Pagecom, Inc. v. Sprint Sols., Inc.

• Decision Date: 20 October 2020
• Docket Number: No. 53018-0-II,53018-0-II
• Court: Washington Court of Appeals
• Parties: PAGECOM, INC., a Washington corporation, Respondent, v. SPRINT SOLUTIONS, INC., a foreign corporation; and ANNETTE JACOBS, a Sprint Area President and Washington resident, Appellants.

PAGECOM, INC., a Washington corporation, Respondent, v. SPRINT SOLUTIONS, INC., a foreign corporation;and ANNETTE JACOBS, a Sprint Area President and Washington resident, Appellants.

No. 53018-0-II

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II

October 20, 2020

UNPUBLISHED OPINION

SUTTON, A.C.J. — Sprint Solutions, Inc. and Annette Jacobs¹ appeal the superior court's order denying their motion to compel arbitration and dismiss the lawsuit after Pagecom, Inc. initiated this lawsuit regarding a contract dispute, despite the parties' agreement to arbitrate.

Sprint argues that the superior court erred by (1) maintaining jurisdiction under the Federal Arbitration Act (FAA) to determine the issue of arbitrability and denying Sprint's motion to compel arbitration because (2) the Dispute Resolution Clause is not ambiguous and is enforceable, and (3) neither Sprint's conduct nor the Dispute Resolution Clause were unconscionable. Sprint also argues that the superior court erred by (4) maintaining jurisdiction to determine the issue ofwaiver and determining that Sprint waived its right to compel arbitration. Pagecom argues that (5) it has presented "uncontroverted evidence" that it is a franchisee and entitled to protection.

We hold that (1) the superior court did not err by maintaining jurisdiction to determine the issue of arbitrability; but the superior court erred by denying Sprint's motion to compel arbitration and ordering dismissal because (2) the Dispute Resolution Clause is not ambiguous and is enforceable, and (3) neither Sprint's conduct nor the Dispute Resolution Clause were unconscionable. We also hold that (4) the superior court erred by maintaining jurisdiction to determine the issue of waiver. Based on our holding, we (5) decline to reach Pagecom's argument regarding whether it is a franchisee. We reverse and remand with an order to the superior court to grant Sprint's motion to compel arbitration and dismiss.

FACTS

I. FACTUAL BACKGROUND

Sprint is a nationwide provider of wireless services and products. Sprint markets and sells its products to its customers through direct sales, as well as through "Authorized Representatives" (ARs) who enter into contracts with Sprint. Clerk's Papers (CP) at 4. ARs run their own storefronts, which are referred to as "doors." CP at 4.

Pagecom was formed in 1999 and has been a Sprint AR since 2005. At the time Pagecom initiated this lawsuit, it operated 13 doors. The owner of Pagecom, Jason Suprenant, previously owned another corporation that operated 39 doors selling T-Mobile goods and services.

Pagecom and Sprint entered into numerous versions of their contract, drafted by Sprint, since 2005, and Pagecom has, on multiple occasions, requested that Sprint modify particularprovisions. On each of these occasions, Sprint declined to make Pagecom's requested changes. The parties entered into the contract at issue (Agreement) in April of 2014.

The Agreement contains a mandatory dispute resolution agreement that states, "Disputes under this Agreement will be resolved according to Exhibit E." CP at 57. Exhibit E to the Agreement (Dispute Resolution Clause) contains the following relevant provisions:

1. Dispute Resolution. All Disputes under this Agreement are subject to the following dispute resolution process. A Dispute means all controversies, disputes, or claims of every kind and nature arising out of or in connection with the negotiation, construction, validity, interpretation, performance, enforcement, operation, breach, continuation or termination of this Agreement. It is expressly understood by AR that this dispute resolution process may only be invoked regarding Sprint's right to terminate the AR Agreement after the termination has gone into effect. . . .

2. Mediation. In the event of a Dispute pursued by AR, Sprint, may require that the Dispute be submitted to mediation. The mediation will occur at a location chosen by Sprint. If the Parties cannot agree to a mediator, a mediation and/or mediation rules, the mediation will proceed under the Commercial Mediation Procedures and Rules of the American Arbitration Association (AAA).

(A) Conduct of Mediation (if the Parties do not or cannot agree otherwise).

. . . .

(3) Additional Rules for Mediation. The mediation:

. . . .

(c) will take place at a location chosen by Sprint.

3. Arbitration. AR party may not commence arbitration until a Dispute has been subject to mediation in accordance with this Agreement. Either party may initiate arbitration with respect to a Dispute by filing a written demand for arbitration pursuant to the Wireless Industry Arbitration Rules of the AAA. AR may only initiate arbitration after the 45th calendar day following the date that a request for mediation of such Dispute was first submitted, or, if earlier, the date that mediation is terminated. This applies to all causes of action, whether nominally a "claim", "counterclaim", or "cross-claim", arising under common law or any state or federal statute. The mediation may continue after the commencement of arbitration if the parties so desire.. . . .

4. Waiver of Rights. Sprint and AR each waive:

4.1 their rights to litigate Disputes in court . . . ;

4.2 to receive a jury trial; and

4.3 to participate as a plaintiff or as a class member in any claim on a class or consolidated basis or in a representative capacity.

CP at 108-110.

Sprint pays Pagecom according to a "Commission Plan" in the Agreement. CP at 43. Sprint may change the Commission Plan at any time under the Agreement. In June 2017, Pagecom contacted Sprint because it believed that other Sprint ARs were being more favorably compensated than Pagecom, in violation of Washington law. CP at 6. Pagecom outlined its complaints in a letter in order "to facilitate an appropriate discussion" and "engage in a meaningful resolution" of the issues. CP at 6. The parties engaged in communication for a number of months after this, both through telephonic and written correspondence. On November 21, 2017, Pagecom sent a letter to Sprint requesting mediation. That same day, Pagecom also submitted a request for mediation to the American Arbitration Association (AAA), requesting mediation to be held in Renton, Washington. Sprint responded to Pagecom's letter, stating that it would not agree to mediation being held in Renton.

The parties spoke on December 7, and they determined that mediation would not be successful, so the next step would be to move to arbitration. The parties agreed to hold the meditation request in abeyance through the holidays, and Pagecom agreed to provide additional financial information to Sprint by January 5, 2018. Pagecom provided this financial information to Sprint on January 22. In its letter, Pagecom offered a settlement, and asked if Sprint was "willing to recognize Washington as the proper locale for arbitration." Pagecom emailed Sprintagain on March 13, asking if "Sprint is still opposing mediation," and "if Sprint plann[ed] on opposing litigation (arbitration or otherwise) in Washington." CP at 324.

On March 31, Sprint gave notice to Pagecom that Pagecom was in violation of the Agreement because it was improperly operating other stores on behalf of T-Mobile, and the Agreement would terminate if Pagecom did not cure the violation within 30 days.² Pagecom asked Sprint to rescind the termination notice because a different business entity owned by Suprenant operated the T-Mobile stores. Pagecom initiated this lawsuit in Pierce County Superior Court on May 11. On June 8, Sprint rescinded its termination notice.

II. PROCEDURAL BACKGROUND

Pagecom's complaint alleged that it is a franchisee under Washington law, and Washington's Franchise Investment Protection Act (FIPA)³ applied. Pagecom also alleged that Sprint made changes to the compensation formula in the 2015 and 2017 contracts that were detrimental to Pagecom, and which violated FIPA. Pagecom alleged that Sprint breached the Agreement and its duty of good faith and fair dealing.

The parties engaged in mediation in Seattle on July 20, 2018, which proved to be unsuccessful. Following this, Sprint filed a motion to compel arbitration and dismiss the lawsuit. The superior court conducted three separate hearings on Sprint's motion to compel arbitration. Sprint argued that (1) the Dispute Resolution Clause was valid and thus, enforceable, and (2) the Dispute Resolution Clause encompassed the entire dispute. Pagecom argued that (1) Sprint waivedarbitration through its conduct, (2) the Dispute Resolution Clause was illusory and unconscionable, and (3) the parties were in a franchise relationship and the Dispute Resolution Clause was illegal.

Following the initial briefing and hearing, the superior court ordered supplemental briefing to determine whether the court or an arbitrator had jurisdiction regarding the issue of arbitrability. The parties provided supplemental briefing, and the court held a second hearing on November 19. The court determined that it had jurisdiction to determine the issue of arbitrability. The court then set a third hearing to determine the remaining issues. The parties filed further briefing in support of their positions. The court held its final hearing on December 24, 2018. At this hearing, Pagecom stated the following:

No, I don't really want to be in arbitration. Who would? What franchisee ever wants to be in arbitration? These are preprinted clauses that are there for a reason. They benefit the party that drafted the contract.

I don't want to be off in Kansas listening to some Kansas lawyer who doesn't even have a statute telling me, "I don't quite get what's going on here." I don't want to have to educate him. I don't want to have to travel, the expense involved in traveling.⁴

If we can be in court, we would rather be in court. I would also rather be bringing the motion that this thing is a franchise in front of [y]our [h]onor so we can just have that legal issue heard like the rights of appeal.

I mean nobody really

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