Stuart v. Global Tel*Link Corporation

Filing 146

MEMORANDUM OPINION AND ORDER denying 133 Motion to Compel. Signed by Honorable Timothy L. Brooks on March 2, 2017. (rg)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION

CASE NO. 5:14-CV-5275

IN RE GLOBAL TEL *LINK
CORPORATION ICS LITIGATION

MEMORANDUM OPINION AND ORDER
Currently before the Court are Defendant Global Tel*Link Corporation 's ("GTL")
Motion to Compel Arbitration (Doc. 133) and Memorandum of Law in Support (Doc. 134 );
Plaintiffs Kaylan Stuart's, Dustin Murilla's, Walter Chruby's, and Rocky Hobbs's
Response in Opposition (Doc. 139); and GTL's Reply (Doc. 142). 1 For the reasons given
below, GTL's Motion is DENIED .

I. BACKGROUND
In this class action , Plaintiffs allege that GTL charged them unjust and
unreasonable rates for inmate phone-calling services at various correctional facilities
throughout the United States, in violation of the Federal Communications Act and the
common law of unjust enrichment. According to the Complaint, Mr. Hobbs "is a resident
of Texas" who "paid unjust and unreasonable telephone charges for interstate calls he
received from his loved one, Mason Hobbs during his incarceration at Southwest
Arkansas Community Correction Center located in Texarkana , Arkansas , using
telecommunication services operated by [GTL] between March 2015 through July 2015 ."
(Doc. 126, ~ 7). GTL asks this Court to compel Mr. Hobbs to arbitrate his claims against

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GTL requested oral argument on this Motion. See Doc. 133, p. 1. However, the Court
believes it is sufficiently well apprised of the law and facts pertaining to this Motion to
make oral argument unnecessary. Accordingly, the Court is ruling on this Motion without
receiving oral argument.
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GTL, pursuant to an arbitration agreement that GTL contends was concluded between
GTL and Mr. Hobbs. Mr. Hobbs and the other Plaintiffs oppose GTL's Motion , and insist
that Mr. Hobbs never agreed to arbitrate his claims at all.
II. LEGAL STANDARD
The Federal Arbitration Act ("FAA") provides that "[a] written provision in . . . a
contract evidencing a transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or transaction . .. shall be valid ,
irrevocable , and enforceable, save upon any grounds as exist at law or in equity for the
revocation of any contract. " 9 U.S.C. § 2. The Supreme Court has repeatedly recognized
this to be the enunciation of a "liberal federal policy favoring arbitration ." AT&T Mobility

LLC v. Concepcion , 566 U.S . 333, 339 (2011) (quoting Moses H. Cone Mem. Hosp. v.
Mercury Constr. Corp , 460 U.S . 1, 24 (1983)) . However, the general rule is that "a party
cannot be required to submit to arbitration any dispute which he has not agreed so to
submit. "

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 , 83 (2002) (quoting

Steelworkers v. Warrior & Gulf Nav. Co. , 363 U.S. 574, 582 (1960)). Further, "[u]nless
the parties clearly and unmistakably provide otherwise, the question of whether the
parties agreed to arbitrate is to be decided by the court , not the arbitrator." AT&T Techs. ,

Inc. v. Commc 'ns Workers of Am. , 475 U.S. 643, 649 (1986) . "When deciding whether
the parties agreed to arbitrate a certain matter . . ., courts generally . . . should apply
ordinary state-law principles that govern the formation of contracts ." Hudson v. ConAgra

Poultry Co., 484 F.3d 496 , 500 (8th Cir. 2007) (quoting First Options of Chicago, Inc. v.
Kaplan , 514 U.S. 938 , 944 (1995)). The party seeking to compel arbitration bears the
burden of establishing the arbitration agreement's existence , and the facts and evidence

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must be viewed in the light most favorable to the party disputing the arbitration
agreement's existence. See Neb. Machinery Co. v. Cargotec Sols., LLC, 762 F.3d 737,
741-42 (8th Cir. 2014).

Ill. DISCUSSION
GTL insists that this Court should not address the issue of whether the arbitration
agreement in question was ever actually formed , but rather should compel arbitration on
even that threshold matter because the disputed arbitration agreement purports to
reserve disputes regarding formation for the arbitrator.

See Doc. 142, pp . 7-9 . This

argument is squarely foreclosed by binding Eighth Circuit precedent. When the parties
dispute whether an arbitration agreement was ever concluded in the first place, then the
Court cannot rely on the disputed arbitration agreement itself to compel arbitration of the
issue of its own formation , since doing so "puts the cart before the horse" by specifically
enforcing an alleged agreement whose very existence has not yet even been established .

See Neb. Machinery Co. , 762 F.3d at 740-41 & n.2.
GTL characterizes the earlier United States Supreme Court cases of Rent-A-

Center, West, Inc. v. Jackson , 561 U.S . 63 (2010), Buckeye Check Cashing, Inc. v.
Cardegna , 546 U.S . 440 (2006), and Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388
U.S. 395 (1967), as holding otherwise , but GTL's argument depends on a fundamental
misreading of those cases. Each of those cases involved challenges to the validity of
contracts containing arbitration clauses-specifically , that the contracts in question were
either unconscionable , Rent-A-Center, 561 U.S. at 65 , illegal , Buckeye Check Cashing ,
546 U.S. at 444 , or obtained by fraud , Prima Paint, 388 U.S . at 402-04. But the Supreme
Court has repeatedly recognized that the issue of a contract's validity is different from the

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issue of whether a contract was ever concluded in the first place , and it has explicitly and
repeatedly cautioned that its holdings in this line of cases should not be read as applying
to disputes over the latter.

Rent-A-Center, 561 U.S . at 70 n.2 ("The issue of the

agreement's 'validity' is different from the issue whether any agreement between the
parties 'was ever concluded ,' and . .. we address only the former. "); Buckeye Check

Cashing , 546 U.S. at 444 n.1 ("The issue of the contract's validity is different from the
issue whether any agreement between the alleged obligor and obligee was ever
concluded . Our opinion today addresses only the former, and does not speak to the issue
. . . [whether] it is for courts to decide whether the alleged obligor ever signed the
contract. ").
Here, Plaintiffs contend that GTL and Mr. Hobbs never concluded an arbitration
agreement in the first place , because there was never any mutual assent to its terms.
(Doc. 139, pp. 8- 13). Thusly framed , and in the wake of binding Eighth Circuit precedent
and silence from the Supreme Court, this question is "presumptively committed to judicial
determination ." Neb. Machinery Co. , 762 F.3d at 740-41 . Accordingly, this Court will
reach it.
To answer this question the Court must look to state contract law, see Casteel v.

Clear Channel Broad., Inc. , 254 F. Supp. 2d 1081 , 1087 (W.D. Ark. 2003) , and specifically
to "the law of the state with the most significant relationship to the issue at hand ," Crisler

v. Unum Ins. Co. of Am., 366 Ark. 130, 133 (2006). 2 Since Mr. Hobbs is a resident of
Texas who opened and funded the account in question from Texas, the parties and the

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The Court is applying Arkansas choice-of-law rules because it sits in the state of
Arkansas. See Whirlpool Corp. v. Ritter, 929 F.2d 1318, 1320-21 (8th Cir. 1991 ).
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Court agree that Texas law governs this issue. See Doc. 134, p. 9; Doc. 139, p. 7. And
under Texas law, as with Arkansas law, "[m]utual assent is a fundamental essential of
every contract. " Nat'/ Gas. Co. v. Lane Express, Inc. , 998 S.W.2d 256 , 262 (Tex. Ct. App.
1999); see also Asset Acceptance, LLC v. Newby, 2014 Ark. 280 , at *5 (listing "mutual
agreement" as an "essential element[] of a contract" under Arkansas law) .
GTL contends that Mr. Hobbs funded his prepaid account with GTL over the
telephone, and that every time he did so prior to March 30 , 2015 , he heard the following
automated message before funding his account:
Please note that your account, and any transactions you complete, with
GTL, PCS , DSl-ITI , or VAC are governed by the terms of use and the
privacy statement posted at www.connectnetwork.com . The terms of use
and the privacy statement were most recently revised on July 3, 2013.
(Doc. 134-1 , if 2). GTL further contends that from March 30 , 2015 onward , Mr. Hobbs
heard the following automated message before funding his account:
Please note that your account, and any transactions you complete with GTL
or any of its affil iates, are governed by the terms of use and the privacy
statement posted at www.connectnetwork.com . The terms of use and the
privacy statement were most recently revised on March 30 , 2015 .
(Doc. 134-1 ,

if 4 ).

It appears that at all times relevant to this Motion , the terms of use

contained an arbitration clause, and provided users the right to opt out within thirty days
and receive a refund. See id. at ifif 3-4.
The critical question here is whether a reasonable person in Mr. Hobbs's position
would have understood this automated message to be referring to the terms of a contract
by its reference to "the terms of use and the privacy statement posted at
www.connectnetwork.com ," such that a reasonable person in his position would have
understood himself to be assenting to those terms by funding an account. If so , then it

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would not necessarily be any bar to enforcement that Mr. Hobbs never placed his
signature on the contract or clicked or punched a button to signify acceptance of its terms ,
see Perez v. Lemarroy, 592 F. Supp. 2d 924, 930 (S.D . Tex. 2008), or never had the

opportunity to review the terms of use prior to using GTL's services instead of afterwards
(with the option of opting out and receiving a refund) , see Marsh v. First USA Bank, N.A. ,
103 F. Supp. 2d 909 , 916 , 918-19 (N.D. Tex. 2000) . But if a reasonable layperson in Mr.
Hobbs's position would not have understood the automated message to be referring to
the terms of a contract, then the essential element of mutual assent has not been satisfied
and Mr. Hobbs never agreed to arbitrate his claims.

After all , as the Restatement

(Second) of Contracts explains , "[t]he conduct of a party is not effective as a manifestation
of his assent unless he intends to engage in the conduct and knows or has reason to
know that the other party may infer from his conduct that he assents." Restatement

(Second) of Contracts§ 19(2) (emphasis added) . And "[a) person has reason to know a
fact, present or future , if he has information from which a person of ordinary intelligence
would infer that the fact in question does or will exist. " Id. at cmt. b.
The Court finds that the automated messages described above did not provide a
person of ordinary intelligence reason to know that GTL would infer from his conduct that
he was assenting to the terms of use. They contained no words indicating the presence
of any sort of bargaining , such as "contract," "consent, " "agree ," "assent," "offer," "accept,"
or the like. Indeed , they contained no indication that "the terms of use and the privacy
statement posted at www.connectnetwork.com " were anything other than statements or
summations of generally-applicable legal rights and duties that were imposed on
providers and users of inmate calling services alike by third-party state actors. It would

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have been very easy for GTL simply to have told Mr. Hobbs in the first place that it was
proposing a bargain to which his assent was requested . But instead , it decided merely
to invite him to visit a website where he might accidentally stumble across this fact. GTL's
Motion fails to establish that Mr. Hobbs ever made that discovery; accordingly, there is
no basis in the record for concluding that Mr. Hobbs ever agreed to arbitrate his claims in
this case. Cf Sw. Airlines Co. v. BoardFirst, L.L.C., 2007 WL 4823761 , at *4-*5 (N.D .
Tex. Sep . 12, 2007) (when a website does not require its users to expressly manifest
assent to its terms and conditions, there must be a "showing of actual or constructive
knowledge of a site's terms and conditions prior to using the site" in order for users to be
bound by those terms and conditions , even if those terms and cond itions were displayed
somewhere on the site) .
IV. CONCLUSION
IT IS THEREFORE ORDERED that Defendant Global Tel*Link Corporation 's
("GTL") Motion to Compel Arbitration
IT IS SO ORDERED on this

(~ .
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J_.,,,.,.

133) is DENIED.
day of March ,

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17.