Wince v. Easterbrooke Cellular Corp.

• Decision Date: 02 February 2010
• Docket Number: Civil Action No. 2:09-CV-135.
• Parties: Joshua WINCE, Delia Loftis, and Carlton White, individually and on behalf of all others similarly situated, Plaintiffs, v. EASTERBROOKE CELLULAR CORPORATION; New Cingular Wireless PCS, LLC; AT & T Mobility II LLC; AT & T Mobility, LLC; AT & T Inc.; and John Does 1 Thru 10, Defendants.
• Court: U.S. District Court — Northern District of West Virginia

681 F. Supp.2d 679

Joshua WINCE, Delia Loftis, and Carlton White, individually and on behalf of all others similarly situated, Plaintiffs, v. EASTERBROOKE CELLULAR CORPORATION; New Cingular Wireless PCS, LLC; AT & T Mobility II LLC; AT & T Mobility, LLC; AT & T Inc.; and John Does 1 Thru 10, Defendants.

Civil Action No. 2:09-CV-135.

United States District Court, N.D. West Virginia, Elkins.

February 2, 2010.

Phillip S. Isner, Curnutte Law Office, Scott A. Curnutte, Elkins, WV, Brian A. Glasser, Bailey & Glasser, LLP, Charleston, WV, for Plaintiffs.

Jeffrey M. Wakefield, Flaherty Sensabaugh & Bonasso PLLC, Morgantown, WV, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO COMPEL ARBITRATION PURSUANT TO THE FEDERAL ARBITRATION ACT

JOHN PRESTON BAILEY, District Judge.

Currently pending before this Court is Defendants' Motion to Compel Arbitration Pursuant to the Federal Arbitration Act Doc. 8, filed December 4, 2009. Plaintiffs responded on January 11, 2010, and Defendants replied on January 25, 2010. The Court has reviewed the record and the arguments of the parties and, for the reasons set out below, concludes that Defendants' motion should be GRANTED.

BACKGROUND

This case involves a putative class action containing breach of contract and West Virginia Consumer Credit and Protection Act ("WVCCPA") claims against, inter alia, several AT & T entities, including AT & T Mobility ("ATTM"). The Complaint Doc. 1-1 was originally filed in the Circuit Court of Randolph County, West Virginia, on August 31, 2009, by Plaintiffs Joshua Wince ("Wince"), Delia Loftis ("Loftis"), and Carlton White ("White"). The defendants removed the action to this Court on November 13, 2009 Doc. 1 pursuant to the Class Action Fairness Act ("CAFA"). On December 4, 2009, the defendants filed the motion to compel arbitration Doc. 8 that is the subject of this decision.

The Named Plaintiffs

Plaintiff Wince became an ATTM customer in March 2008, when he activated two cellular phone lines with ATTM. ( Doc. 1-1 at 3). During that transaction, Wince accepted the terms of ATTM's wireless service agreement by signing his name on an electronic signature-capture device. (Doc. 8 at 2). This service agreement expressly incorporated the "binding arbitration clause" of "AT & T's current Terms and Conditions Booklet. . . ." (Id. at 3). More than a year later, on April 15, 2009, Wince purchased an iPhone for use on a new telephone line in his account with ATTM. (Id.). Again, during that transaction, Wince accepted the then-current terms of ATTM's service agreement by signing his name on an electronic signature-capture device. (Id.). Similarly, this service agreement also expressly incorporated the "binding arbitration clause" in "AT & T's current Terms of Service Booklet...." (Id.).

Plaintiff Loftis became an ATTM customer on June 17, 2008, after she purchased a wireless phone and activated it for use with ATTM's GoPhone service, i.e., ATTM's prepaid or "pay as you go" wireless service. (Doc. 8 at 4). When she obtained GoPhone service at an ATTM retail store, Loftis would have received a then-current GoPhone User Guide, which included ATTM's then-current GoPhone Terms of Service. (Id.). Those GoPhone service terms include an arbitration clause. (Id.).

Plaintiff White at no time became an ATTM customer. As a result, Plaintiff White's claims are not the subject of this motion or this Court's ruling thereupon. Accordingly, this case involves only the ATTM arbitration agreements of Plaintiffs Wince and Loftis.

The ATTM Agreements

The agreements entered into by Plaintiffs Wince and Loftis each contained substantially similar arbitration clauses requiring them and ATTM "to arbitrate all disputes and claims between us" or pursue such disputes in small claims court. These clauses cover disputes involving not only ATTM but also all its "subsidiaries, affiliates, agents, employees, predecessors in interest, successors and assigns." Moreover, each clause requires arbitration on an individual rather than a class-wide basis. Finally, these clauses contain many of the same incentives for entering arbitration. For example, ATTM has committed to pay all of the costs of arbitration whether a customer wins or loses, provided the claim comports with Rule 11(b) of the Federal Rules of Civil Procedure. If a customer prevails in arbitration, he or she may obtain the same remedies—including compensatory, punitive, and statutory damages; injunctive and declaratory relief; and attorneys' fees—that are available in court. In addition, if the arbitrator awards the customer an amount greater than ATTM's last settlement offer, ATTM must pay him a substantial minimum recovery, plus double attorneys' fees.

DISCUSSION

I. Federal Arbitration Act

Defendants rely upon the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., in support of their motion to compel arbitration. Specifically, section 2 of the FAA provides that a written arbitration agreement "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2.

A party can compel arbitration by establishing: (1) the existence of a dispute between the parties; (2) a written agreement that includes an arbitration provision which purports to cover the dispute; (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce; and (4) the failure, neglect, or refusal of the defendant to arbitrate the dispute. See American General Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir.2005) (citing Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir.2002)).

Generally, "the FAA reflects `a liberal federal policy favoring arbitration agreements.'" Adkins, 303 F.3d at 500 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Indeed, the FAA serves as "a response to hostility of American courts to the enforcement of arbitration agreements, a judicial disposition inherited from then-longstanding English practice." Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). Moreover, a court is required to "resolve `any doubts concerning the scope of arbitrable issues. . . in favor of arbitration.'" Hill v. PeopleSoft USA, Inc., 412 F.3d 540, 543 (4th Cir.2005) (quoting Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25, 103 S.Ct. 927).

Finally, there is one important caveat to the reach of the FAA. "Although federal law governs the arbitrability of disputes, ordinary state-law principles resolve issues regarding the formation of contracts." Hill, 412 F.3d at 543 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Moses H. Cone Mem'l Hosp., 460 U.S. at 24, 103 S.Ct. 927). For example, "generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2" of the FAA. See Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) (citations omitted).

II. Analysis

A. ATTM Arbitration Clauses Challenged as Unconscionable

Plaintiffs Wince and Loftis dispute the existence of only one of the four prerequisites for compelling arbitration, namely, whether an enforceable arbitration provision exists under general principles of contract law. Specifically, Wince and Loftis challenge the arbitration clause as unconscionable, a generally applicable contract defense.

1. Class Action Restriction

Plaintiffs Wince and Loftis cite as the "most troubling unconscionability" the provision prohibiting the option to bring a class action. For the reasons explained below, this Court upholds the class action restriction as valid pursuant to the applicable state and federal law.

i. West Virginia Law

In West Virginia, unconscionability requires both "gross inadequacy in bargaining power," and "terms unreasonably favorable to the stronger party." See Adkins, 303 F.3d at 502. However, "a finding that the transaction was flawed . . . still depends on the existence of unfair terms in the contract. A litigant who complains that he was forced to enter into a fair agreement will find no relief on grounds of unconscionability." Id. (internal citations and quotations omitted). Therefore, this Court will focus on the second element of unconscionability, i.e., whether the class action restriction is an unfair term.

Plaintiffs Wince and Loftis argue that the class action restriction is an unfair term. In so arguing, they rely upon State ex rel. Dunlap v. Berger, 211 W.Va. 549, 567 S.E.2d 265 (2002). Dunlap involved an alleged deceptive and illegal loan packing scheme. Dunlap was illegally charged $1.48 for credit life insurance and $6.96 for property insurance. Dunlap instituted an action alleging state statutory and common-law claims. He sought certification of a class of similarly situated aggrieved former employees. The circuit court compelled arbitration pursuant to the parties' form agreement executed at the time of Dunlap's purchase. In reversing the circuit court, the Supreme Court of Appeals of West Virginia held:

Exculpatory provisions in a contract of adhesion that if applied would prohibit or substantially limit a person from enforcing and vindicating rights and protections or from seeking and obtaining statutory or common-law relief and remedies that are afforded by or arise under state law that exists for the benefit and protection of the public are unconscionable; unless the court determines that exceptional circumstances exist that make the provisions conscionable.

Dunlap, 567 S.E.2d at 275.

In finding the provision prohibiting class action relief "clearly unconscionable", the Dunlap court emphasized that Dunlap's case involved "precisely the sort of smalldollar/high volume (alleged) illegality that class action claims...