Sanford v. Memberworks, Inc.
| Decision Date | 16 April 2007 |
| Docket Number | No. 05-55175.,05-55175. |
| Citation | 483 F.3d 956 |
| Parties | Patricia SANFORD, Plaintiff-Appellant, v. MEMBERWORKS, INC., a Delaware corporation, aka MWI Essentials, aka MWI Home and Garden, aka MWI Connections, aka MWI Valuemax; West Corporation, a Delaware corporation; West Telemarketing Corporation, a Delaware corporation, Defendants-Appellees, v. Preston Smith; Rita Smith, on behalf of themselves and all others similarly situated, Plaintiffs-Intervenors-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Eric Alan Isaacson, Lerach Coughlin Stoia Geller Rudman & Robbins, San Diego, California, for the plaintiff-appellant and the plaintiffs-intervenors-appellants.
Darrel J. Hieber, Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California, for defendant-appellee Memberworks, Inc.
M. Jerome Elmore and Joshua F. Thorpe, Bondurant, Mixson & Elmore, Atlanta, Georgia, for defendants-appellees West Corporation and West Telemarketing Corporation.
Appeal from the United States District Court for the Southern District of California; Larry A. Burns, District Judge, Presiding. D.C. No. CV-02-00601-LAB.
Before HALL, O'SCANNLAIN, and CALLAHAN, Circuit Judges.
Patricia Sanford appeals the district court's order confirming an arbitration award in her action against Member-Works, Inc., West Corporation, and West Telemarketing Corporation for alleged violations of 39 U.S.C. § 3009 and related state law claims. Preston and Rita Smith appeal the district court's order denying their motion to intervene in the same action. The district court had jurisdiction under 28 U.S.C. § 1331. This court has jurisdiction under 28 U.S.C. § 1291. We affirm in part, vacate in part, and remand for further proceedings.
In response to a television advertisement, Sanford purchased a set of fitness tapes by phone from NCP Marketing, through a call center operated by defendants West Corporation and West Telemarketing Corporation (collectively "West"). At the time, defendant Member-Works, Inc. had an agreement with NCP under which NCP's sales agent, West, would read customers a sales script for a free trial membership in the Member-Works Essentials program.1 The script was identical or substantially similar to the following:
Mr(s). ______, for purchasing Tae-Bo today, we're sending you a risk-FREE 30-day membership to ESSENTIALS, a service designed to SAVE YOU 20% from leading stores such as EXPRESS and FLORSHEIM, plus reward savings at VICTORIA'S SECRET, TJ MAXX, PIER ONE and TARGET, PLUS additional savings on eyewear, beauty products, haircuts, and more! After 30 days, the service is extended to a full year for just $6 a month, billed annually in advance to the credit card you're using today. If you want to cancel, just call the toll-free number that appears in your kit in the first 30 days and YOU WON'T BE BILLED. So look for that kit in the mail, OKAY?
According to MemberWorks records, Sanford was enrolled in the Essentials program and was sent a membership kit with an agreement containing an arbitration clause.2 Sanford has no recollection of having been read a script, agreeing to the trial membership, or receiving a membership kit. When Sanford did not cancel at the end of the trial membership, her credit card was billed $72 for a one-year membership. The following year, Sanford was charged $84 for renewal of the program, which Sanford disputed and which MemberWorks then refunded. Sanford claims this second charge is the first she heard of the Essentials program.3
On March 28, 2002, Sanford filed a claim against MemberWorks and West for violating 39 U.S.C. § 3009, which makes the mailing of unordered merchandise an unfair trade practice, along with state law claims for conversion, unjust enrichment, and fraud. The complaint sought class certification and a jury trial. MemberWorks then brought a motion (which West joined) to compel arbitration of Sanford's individual claim pursuant to the arbitration clause of the membership agreement, to stay the case pending arbitration or alternatively to dismiss for failure to state a claim, and to strike the class allegations. Sanford disputed that she had entered a contract with MemberWorks and argued that the arbitration clause was therefore not binding upon her.
On July 15, 2002, the district court granted MemberWorks' motion to compel arbitration. The court's order acknowledged Sanford's contention that she was unaware that she had enrolled in the Essentials program. But it explained that because Sanford "challenges the validity of the whole contract and not specifically the arbitration agreement," her claim "is an issue for the arbitrator and not the Court." The district court then denied MemberWorks' request for a stay and denied the motion to strike as moot.
Because West did not allege it was a party to any agreement with Sanford, the court denied West's joinder in the motion to compel arbitration. Instead it dismissed the federal claim against West on the ground that West never mailed Sanford any unordered merchandise, and it declined to exercise supplemental jurisdiction over the state law claims against that defendant. As a result, the court explained, the case was "terminated as to West." The court further explained that if the arbitration were not completed within twelve months, the court would terminate the remainder of the case.
Sanford then brought a Petition to Arbitrate her class-action complaint before the American Arbitration Association, which appointed an arbitrator. In a preliminary ruling, the arbitrator ruled that he lacked jurisdiction to certify a class because he interpreted the district court's order as compelling arbitration only of Sanford's individual claim, not the issue of class certification. Sanford then moved the district court to reconsider the order compelling arbitration and to certify a class. The district court denied this motion on June 12, 2003, explaining that the July 2002 order compelled Sanford to arbitrate only her individual claim and dismissed the class claims as moot. Sanford then brought a second motion for reconsideration, relying upon the intervening decision Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003), which held that the issue of whether a contract permits class arbitration is a question for the arbitrator, not the court. The district court denied this motion as well, explaining that Sanford "has had the opportunity to request class arbitration of the arbitrator" and lost.
On March 15, 2004, the arbitrator issued his final ruling. Initially, he held that he lacked jurisdiction to decide Sanford's contention that no contract was formed between the parties. Calling his situation "curious," the arbitrator explained that the question of contract formation must be determined by the court before compelling arbitration under that contract. Because the district court had compelled arbitration here, he reasoned, it must necessarily have found that a contract existed. The arbitrator's jurisdiction stems from the district court's order, so he determined he was powerless to revisit that ruling.
But when purporting to decide Count I of Sanford's petition (seeking restitution for mailing unordered merchandise in violation of Section 3009), the arbitrator then found no contract had been formed. The arbitrator held that "even if the script was read to [Sanford,] the basic requirements of `offer' and `acceptance' were not met." He therefore awarded Sanford $72 in damages plus $34.57 in interest and $21,209.28 in arbitration fees, offset by the $72 reimbursement MemberWorks had recently paid Sanford. The arbitrator found for MemberWorks on Sanford's other claims.
The Smiths then filed a motion to intervene in the district court to serve as alternative class plaintiffs. Shortly thereafter, MemberWorks moved the district court to confirm the arbitrator's award. Sanford moved to confirm the arbitrator's decision that no contract was formed, but otherwise to vacate the award. On December 30, 2004, the district court denied Sanford's and the Smiths' motions, and granted MemberWorks' motion to confirm the arbitration award.
We review de novo a district court's order compelling arbitration, its dismissal of the class claims as moot, and its dismissal of the claims against West. See Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 n. 2 (9th Cir.2002); Gest v. Bradbury, 443 F.3d 1177, 1181 n. 1 (9th Cir.2006); Warshaw v. Xoma Corp., 74 F.3d 955, 957 (9th Cir.1996). Our review of the arbitration award is more deferential: we will vacate the award only if the arbitrator violated the Federal Arbitration Act or if the award itself is "completely irrational" or exhibits "manifest disregard of the law." Coutee v. Barington Capital Group, L.P., 336 F.3d 1128, 1132 (9th Cir. 2003) (internal citation omitted). The denial of a motion to intervene as untimely is reviewed for abuse of discretion. Smith v. Marsh, 194 F.3d 1045, 1049 (9th Cir.1999).
Before discussing the merits of Sanford's appeal, we must address defendants' claim that Sanford waived her right to challenge the July 2002 order. In separate motions to dismiss in part, MemberWorks and West assert that the July 2002 order compelling arbitration was an appealable final order under the Federal Arbitration Act. Therefore, they assert, Sanford should have immediately appealed that order, and any appeal now is untimely under Federal Rule of Appellate Procedure 4.4
We begin by noting that through the Federal Arbitration Act, Congress sought "to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible." Bushley v. Credit Suisse First Boston, 360 F.3d 1149, 1153 (9th Cir.2004) (internal citations omitted). To that end, the act generally "promote[s] appeals from...
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