Solo v. United Parcel Serv. Co.

• Decision Date: 23 January 2020
• Docket Number: No. 17-2244,17-2244
• Citation: 947 F.3d 968
• Parties: Joe SOLO; BleachTech LLC, and all others similarly situated, Plaintiffs-Appellees, v. UNITED PARCEL SERVICE CO., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

947 F.3d 968

Joe SOLO; BleachTech LLC, and all others similarly situated, Plaintiffs-Appellees,

v.UNITED PARCEL SERVICE CO., Defendant-Appellant.

No. 17-2244

United States Court of Appeals, Sixth Circuit.

Decided and Filed: January 23, 2020

ON BRIEF: Jill M. Wheaton, DYKEMA GOSSETT PLLC, Ann Arbor, Michigan, Deanne E. Maynard, Joseph R. Palmore, Bryan J. Leitch, MORRISON & FOERSTER LLP, Washington, D.C., for Appellant. Andrew J. McGuiness, ANDREW J. MCGUINNESS, ESQ., Ann Arbor, Michigan, Daniel R. Karon, KARON LLC, Cleveland, Ohio, Sanford P. Dumain, MILBERG LLP, New York, New York, for Appellees.

Before: STRANCH, DONALD, and LIPEZ, Circuit Judges.^*

JANE B. STRANCH, Circuit Judge.

Plaintiffs Joe Solo and BleachTech LLC sued Defendant United Parcel Service Co. (UPS) in July 2014 alleging that it had systematically overcharged customers for insurance on their shipments. The first time this case was appealed, we held that the contract governing the shipments was "at least ambiguous" as to the contested charge, Solo v. UPS Co. , 819 F.3d 788, 796 (6th Cir. 2016), and reversed the order granting UPS’s motion to dismiss. After remand and several months of discovery, UPS moved to compel arbitration, citing an arbitration provision contained in a contract effective after the contested shipments occurred. For the reasons explained below, we AFFIRM the district court’s denial of the motion to compel arbitration.

I. BACKGROUND

Both Solo and BleachTech purchased liability insurance for valuable packages shipped through UPS before December 30, 2013. The price of that insurance, called "declared value coverage," was set by the contract governing the shipments, the UPS Tariff/Terms and Conditions of Service (the Original UPS Terms).¹ The contract lays out the rates as follows:

(R. 1, Compl., PageID 137) According to Solo and BleachTech, this language plainly states that there is no additional charge for the first $100 of coverage whether or not a shipper purchases additional declared value coverage. But when Solo and BleachTech shipped their packages, they were charged $0.85 for each hundred-dollar increment, including the first.

Solo and BleachTech sued UPS on behalf of a proposed class of similarly situated UPS customers. UPS moved to dismiss the suit in its entirety because all the claims "require a misinterpretation" of the Terms. UPS argued that the controlling phrase was "total value declared" and that "total" value necessarily includes the first $100.

The final paragraph of that motion stated that UPS "reserves its right to move to compel arbitration and does not by this motion in any way waive this contractual right." UPS referenced an arbitration clause found in the amended contract that became effective December 30, 2013 (the Amended UPS Terms)—after the shipments at issue in this suit were mailed, though BleachTech shipped packages with UPS under the amended terms post-December 30, 2013. The Amended UPS Terms, unlike the Original UPS Terms in use at the time of the shipments, provide that "any controversy or claim, whether at law or equity, arising out of or related to the provision of services by UPS, regardless of the date of accrual of such dispute, shall be resolved in its entirety by individual (not class-wide nor collective) binding arbitration." UPS’s motion to dismiss stated that because the Complaint alleges shipments only prior to the effective date of the Amended UPS Terms, "UPS does not have sufficient information at this time to know whether its arbitration clause could apply in this action."

The district court granted the motion to dismiss, agreeing with UPS that the first $100 of declared value is part of the total value declared under the plain meaning of that term, and accordingly, an $0.85 charge applies to that declared value under the contract. Solo and BleachTech appealed. We reversed, relying on the complaint’s allegations that UPS routinely credits customers who complain about the overcharge and so "itself acknowledges the validity of Solo’s reading of the contractual provision." Solo , 819 F.3d at 795–96. We held that the provision was "at least ambiguous," id. at 796, and remanded for further proceedings.

On remand, UPS filed its answer, raising the obligation to arbitrate as its first affirmative defense, and sought limited discovery focused on arbitration. The district court appears to have rejected the proposed limitation, and after six months of full discovery, UPS moved to compel arbitration. The district court denied the motion on the basis that UPS "waived its right to arbitrate by taking actions inconsistent with reliance on the arbitration provision and delaying its assertion of the need to arbitrate, to the actual prejudice of Plaintiffs." UPS appeals.

II. ANALYSIS

This case, now in its fifth year of litigation, makes its second appearance in this court. Having already resolved a merits-based issue about the ambiguity of the contractual terms at issue, see id. , we now confront an issue that normally precedes the merits: whether the dispute should be resolved via arbitration.

Although an order declining to compel arbitration does not end a case, we have jurisdiction to hear an appeal of such a denial pursuant to the Federal Arbitration Act (FAA). See 9 U.S.C. § 16(a). The FAA manifests "a liberal federal policy favoring arbitration agreements." Hergenreder v. Bickford Senior Living Grp., LLC , 656 F.3d 411, 416 (6th Cir. 2011) (quoting Javitch v. First Union Sec., Inc. , 315 F.3d 619, 624 (6th Cir. 2003) ). Prompt appellate review of orders declining to compel arbitration gives effect to that policy and to the "two goals of the [FAA]—enforcement of private agreements and encouragement of efficient and speedy dispute resolution." Dean Witter Reynolds Inc. v. Byrd , 470 U.S. 213, 221, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).

"Because arbitration agreements are fundamentally contracts, we review the enforceability of an arbitration agreement according to the applicable state law of contract formation." Hergenreder , 656 F.3d at 416 (quoting Seawright v. Am. Gen. Fin. Servs., Inc ., 507 F.3d 967, 972 (6th Cir. 2007) ).² As with other contract disputes, we review the district court’s decision de novo. Inland Bulk Transfer Co. v. Cummins Engine Co. , 332 F.3d 1007, 1014 (6th Cir. 2003). And "[i]n this endeavor, ‘as with any other contract, the parties’ intentions control.’ " Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp. , 559 U.S. 662, 682, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. , 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ). To find that the parties intended to resolve this dispute in arbitration, we must confirm "that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of the agreement." Hergenreder , 656 F.3d at 415–16 (quoting Mazera v. Varsity Ford Mgmt. Servs., LLC , 565 F.3d 997, 1001 (6th Cir. 2009) ).

A. The Arbitration Agreement

The arbitration agreement UPS invokes is not found in the contract in place during the period when Solo and BleachTech assert they were charged the improper fee. The Original UPS Terms describe a claim-filing process that serves as a prerequisite to seeking "any legal or equitable relief whatsoever," but the terms do not mention arbitration. The Amended UPS Terms, enacted after the relevant shipments, require that "any controversy or claim, whether at law or equity, arising out of or related to the provision of services by UPS, regardless of the date of accrual of such dispute, shall be resolved in its entirety by individual (not class-wide nor collective) binding arbitration." The question presented is, did the parties intend the arbitration provision in the Amended UPS Terms to govern preexisting disputes, or only disputes arising during that contractual period?³

We have recognized that a broadly worded arbitration clause may govern disputes predating its enactment. For example, when a contract requires the parties to arbitrate "any dispute or claim arising from or in connection with this agreement or the services provided by [the plaintiff]," the natural reading is that "the language covers more than claims arising ‘out of the agreement’ " and so applies outside the agreement’s timeframe. Watson Wyatt & Co. v. SBC Holdings, Inc. , 513 F.3d 646, 650 (6th Cir. 2008) (quoting the contract at issue) (quoting Kristian v. Comcast Corp. , 446 F.3d 25, 33 (1st Cir. 2006) ).

But we do not imply retroactivity where it is not contemplated in the contractual language. Thus, when a contract required arbitration of "all employment-related disputes ... which ... arise between [the parties]," the use of present- and future-tense language led us to conclude that "the parties signed this agreement to head off future lawsuits, not to cut off existing ones." Russell v. Citigroup, Inc. , 748 F.3d 677, 679–80 (6th Cir. 2014) (quoting the contract at issue). The presumption of arbitrability, moreover, cannot bridge a textual gap. "While ambiguities in the language of the agreement should be resolved in favor of arbitration[,] ... we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated." GGNSC Louisville Hillcreek, LLC v. Est. of Bramer , 932 F.3d 480, 485 (6th Cir. 2019) (quoting E.E.O.C. v. Waffle House, Inc. , 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002) ). In other words, courts may not "use policy considerations as a substitute for party agreement," Granite Rock Co. v. Int’l Bhd. of Teamsters , 561 U.S. 287, 303, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010), because the Supreme Court "has made consent the cornerstone of arbitration," GGNSC , 932 F.3d at 485.

To determine whether the parties intended the Amended UPS Terms to have retroactive effect, we construe the two "contracts as a whole, giving...