Ohanian v. Apple Inc.
| Decision Date | 09 March 2021 |
| Docket Number | 20 Civ. 5162 (LGS) |
| Parties | TIGRAN OHANIAN, et al., Plaintiffs, v. APPLE INC., et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiffs Tigran Ohanian and Regge Lopez bring this putative class action against Defendants T-Mobile USA, Inc. ("T-Mobile") and Apple, Inc. ("Apple"), alleging violations of New York General Business Law ("N.Y. GBL") sections 349 and 350, fraudulent misrepresentation and unjust enrichment. Defendants filed motions to compel arbitration. Decision is reserved on Defendants' motions to compel arbitration of Ohanian's claims pending further proceedings. Apple's motion to compel arbitration of Lopez's claims is denied.
The following facts relevant to the current motions are drawn from the Complaint, exhibits and declarations submitted in this case.
Ohanian and Lopez are T-Mobile customers. On April 19, 2016, Ohanian activated a prepaid line of service with T-Mobile and purchased a subscriber information module card ("SIM card"), which provided a phone number for use in his iPhone 6. The phone automatically linked Ohanian's Apple ID with the phone number, and Ohanian used the number for about one year. On January 16, 2017, Lopez also activated a prepaid line of service with T-Mobile, and T-Mobile installed a SIM card on his phone, providing the same phone number previously given to Ohanian. Lopez's phone also associated the phone number with Lopez's Apple account. Ohanian subsequently received unwanted iMessages and FaceTime calls, intended for Lopez, the new user of the phone number.
At the time Ohanian and Lopez opened their T-Mobile accounts, T-Mobile's practice was to provide prepaid customers with a Prepaid Service Confirmation Form (the "Form"). The Form provided to Lopez informed him that by activating or using T-Mobile's services, he was accepting T-Mobile's Terms and Conditions ("T&Cs") and also that T-Mobile requires arbitration of disputes:
By activating or using T-Mobile service, you accept T-Mobile's Terms and Conditions. T-Mobile requires Arbitration of Disputes unless you opt-out within 30-days of activation. If you fail to activate service within 30 days from purchase, this will also be considered acceptance of T-Mobile's Terms and Conditions. For details see T-Mobile's Terms and Conditions at www.T-Mobile.com/terms-conditions or www.T-Mobilepr.com for Puerto Rico customers.
See Declaration of Christopher Muzio ("Muzio Decl."), Ex. C, at Dkt. No. 32 (emphasis in original). Ohanian asserts that the only document he received in connection with his transaction was a receipt. He denies receiving the Form accompanying his service plan or being informed of any T&Cs.
Ohanian's receipt describes the items purchased in his April 2016 transaction. At the bottom of the first page are lengthy paragraphs, providing additional information about prepaid services, plan features and data plans. The paragraph beginning with "Prepaid Services" refers to the T&Cs in the final sentence as below:
Prepaid Services. Requires an active T-Mobile Account. Pricing and plans subject to change at any time without notice, and may have changed prior to purchase of refill card. T-Mobile No Annual Contract (prepaid) service is available for 90 days following Activation of this refill. Different terms apply to FlexPay and prepaid Mobile Broadband service; see plans for details. Data roaming not available for prepaid plans. Partial minutes rounded up for billing; data usage rounded up to nearest KB each use. No cash redemption value. Non-refundable. Not responsible if lost or stolen. See brochures and T-Mobile Terms and Conditions at T-Mobile.com for details.
See Muzio Decl., Ex. A.
T-Mobile asserts that different versions of the T&Cs applied to each Plaintiff and at various times. Each version includes the same arbitration provision:
YOU AND WE EACH AGREE THAT, EXCEPT AS PROVIDED BELOW . . . ANY AND ALL CLAIMS OR DISPUTES IN ANY WAY RELATED TO OR CONCERNING THE AGREEMENT, OUR PRIVACY POLICY, OUR SERVICES, DEVICES OR PRODUCTS, INCLUDING ANY BILLING DISPUTES, WILL BE RESOLVED BY BINDING ARBITRATON OR IN SMALL CLAIMS COURT. This includes any claims against other parties relating to Services or Devices provided or billed to you (such as our suppliers, dealers, authorized retailers, or third party vendors) whenever you also assert claims against us in the same proceeding.
See Muzio Decl., Ex. I-K (emphasis in original). The T&Cs also have a governing law provision, which states, "This Agreement is governed by the Federal Arbitration Act, applicable federal law, and the laws of the state in which your billing address in our records is located, without regard to the conflicts of laws rules of that state." Ohanian provided an international billing address; Lopez's billing address in T-Mobile's records is in Florida.
Ohanian and Lopez allege that T-Mobile and Apple engaged in false, deceptive and materially misleading consumer-oriented conduct concerning T-Mobile SIM cards and privacy features of Apple iPhones. The Complaint separately asserts claims against each of T-Mobile and Apple for violations of N.Y. GBL sections 349 and 350, fraudulent misrepresentation, and unjust enrichment. As to T-Mobile, the Complaint alleges that it deceived consumers by "failing to disclose that its practice of recycling phone numbers linked to SIM cards, and selling those SIM cards to consumers without requiring prior users to manually disassociate their Apple IDs from the phone numbers associated with the recycled SIM cards, did not protect the privacy of users' data and confidential personal information." As to Apple, the Complaint alleges thatApple represented that the iPhone was designed to protect the privacy of users' data but failed to disclose the "significant security flaw in the Apple iOS software . . . known only to Apple that allowed iMessage correspondence sent by iPhone users and FaceTime calls made by iPhone users to be improperly directed to and accessed by third parties."
T-Mobile and Apple moved to compel arbitration of the claims based on the arbitration provision contained in T-Mobile's T&Cs. After Defendants filed their motions, Lopez filed a notice of voluntary dismissal, dismissing his claims against T-Mobile.
When deciding motions to compel arbitration, courts apply a "standard similar to the one applicable to a motion for summary judgment." Starke v. SquareTrade, Inc., 913 F.3d 279, 281 n.1 (2d Cir. 2019) (citation omitted). That is, courts consider "all relevant, admissible evidence submitted by the parties" and must "draw[] all reasonable inferences in favor of the non-moving party." Id. (citing Nicosia v. Amazon.com, Inc., 834 F.3d 220, 229 (2d Cir. 2016)). Courts, rather than arbitrators, must decide whether parties have agreed to arbitrate "unless the parties clearly and unmistakably provide otherwise." Nicosia, 834 F.3d at 229. "Where the undisputed facts in the record require the matter of arbitrability to be decided against one side or the other as a matter of law, we may rule on the basis of that legal issue and avoid the need for further court proceedings." Starke, 913 F.3d at 288. However, "[i]f there is an issue of fact as to the making of the agreement for arbitration, then a trial is necessary." Nicosia, 834 F.3d at 229; see 9 U.S.C. § 4 (). The party challenging the existence of an agreement must make "an unequivocal denial that the agreement had been made . . . and some evidence should [be] produced to substantiate the denial." Interocean Shipping Co. v. Nat'l Shipping & TradingCorp., 462 F.2d 673, 676 (2d Cir. 1972); accord Mobile Real Est., LLC v. NewPoint Media Grp., LLC, 460 F. Supp. 3d 457, 471 (S.D.N.Y. 2020).
The Federal Arbitration Act ("FAA") was enacted to counteract "widespread judicial hostility to arbitration agreements." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). The FAA reflects "both a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract." Id.; accord Dr.'s Assocs., Inc. v. Alemayehu, 934 F.3d 245, 250 (2d Cir. 2019). "[A] court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute." Granite Rock Co. v. Int'l Brotherhood of Teamsters, 561 U.S. 287, 297 (2010) (emphasis in original). Accordingly, when considering a motion to compel arbitration, courts must determine: (1) whether the parties agreed to arbitrate, and if so, (2) whether the scope of that agreement encompasses the claims at issue. See Daly v. Citigroup Inc., 939 F.3d 415, 421 (2d Cir. 2019), cert. denied, 140 S. Ct. 1117 (2020). Where a party brings a challenge to the very formation of a contract containing an agreement to arbitrate, the court must resolve that challenge to determine whether to compel arbitration, see Granite Rock Co., 561 U.S at 296-97, and apply state contract law principles, see id. at 296; Nicosia, 834 F.3d at 229. State law governs whether a nonsignatory may enforce an arbitration clause. See Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009).
Decision is reserved on Defendants' motions to compel arbitration of Ohanian's claims pending resolution of the issue of whether Ohanian agreed to arbitrate with T-Mobile. Apple's motion to compel arbitration of Lopez's claims is denied.
Ohanian has sufficiently raised an issue of fact as to whether he agreed to arbitrate with T-Mobile, requiring further proceedings to resolve the motions as to Ohanian's claims. Under New York law,1 the party seeking arbitration bears the burden of proving that a valid agreement to arbitrate exists by a preponderance of evidence. See Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De...
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