. Commc'ns Workers of Am. , 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (...