In re Actions

• Decision Date: 16 September 2013
• Docket Number: No. 12 CV 2656(AJN).,12 CV 2656(AJN).
• Citation: 972 F.Supp.2d 465
• Parties: In re A2P SMS ANTITRUST LITIGATION. This Document Relates to: All Actions.
• Court: U.S. District Court — Southern District of New York

972 F.Supp.2d 465

In re A2P SMS ANTITRUST LITIGATION. This Document Relates to: All Actions.

No. 12 CV 2656(AJN).

United States District Court, S.D. New York.

Sept. 16, 2013.

Robert N. Kaplan, Elana Katcher, Gregory Keith Arenson, Richard Jo Kilsheimer, Kaplan Fox & Kilsheimer LLP, New York, NY, for Plaintiffs.

Luke A. Connelly, Winston & Strawn LLP, Steven M. Bierman, Sidley Austin LLP, Joel Murray Cohen, Davis Polk & Wardwell L.L.P., Lawrence Kill, Carrie Maylor DiCanio, Anderson Kill & Olick, P.C., Scott Allan Martin, Greenberg Traurig, LLP, Robert L. Sills, Jeffrey Michael Prokop, Orrick, Herrington & Sutcliffe LLP, Carmine D. Boccuzzi, Jr., Cleary Gottlieb, Peter Nicholas Flocos, Sarah Peck Kenney, K & L Gates LLP, Karl Geercken, Alston & Bird, LLP, Karen H. Bromberg, Nathaniel P. T. Read, Thomas Edward Bezanson, Cohen & Gresser, LLP, Adam C. Hemlock, Steven Alan Reiss, Weil, Gotshal & Manges LLP, Paolo Morante, DLA Piper US LLP, New York, NY, Aaron Martin Panner, Brendan J. Crimmins, Kellogg, Huber, Hansen, Todd & Evans, PLLC, Andrew G. McBride, Thomas Ryan McCarthy, Wiley Rein LLP, Archis A. Parasharami, Mayer Brown LLP, John E. Schmidtlein, Megan Anne Hughes, Michael V. Pinkel, Williams & Connelly L.L.P., David Smutny, Ross C. Paolino, Orrick, Herrington & Sutcliffe, LLP, Washington, DC, Christopher B. Essig, Thomas James Frederick, Winston & Strawn LLP, John Walter Treece, Linton J. Childs, Sidley, Austin LLP, Basileios Katris, Horwood Marcuz & Berk Chartered, Chicago, IL, Christopher Burch Hockett, Micah G. Block, Menlo Park, CA, Michael D. McNeely, DLA Piper US LLP, Florham Park, NJ, Jennifer L. Stewart, Cooley LLP, John C. Blessington, K & L Gates LLP, Boston, MA, Mark A. McCarty, Peter Kontio, Alston & Bird, L.L.P., Atlanta, GA, Richard E. Donovan, Kelley Drye & Warren LLP, Parsippany, NJ, Dylan M. Carson, Tucker Ellis LLP, Denver, CO, Patrick J. Pascarella, Tucker Ellis LLP, Cleveland, OH, Laura M. Kam, DLA Piper LLP, Phoenix, AZ, for Defendants.

MEMORANDUM AND OPINION

ALISON J. NATHAN, District Judge.

Plaintiffs Club Texting, Inc. (“Club Texting”), iSpeedbuy LLC (“iSpeedbuy”), and TextPower, Inc. (“TextPower”) (collectively “Plaintiffs”), bring this putative class action alleging violations of Sections 1 and 2 of the Sherman Act of 1890 (the “Sherman Act”), 15 U.S.C. §§ 1 and 2. Plaintiffs bring these claims, as alleged in their second amended complaint (“SAC”), against the following Defendants: CTIA—The Wireless Association (“CTIA”); Wireless Media Consulting, Inc. d/b/a WMC Global (“WMC”); AT & T Mobility LLC (“AT & T”); Cellco Partnership d/b/a Verizon Wireless (“Verizon”); Sprint Nextel Corporation (“Sprint”); T–Mobile USA, Inc. (“T–Mobile”); U.S. Cellular Corporation (“USCC”); Air2Web, Inc. (“Air2Web”); Ericsson Inc. (“Ericsson”); Sybase, Inc. (“Sybase”); SoundBite Communications, Inc. (“SoundBite”); 2ergo Americas, Inc. (“2ergo”); Syniverse Technologies LLC (“Syniverse”); ¹ Vibes Media, LLC (“Vibes”); 3Cinteractive, LLC (“3Cinteractive”); mBlox, Inc. (“mBlox”); and OpenMarket, Inc. (“OpenMarket”).

As discussed in more detail below, these Defendants can be grouped based on the various functions they serve in the relevant market or on their relationships with the Plaintiffs. Currently before the Court are a number of motions that these Defendants have filed as individuals and as groups. Although these motions fall within two broad categories—arbitration motions and Formerly known as, and sued as, Syniverse Technologies, Inc. motions to dismiss—the Court's Memorandum and Order addresses only the arbitration motions, filed pursuant to the Federal Arbitration Act, 9 U.S.C § 3 (the “FAA”). See Dkt. Nos. 159, 151, 162, 165, 171. Having considered these motions, and for the reasons discussed below, the Court concludes that a number of Defendants can compel arbitration and that the current matter must be stayed pending such arbitration.

I. FACTUAL AND PROCEDURAL BACKGROUND

Except as otherwise noted, the following facts are undisputed. This case relates to text messages or SMS (“short message service”)—short electronic messages transmitted over a cellular network, generally to cell phones, but also to other wireless communication devices. SAC ¶ 2. Specifically, the case relates to application-to-person text messages (“A2P” or “A2P SMS”). Unlike the more commonly known person-to-person (“P2P”) text messages, A2P text messages are sent from “applications”—businesses and institutions—to wireless subscribers, and are often sent simultaneously to a large number of recipients. SAC ¶¶ 3, 4, 5.

Although some A2P are sent using traditional 10–digit telephone numbers, issued under the North American Numbering Plan (“NANP”) and regulated by the Federal Communications Commission (“FCC”), the majority of A2P messages are sent using “common short codes” (“CSC”). CSCs are 5 or 6 digit numbers that are leased to businesses and institutions (“CSC Lessees”) for the purpose of sending A2P SMS. To obtain a CSC lease, prospective CSC Lessees must first submit a “Registrant Sublicense Agreement,” (the “RS Agreement” or “RSA”) through the Common Short Code Administration (“CSCA”) website, which is operated by Neustar, Inc. (“Neustar”). The RS Agreement, which contains an arbitration provision, is at the heart of the current dispute regarding whether certain Defendants can compel arbitration of Plaintiffs' claims.

A. The Defendants

Prior to addressing the alleged scheme, it is prudent to define the various subsets of Defendants. It bears noting, initially, that Neustar, the only entity entitled to lease the CSCs at issue in this action and the direct signatory to the RS Agreement, SAC ¶ 8, is listed as a co-conspirator, but it is not a named Defendant in this action.

1. The Carrier Defendants

The “Carrier Defendants” consist of five of the six largest wireless service providersin the nation: AT & T, Verizon, Sprint, T–Mobile, and USCC. SAC ¶¶ 24–29. The Carrier Defendants' wireless subscribers are the end-point recipients of A2P SMS—the “person” in “application-to-person.” As described the RS Agreement, the Carrier Defendants appointed CTIA as their CSC Administrator, which in turn granted Neustar a license to lease CSCs to the businesses and institutions seeking to send A2P SMS to the Carrier Defendants' subscribers. RSA ¶ 2.

2. CTIA—The Wireless Association

CTIA is the cellular telecommunications and wireless services trade association. As alleged in the SAC, at all relevant times the CTIA has counted among its members the vast majority of the carriers providing most of the telecommunications services in the United States, including all of the Carrier Defendants. SAC ¶ 49. Plaintiffs allege that since 2002, the presidents and CEOs of the Carrier Defendants ² have continuously sat on the CTIA Board of Directors (“the Board”) and served as officers of the CTIA, thereby dominating and controlling the CTIA's activities and its budget. SAC ¶¶ 32, 49, 50. Specifically, Plaintiffs allege that the CEO of Sprint serves as the Chairman Emeritus of the Board, the President and CEO of USCC serves as the Vice–Chairman of the Board, the President/CEO of Verizon serves as the Secretary of the Board, and the Presidents and CEOs of T–Mobile and AT & T are members of the Board. SAC ¶ 50.

3. The Aggregators

The “Aggregator Defendants” consist of the following Defendants: Air2Web, Ericsson, Sybase, SoundBite, 2ergo, Syniverse, Vibes, and 3Cinteractive. Additionally, there are two Defendants—mBlox and OpenMarket—who serve as aggregators, but who have filed separate motions and are thus distinct from the general class of Aggregator Defendants. According to the SAC, aggregators serve as required intermediaries between CSC Lessees and the Carrier Defendants. SAC ¶ 102. As alleged, only a select few CSC Lessees are permitted to deal directly with the Carrier Defendants, while the vast majority must instead be connected to the Carrier Defendants through aggregators. ³ SAC ¶ 102.

4. Wireless Media Consulting

WMC is a Virginia-based corporation that provides CSC monitoring and compliance services to CTIA. Dkt. No. 152 at 7. In this capacity, WMC reviews advertisements and other content to make sure that it is in compliance with CTIA's standards, as set forth in the RS Agreement and the Acceptable Use Policy (“AUP”), described and incorporated therein. RSA ¶ 5. If WMC detects a violation, they issue a notice of violation, which the offending CSC Lessee is required to fix within a set period of time. Dkt. No. 152 at 8. Violations can lead to the imposition of fees, a Carrier Defendant suspending a CSC Lessee from its individual network, or the general suspension or termination of the CSC lease. Id.; RSA ¶¶ 5, 8. According to WMC, during the relevant period, it issued 228 violation notices to Plaintiffs. Dkt. No. 152 at 8.

B. The Alleged Conspiracy

Plaintiffs allege that beginning in 2002 or 2003, Defendants engaged in a four-step plan to create a system to extract the maximum amount of inflated fees from their consumers by means of the CSC system. SAC ¶ 54. First, the Carrier Defendants and CTIA created the CSC system and agreed to refuse transmission to any transmitter seeking to send A2P SMS from ten-digit numbers. SAC ¶ 55. Second, the Carrier Defendants and CTIA created Neustar and granted it the exclusive right to lease CSCs, which Neustar did at non-price based costs and pursuant to agreements with uniform, non-negotiable terms. SAC ¶ 56. Third, Defendants required all CSC Lessees to transmit their A2P SMS through aggregators, who imposed on CSC Lessees unnecessary connectivity fees and exorbitantly high per-message fees, a portion of which were then passed on to CTIA and the Carrier Defendants. SAC ¶ 57. And finally, Defendants imposed unnecessary audits, conducted by WMC, further driving up profits to Defendants and costs to Plaintiffs. SAC ¶ 58.

C. Plaintiffs' Claims

Plaintiffs' putative class consists of themselves and the...