Southern Communications Servs., Inc. v. Thomas

• Decision Date: 03 November 2011
• Docket Number: Civil Action No. 1:10–CV–2975–AT.
• Citation: 829 F.Supp.2d 1324
• Parties: SOUTHERN COMMUNICATIONS SERVICES, INC. d/b/a SouthernLINC Wireless, Plaintiff, v. Derek THOMAS, individually and on behalf of others similarly situated, Defendant.
• Court: U.S. District Court — Northern District of Georgia

829 F.Supp.2d 1324

SOUTHERN COMMUNICATIONS SERVICES, INC. d/b/a SouthernLINC Wireless, Plaintiff,

v.Derek THOMAS, individually and on behalf of others similarly situated, Defendant.

Civil Action No. 1:10–CV–2975–AT.

United States District Court, N.D. Georgia,Atlanta Division.

Nov. 3, 2011.

John P. Hutchins, Robert P. Williams, II, Troutman Sanders, LLP, Atlanta, GA, for Plaintiff.

Richard J. Burke, Freed & Weiss, LLC, St. Louis, MO, Alan G. Snipes, Pope McGlamry Kilpatrick Morrison & Norwood, LLP, Columbus, GA, for Defendant.

ORDER

AMY TOTENBERG, District Judge.

This case is before the Court on Plaintiff Southern Communications Services, Inc., D/B/A SouthernLINC Wireless' (“SouthernLINC”) Motion to Vacate [Doc. 1] two arbitration awards: a Clause Construction Award and a Class Determination Award. By issuing these two awards, the arbitrator answered two questions the parties submitted to him in turn: 1) whether their arbitration agreement authorizes class arbitration and 2) what class, if any, he should certify. The arbitrator determined first that the arbitration clause in the parties' agreement permits class arbitration and second that the class—including Defendant Derek Thomas, individually and on behalf of others similarly situated (the “Customers”)—meets the applicable class certification criteria. SouthernLINC now argues that the arbitrator exceeded his authority in making these determinations and moves for the Court to vacate both awards. For the following reasons, the arbitrator did not in fact exceed his authority, and the Court has no jurisdiction to vacate his awards. Accordingly, SouthernLINC's Motion is DENIED.

I. Background

Defendant Thomas contracted with Plaintiff SouthernLINC for cellular phone service in June 2005. (Demand [1–4] ¶ 32). As a condition of obtaining service from SouthernLINC, Thomas and other Customers were required to agree to a standard form contract (the “Agreement”) including non-negotiable “Terms and Conditions” drafted by SouthernLINC. Id. at ¶ 16, Ex. A. This Agreement states that it is governed by Georgia law. Id. at Ex. A ¶ 18. The Agreement includes a clause requiring a Customer to pay a $200 early termination fee (“ETF”) if he or she terminates the contract early. Id. at Ex. A ¶ 6. The Agreement also includes a clause requiring any disputes to be resolved through binding arbitration (the “Arbitration Clause”). Id. at ¶ 6, Ex. A ¶ 17. The Arbitration Clause specifies that the parties “will conduct the arbitration ... pursuant to applicable Wireless Industry Arbitration rules of the American Arbitration Association” (the “WIA Rules” of the “AAA”). Id. at ¶ 6, Ex. A ¶ 17.

In February 2008, Thomas cancelled his phone service before the end of the contract term and refused to pay the ETF, and SouthernLINC refused to waive this fee and threatened collection action. Id. at ¶ 33–34. On July 31, 2008, pursuant to the Arbitration Clause, Thomas filed a demand with the AAA on behalf of himself and the other Customers challenging the ETFs as illegal penalties. (Demand [1–4] ).

As a threshold matter, the arbitrator's first duty was to determine whether the Arbitration Clause permitted class arbitration. He derived his authority to make this determination from the AAA's Supplementary Rules for Class Arbitrations (“Supplementary Rules”), which were incorporated by reference into the WIA Rules, which were specified by the Arbitration Clause. (Clause Const. Award [1–2] at 2). AAA Supplementary Rule 3 makes a “Clause Construction Award” the first step in any AAA class action proceeding and provides that “the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class.” Id.

The parties disputed whether the Arbitration Clause authorized this action to proceed on behalf of a class and submitted briefs for the arbitrator's consideration: the Customers filed a Motion; SouthernLINC filed a Brief in Opposition; the Customers filed a Reply; and both parties filed supplemental briefs following the arbitrator's request. Id. at 1. Discovery and briefings continued for over six months. The parties did not dispute the arbitrator's jurisdiction to decide this issue. Id. at 2.

The crux of this dispute was whether the parties intended to permit class proceedings. The parties argued their opposing positions regarding their intent in their briefs to the arbitrator and submitted to his authority to render a decision on this issue. The Customers argued that “there is no evidence of any mutual intent to prohibit class arbitration.” (Claimant's Reply Supp. Mot. Prelim. Clause Const. Award [1–10] at 2). Conversely, SouthernLINC argued that “the parties' [sic] intended to preclude class arbitrations.” (Resp. Br. Opp. Claimant's Mot. Prelim. Clause Const. Award [1–11] at 3). The parties took “opposite positions on whether the arbitration clauses' [sic] silence on class arbitration does or does not create an ambiguity.” (Clause Const. Award [1–2] at 5).

On April 2, 2009, the arbitrator issued a Clause Construction Award after finding that the Arbitration Clause permitted class arbitration. Id. at 4. He concluded that “class arbitration is permitted by the arbitration clause under Georgia authority on class arbitrations, United States Supreme Court precedent on arbitration, and Georgia rules of contract construction.” Id. at 4. The arbitrator recognized that “prior unconfirmed clause construction awards have little precedential value for purposes of this Clause Construction Award.” Id. Instead, he based his decision “solely upon [his] analysis of the facts and law applicable to the parties' Agreement here.” Id.

The arbitrator began his analysis of the Agreement by recognizing that Georgia law applies and that “a fundamental principle of contract construction is that a contract is to be construed against the drafter,” Id. at 5, citing Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62–63, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) (“[A] court should construe ambiguous language against the interest of the party that drafted it .... [The drafter of] an ambiguous document ... cannot ... claim the benefit of the doubt. The reason for this rule is to protect the party who did not choose the language from an unintended or unfair result.”); see also Dept. of Community Health v. Pruitt Corp., 295 Ga.App. 629, 673 S.E.2d 36, 39 (2009) (“Another rule of construction requires us to construe ambiguous contract provisions against the drafter....”). The arbitrator reasoned that to reject the Customers' argument that they intended to authorize class arbitration would “effectively impute an intent to the non-drafters to give up unknown rights that were not expressly disclosed or discussed in the contract.” (Clause Const. Award [1–2] at 5). Following this contract construction analysis under Georgia law, he concluded that there was no intent to bar arbitration and that “Georgia contract law ... permits class arbitration.” ¹ Id. at 5–6.

The arbitrator further reasoned that to reject the Customers' argument that they intended to authorize class arbitrations would effectively deny them the ability to vindicate their rights under Georgia law, citing Dale v. Comcast Corp., 498 F.3d 1216 (11th Cir.2007). In Dale, customers brought a class action against Comcast Corporation to recover for its alleged failure to pass through cost savings resulting from decreased franchise fees to its customers, as required by federal law. Id. at 1217–18. Comcast moved to dismiss the case and compel arbitration based on its mandatory arbitration agreement with its customers, which included a class action waiver. Id. at 1218. The Eleventh Circuit concluded that “the enforceability of a particular class action waiver in an arbitration agreement must be determined on a case-by-case basis, considering the totality of the facts and circumstances,” and held that under the facts and circumstances before it, the arbitration agreement was unconscionable and unenforceable. Id. at 1224. The court reasoned that the agreement was unconscionable under Georgia law because no provision existed for the recovery of attorneys' fees and costs in the absence of bad faith, and “[w]ithout the benefit of a class action mechanism, the subscribers would effectively be precluded from suing Comcast” because no single subscriber would be able to retain representation since “[t]he cost of vindicating an individual subscriber's claim, when compared to his or her potential recovery, is too great.” Id. at 1224. In the present case, the arbitrator applied Dale to the facts before him and concluded that Georgia law authorized class proceedings in this situation because the Customers' claims are relatively small and there is no guaranty that attorneys' fees would be recoverable.² (Clause Const. Award [1–2] at 7).

For over a year after the arbitrator issued the Clause Construction Award, the parties conducted discovery and submitted briefs regarding class determination. On June 24, 2010, the arbitrator issued a Class Determination Award, finding that the Customers had met the criteria for class arbitration and certifying the following class: “All consumer subscribers to SouthernLINC's wireless telephone service pursuant to contracts which include an early termination fee provision, and who paid or have been charged an early termination fee by SouthernLINC after July 31, 2004.” ³ (Class Determ. Award [1–3] at 22.)

After the Supreme Court issued its decision in Stolt–Nielsen v. AnimalFeeds Int'l Corp., ––– U.S. ––––, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010), SouthernLINC asked the arbitrator to reconsider his decision in light of that case, and the parties submitted briefs to him during July and August 2010. (Ruling Resp. Mot. Recons. [14–1] at 1). The arbitrator decided that he had no...