Landry v. Transworld Sys. Inc.

• Decision Date: 28 July 2020
• Docket Number: SJC-12813
• Citation: 485 Mass. 334,149 N.E.3d 781
• Parties: Philip LANDRY v. TRANSWORLD SYSTEMS INC.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

485 Mass. 334

149 N.E.3d 781

Philip LANDRY¹

v.TRANSWORLD SYSTEMS INC.

SJC-12813

Supreme Judicial Court of Massachusetts, Worcester..

Argued December 6, 2019

Decided July 28, 2020

Bryan C. Shartle, of Louisiana, for the defendant.

Sergei Lemberg, for the plaintiff.

Angela Laughlin Brown, of Texas, & John C. La Liberte, Boston, for ACA International, amicus curiae, submitted a brief.

Maura Healey, Attorney General, & Max Weinstein, Assistant Attorney General, for the Commonwealth, amicus curiae, submitted a brief.

Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, & Kafker, JJ.

LENK, J.

The plaintiff, Philip Landry, purportedly owes a debt to Enterprise Rent-A-Car Company of Boston, LLC (Enterprise), for damage to a rental vehicle that he has declined to pay.² Enterprise assigned this debt to the defendant, Transworld Systems Inc. (Transworld), for collection. Landry subsequently filed a class action complaint against the defendant in the Superior Court; he claimed that Transworld, by virtue of its too frequent telephone contact with him and other debtors, had engaged in improper debt collection practices in violation of the Massachusetts consumer protection act, G. L. c. 93A, § 2, and debt collection regulations, 940 Code Mass. Regs. §§ 7.00 (2012). Although Transworld is not a party to the rental contract between Landry and Enterprise, and although Landry's G. L. c. 93A claim against Transworld is unrelated to that rental contract, Transworld nonetheless sought to compel arbitration of Landry's claims pursuant to that contract. Transworld appeals from the denial of its motion to compel. We affirm.³

1. Background. The facts are drawn from Landry's complaint and from Transworld's motion to compel arbitration. In February of 2018, Landry rented a vehicle from Enterprise, which Enterprise asserts that he returned in a damaged condition. Enterprise repaired the vehicle and billed Landry for the repairs. After Landry failed to make any payment, Enterprise assigned the debt to Transworld, a company that Enterprise had engaged to provide it debt collection services.⁴

In September of 2018, Landry filed a class action complaint against Transworld in the Superior Court. The complaint asserted that Transworld had called Landry's cellular telephone eight times within a seven-day period, in violation of the limits established under the Massachusetts consumer protection act, G. L. c. 93A, § 2, and debt collection regulations, 940 Code Mass. Regs. § 7.04(1)(f).⁵ Landry seeks to represent all Massachusetts consumers who have received more than two collection calls from Transworld in a seven-day period in the four years immediately prior to the filing of his complaint.

Transworld moved to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. In support of its motion, Transworld cited a binding arbitration provision contained in Landry's rental contract with Enterprise. In order to rent a vehicle from Enterprise, Landry signed a form lease contract, which contains the following language:

"25. Mandatory Arbitration Agreemen t: RENTER AND OWNER [ (i.e., Enterprise) ] EACH WAIVE THEIR RIGHT TO A JURY TRIAL OR TO PARTICIPATE IN A CLASS ACTION PURSUANT TO THE FOLLOWING TERMS. RENTER AND OWNER AGREE TO ARBITRATE ANY AND ALL CLAIMS, CONTROVERSIES OR DISPUTES OF ANY KIND ("CLAIMS") AGAINST EACH OTHER, INCLUDING BUT NOT LIMITED TO CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR OWNERS'S ... CHARGES .... This Arbitration Agreement is to be broadly interpreted and applies to all claims based in contract, tort, statute, or any other legal theory; all claims that arose prior to or after termination of the Rental Agreement; all claims Renter may bring against Owner's employees, agents, affiliates or representatives; and all claims that Owner may bring against Renter....

"(1) Procedure. A party must send a written Notice of Dispute ... to the other party.... If Owner and Renter do not resolve the claim ... a party may [demand arbitration] ....

"...

"(4) Governing Law and Enforcement: The [Federal Arbitration Act] applies to this Arbitration Agreement and governs whether a claim is subject to arbitration."

The Superior Court judge denied Transworld's motion to compel arbitration. He reasoned that Transworld, as a nonsignatory, was required to present "clear and unmistakable" evidence that Landry had agreed to arbitrate his claims against Transworld, and that Transworld had failed to do so. Transworld sought an interlocutory appeal in the Appeals Court, as was its right pursuant to G. L. c. 251, § 18, of the denial of its motion to compel arbitration. We transferred the case to this court on our own motion.

2. Discussion. We review the denial of a motion to compel arbitration de novo. See Machado v. System4 LLC, 471 Mass. 204, 208, 28 N.E.3d 401 (2015). In interpreting arbitration provisions, we "seek a balance between the statutory policy favoring arbitration as an expeditious and efficient means for resolving disputes and the courts' role as the guardian of the parties' right to submit to arbitration only those disputes that the parties intended." Massachusetts Highway Dep't v. Perini Corp., 444 Mass. 366, 374, 828 N.E.2d 34 (2005) ( Perini Corp. ). Our interpretation of the arbitration provision in question is guided by decisions interpreting the Federal Arbitration Act, and by State contract law pertaining to enforcement of a contract by nonsignatories. a. The Federal Arbitration Act. Under the terms of the arbitration provision in this case, we must apply the Federal Arbitration Act when determining whether a claim is subject to arbitration. The Federal Arbitration Act, 9 U.S.C. § 2,⁶ provides:

"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

The Federal Arbitration Act has been interpreted to require courts to "place arbitration agreements on an equal footing with other contracts." See AT & T Mobility v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). Indeed, the Federal Arbitration Act preempts any "[S]tate law [that] prohibits outright the arbitration of a particular type of claim." See id. at 341, 131 S.Ct. 1740. Where there is a valid and enforceable arbitration agreement between two parties, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration" (emphasis added). See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). See also Commonwealth v. Philip Morris Inc., 448 Mass. 836, 844, 864 N.E.2d 505 (2007).

In the present case, however, the question is not whether the subject matter of a particular claim falls within the scope of the arbitration provision, but, rather, whether there is an enforceable arbitration agreement between Transworld and Landry. "[B]efore the [Federal Arbitration] Act's heavy hand in favor of arbitration swings into play, the parties themselves must agree to have their disputes arbitrated." Howard v. Ferrellgas Partners, L.P., 748 F.3d 975, 977 (10th Cir. 2014). "[I]t remains a ‘fundamental principle’ that ‘arbitration is a matter of contract,’ not something to be foisted on the parties at all costs." See id., quoting Concepcion, 563 U.S. at 339, 131 S.Ct. 1740. See also Granite Rock Co. v. International Bhd. of Teamsters, 561 U.S. 287, 302-303, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) ("[W]e have never held that this [presumption of arbitrability] overrides the principle that a court may submit to arbitration ‘only those disputes ... that the parties have agreed to submit.’ ... Nor have we held that courts may use policy considerations as a substitute for party agreement" [citation omitted] ). Unless the parties "clearly and unmistakably provide otherwise," whether an agreement creates a duty to arbitrate is "undeniably an issue for judicial determination" (citation omitted). See Perini Corp., 444 Mass. at 374, 828 N.E.2d 34. As arbitration is a matter of contract, the interpretation of an arbitration provision itself "is generally a matter of [S]tate law." See Stolt-Nielsen S.A. v. AnimalFeeds Corp., 559 U.S. 662, 681, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). See also Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-631, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009) (Federal Arbitration Act does not displace "background principles of [S]tate contract law").

We therefore apply Massachusetts contract law to determine whether Transworld can enforce the arbitration provision in question. In making this determination, we rely only on generally applicable principles of contract law, rather than on "defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue." See Epic Sys. Corp. v. Lewis, ––– U.S. ––––, 138 S. Ct. 1612, 1622, 200 L.Ed.2d 889 (2018), quoting Concepcion, 563 U.S. at 339, 131 S.Ct. 1740. b. Enforcement of a contract by a nonsignatory. The sole issue before us is whether Transworld may enforce the arbitration provision in a contract to which it is not a signatory. Hence, we look to State law principles of contract law pertaining to such enforcement.

This court has acknowledged six theories under which a nonsignatory may enforce a contract, such as an arbitration agreement, against a signatory: "(1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing/alter ego; (5) equitable...