Hendricks v. AT&T Mobility LLC
Filing
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OBJECTIONS to re 42 Reply to Opposition/Response, L.R. 7-3(d) by Patrick Hendricks. (Fisher, Lawrence) (Filed on 9/16/2011)
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BURSOR & FISHER, P.A.
Scott A. Bursor (State Bar No. 276006)
369 Lexington Avenue, 10th Floor
New York, NY 10017
Telephone: (212) 989-9113
Facsimile: (212) 989-9163
E-Mail: scott@bursor.com
BURSOR & FISHER, P.A.
L. Timothy Fisher (State Bar No. 191626)
Sarah N. Westcot (State Bar No. 264916)
2121 North California Blvd., Suite 1010
Walnut Creek, CA 94596
Telephone: (925) 482-1515
Facsimile: (925) 407-2700
E-Mail: ltfisher@bursor.com
swestcot@bursor.com
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THORNTON, DAVIS & FEIN, P.A.
Barry L. Davis (pro hac vice)
Daniel R. Lever (pro hac vice)
Aaron P. Davis (pro hac vice)
80 SW Eighth Street, 29th Floor
Miami, Florida 33130
Tel: (305) 446-2646
Fax: (305) 441-2374
Email: davis@tdflaw.com
lever@tdflaw.com
adavis@tdflaw.com
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Attorneys for Plaintiff
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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PATRICK HENDRICKS, on behalf of himself
and all others similarly situated,
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Plaintiff,
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Hon. Charles R. Breyer
AT&T MOBILITY LLC,
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PLAINTIFF’S OBJECTION TO REPLY
EVIDENCE
Date: September 23, 2011
Time: 10:00 a.m.
Courtroom 8
v.
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Case No. C11-00409 CRB
Defendant.
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PLAINTIFF’S OBJECTIONS TO REPLY EVIDENCE
CASE NO. C11-00409 CRB
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Pursuant to Local Civil Rule 7-3(d)(1) plaintiff submits the following objections to new
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evidence that AT&T submitted with its Reply in Support of Motion to Compel Arbitration and to
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Stay Case. Dkt. 42.
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Objections to Declaration of Jan Mendel In Support of Defendant AT&T Mobility LLC’s
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Motion To Compel Arbitration And Stay Case, ¶¶ 3-4 (Dkt. 42-2)
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Paragraphs 3-4 of the Mendel Declaration state:
3. ATTM (formerly known as Cingular Wireless LLC) adopted
arbitration clauses that, beginning in mid-2003, provided for the
company to pay its customers’ share of arbitration costs except in
certain specified circumstances. Since the adoption of those arbitration
clauses, ATTM has never refused to pay the American Arbitration
Association’s arbitration fees or to reimburse customers for those fees,
with the sole exception of the arbitration demands recently submitted
by the law firm of Bursor & Fisher P.A. that seek to enjoin the merger
between AT&T Inc. and Deutsche Telekom AG.
4. In fact, ATTM has paid arbitration costs even when customers
breached the arbitration agreement by filing a lawsuit in a court of
general jurisdiction before commencing arbitration.
Plaintiff objects to ¶¶ 3-4 on the ground that the witness lacks personal knowledge and lacks
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foundation for this testimony. See Federal Rules of Evidence 601 and 602. Mendel states that she is
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currently “employed by AT&T Mobility LLC (‘ATTM’) as lead discovery manager with the Legal
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Department.” Id. ¶ 2. She does not state her dates of tenure with AT&T or its predecessor, Cingular.
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She does not state any basis from which she could have personal knowledge of AT&T’s or
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Cingular’s conduct from mid-2003 to date. She does not identify any arbitration in which AT&T or
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Cingular has ever participated. She does not attach or reference a single document – no arbitration
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invoices, and no documentation of the payment of any arbitration fees in any case. She does not
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testify that she has reviewed such records, or even that she would have access to such records.
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AT&T and its counsel have a history of submitting false testimony that is beyond the
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personal knowledge of the witness. We encourage the Court to take a close look at Judge Kennelly’s
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opinion in Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (N.D. Ill. 2008), detailing AT&T
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Associate General Counsel Neal S. Berinhout’s submission of false declarations and
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misrepresentations in connection with AT&T’s motion to compel arbitration against a customer.
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AT&T contends this was not perjury but was instead an innocent mistake – or, more correctly, a
PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO AT&T MOBILITY LLC’S MOTION TO
COMPEL ARBITRATION AND TO STAY CASE
CASE NO. C11-00409 CRB
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series of innocent mistakes – by Mr. Berinhout. Judge Kennelly described it differently. After
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detailing the “disturbing events” that uncovered at least 5 false statements in Mr. Berinhout’s sworn
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testimony, Judge Kennelly stated:
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“One might be tempted to chalk this up to a simple lack of foundation
for Berinhout’s original statements – in other words, to mere lack of
direct knowledge. That would be bad enough, but there is more to it
than that. Berinhout affirmatively misrepresented to the Court that the
information in his affidavit was based on his personal knowledge. In
fact, it was – as Berinhout no doubt knew at the time – based on
second- and third-hand information.”
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Trujillo, 578 F.Supp.2d at 988. Judge Kennelly described this as “troubling” and “a shocking
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disregard of the requirements of the rules of evidence.” Id. This Court can reach its own
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conclusions. Judge Kennelly’s opinion is attached hereto as Exhibit A.
Ms. Mendel’s testimony is similarly suspect because she provides no documentary support
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for statements where documents should certainly exist, and she provides no explanation for how she
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could have personal knowledge as to something she says has “never” happened at AT&T or Cingular
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over an 8-year period.
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For the foregoing reasons, Plaintiff objects to ¶¶ 3-4 as inadmissible and requests that they be
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stricken and not be considered in connection with the Court’s ruling on the pending motion to
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compel arbitration.
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In the alternative, Plaintiff requests a reasonable opportunity to conduct discovery relating to
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¶¶ 3-4, including (1) the production of documents concerning the amount of arbitral fees for prior
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arbitration cases between AT&T and individual customers – if in fact any such arbitrations have
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occurred, (2) production of documents concerning AT&T’s payment and/or non-payment of such
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fees, and (3) a deposition of Ms. Mendel. See, e.g., Ventura v. 1st Financial Bank USA, 2005 WL
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2406029, at *1 (N.D. Cal. Sept. 29, 2005) (“The Court deferred consideration of the petition … to
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permit discovery relevant to the issue of arbitrability.”).
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The Trujillo episode demonstrates the importance of discovery to test the veracity of Ms.
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Mendel’s unsupported statements. The real facts in Trujillo “emerged slowly,” and only after the
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court “questioned the foundation for certain of ATTM’s contentions.” Trujillo, 578 F.Supp.2d
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at 981. “Had the Court simply relied on Berinhout’s affidavit – as he and ATTM obviously intended
PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO AT&T MOBILITY LLC’S MOTION TO
COMPEL ARBITRATION AND TO STAY CASE
CASE NO. C11-00409 CRB
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– it would have decided the motion to compel arbitration based on false premises.” Id. at 988. The
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same danger is readily apparent with respect to Ms. Mendel’s unsupported testimony.
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Dated: September 16, 2011
Respectfully submitted,
BURSOR & FISHER, P.A.
Scott A. Bursor (State Bar No. 276006)
369 Lexington Avenue, 10th Floor
New York, NY 10017
Telephone: (212) 989-9113
Facsimile: (212) 989-9163
E-Mail: scott@bursor.com
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By
/s/
Scott A. Bursor
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L. Timothy Fisher (State Bar No. 191626)
Sarah N. Westcot (State Bar No. 264916)
2121 North California Blvd., Suite 1010
Walnut Creek, CA 94596
Telephone: (925) 482-1515
Facsimile: (925) 407-2700
E-Mail: ltfisher@bursor.com
swestcot@bursor.com
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THORNTON, DAVIS & FEIN, P.A.
Barry L. Davis (pro hac vice)
Daniel R. Lever (pro hac vice)
Aaron P. Davis (pro hac vice)
80 SW Eighth Street, 29th Floor
Miami, Florida 33130
Tel: (305) 446-2646
Fax: (305) 441-2374
Email: davis@tdflaw.com
lever@tdflaw.com
adavis@tdflaw.com
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Attorneys for Plaintiff
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PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO AT&T MOBILITY LLC’S MOTION TO
COMPEL ARBITRATION AND TO STAY CASE
CASE NO. C11-00409 CRB
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EXHIBIT A
Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
how he would have known that the service terms
were available on the Internet. 9 U.S.C.A. § 2.
578 F.Supp.2d 979
United States District Court,
N.D. Illinois,
Eastern Division.
1 Cases that cite this headnote
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Jose TRUJILLO, on behalf of himself
and all others similarly situated, Plaintiff,
v.
APPLE COMPUTER, INC. and
AT & T Mobility LLC, Defendants.
No. 07 C 4946. Sept. 22, 2008.
Party cannot be compelled to arbitrate a dispute
that he has not agreed to arbitrate.
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Federal Courts
Arbitration
Under the Federal Arbitration Act, when a
party challenges the validity of an agreement to
arbitrate, a court applies the relevant state law
principles that govern the formation of contracts;
general state-law contract defenses such as fraud,
duress, or unconscionability may operate to
invalidate arbitration agreements, allowing a
party to avoid having to arbitrate his dispute. 9
U.S.C.A. § 2.
Motion denied.
West Headnotes (8)
Alternative Dispute Resolution
Unconscionability
Under Illinois law, an arbitration requirement
of an agreement between the buyer of a
mobile phone and the exclusive provider of
wireless service for the phone was unenforceable,
due to procedural unconscionability, where the
agreement was not available to the buyer before
or when he purchased the phone; no paper
copy of any documents explaining or referencing
the terms of service, including in particular the
arbitration requirement, were available at the
store where the buyer purchased the phone, the
only version of the terms of service that he would
have seen had he known to search online was out
of date, and in any event there was no evidence of
Alternative Dispute Resolution
Validity of Assent
Alternative Dispute Resolution
Unconscionability
Holding: The District Court, Matthew F. Kennelly, J.,
held that arbitration agreement was unenforceable due to
procedural unconscionability.
1
Alternative Dispute Resolution
Evidence
Under the Federal Arbitration Act, the party
resisting arbitration bears the burden of showing
that the claim at issue is unsuitable for arbitration.
9 U.S.C.A. § 2.
Synopsis
Background: Purchaser of a mobile phone sued the phone's
seller and the exclusive provider of wireless service for the
phone, asserting claims of fraud, breach of contract, breach
of implied warranty, unjust enrichment, and violation of the
Illinois Consumer Fraud Act regarding the limited life of the
phone's battery and what was required to replace it. Seller
removed the action from state court, and the service provider
moved to compel arbitration.
Alternative Dispute Resolution
Contractual or Consensual Basis
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Contracts
Nature and Grounds of Contractual
Obligation
Unconscionability under Illinois law has both
procedural and substantive facets; a finding
of unconscionability may be based on either
procedural or substantive unconscionability, or a
combination of both.
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Contracts
© 2011 Thomson Reuters. No claim to original U.S. Government Works.
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
Nature and Grounds of Contractual
Obligation
Under Illinois law, procedural unconscionability
exists when a contract provision is so difficult
to locate, read, or understand that a party cannot
fairly be said to have been aware he was agreeing
to it.
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Contracts
Nature and Grounds of Contractual
Obligation
Under Illinois law, procedural unconscionability
analysis takes into account the relative bargaining
power of the parties to the agreement and inquires
whether there has been some impropriety during
the process of forming the contract depriving a
party of a meaningful choice.
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States
Preemption in General
Federal law may preempt state law in one of three
ways: expressly, impliedly through the doctrine
of conflict preemption, or through the doctrine of
field preemption. U.S.C.A. Const. Art. 6, cl. 2.
Brook, Illinois in early July 2007 and then gave to Dawn
Trujillo as a gift.
ATTM is the exclusive provider of wireless service for the
iPhone. A person who signs up with ATTM for iPhone
service must do so for a minimum of two years. The iPhone's
battery, however, may not last that long; even though it is
rechargeable, it must be replaced after about 300 charges. To
replace the battery, the iPhone user must send the device to
Apple, incurring a $79 service fee plus shipping charges and
an additional fee for the use of a loaner iPhone in the interim.
The only alternative for the user is to cancel his service with
ATTM before the end of the two year term, which results in
a significant early termination fee.
Trujillo contends that in marketing and promoting the iPhone
before it was launched for sale, both Apple and ATTM hid
information about the limited life of the *981 battery and
what is required to replace it, thus misleading consumers
about the true cost of the iPhone. He has sued both companies
for fraud, breach of contract, breach of implied warranty,
unjust enrichment, and violation of the Illinois Consumer
Fraud Act.
ATTM has moved to compel arbitration; it argues that
pursuant to its service contract with Trujillo, his claims
against ATTM must be submitted to arbitration on an
individual basis. The Court denies ATTM's motion. The
agreement that ATTM contends requires arbitration of
Trujillo's claims was not available to Trujillo before or when
he purchased the iPhone-a factor that, under Illinois law, is
critical to enforceability.
Attorneys and Law Firms
*980 James R. Rowe, The Law Firm of Rowe & Associates,
Larry D. Drury, Larry D. Drury, Ltd., Chicago, IL, for
Plaintiff.
Johanna W. Roberts, Penelope A. Preovolos, Morrison &
Foerster LLP, San Francisco, CA, Patrick Thomas Stanton,
Dykema Gossett, PLLC, Chicago, IL, for Defendants.
Opinion
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Jose Trujillo has sued AT & T Mobility LLC (ATTM) 1
and Apple Computer, Inc. (Apple). His lawsuit concerns an
iPhone that he purchased at an Apple retail store in Oak
Facts
1. Outline of Trujillo's claims
The iPhone is a combined wireless telephone and internet
access device, manufactured by Apple. Both Apple and
ATTM (known until January 2007 as Cingular Wireless) sold
the iPhone at their respective retail stores at the relevant time.
ATTM is the sole licensed provider of wireless service for the
iPhone. When a prospective iPhone user contracts for service
with ATTM, he must sign up for a minimum of two years.
Trujillo's lawsuit concerns the durability of the iPhone's
battery. After recharging the battery about 300 times, a user
must send his iPhone to Apple for battery replacement.
This typically occurs, Trujillo alleges, inside of two years
after purchase. When the user send in the device for battery
© 2011 Thomson Reuters. No claim to original U.S. Government Works.
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
replacement, he incurs a $79 service fee plus shipping charges
and an additional fee for the use of a loaner iPhone in the
interim.
Trujillo alleges that given ATTM's two year minimum service
term, the charges connected with battery replacement amount
to “a de facto annual maintenance and/or service charge”
worth nearly one-fifth of the iPhone's purchase price. Am.
Compl. ¶ 22. He alleges that in marketing and promoting
the iPhone, both Apple and ATTM hid information about the
iPhone battery's limited life and the details of Apple's battery
replacement program until after the device was launched for
sale to the public. This, Trujillo alleges, misled consumers
about the “true nature of the iPhone and its actual expense.”
Am. Compl. ¶ 31. Trujillo asserts claims of common law
fraud, breach of contract, implied warranty, and unjust
enrichment, and violation of the Illinois Consumer Fraud Act.
The facts relevant to ATTM's motion to compel arbitration
have emerged slowly. After the Court questioned the
foundation for certain of ATTM's contentions, ATTM
submitted supplemental materials. Those materials revealed
that ATTM's initial factual submission had been false in
several material respects. The Court will lay out these
circumstances in some detail as it reviews the relevant facts.
2. Trujillo's purchase of an iPhone
As noted at the outset of this decision, Trujillo's claims
concern an iPhone that he purchased. See Am. Compl. ¶ 8.
Trujillo purchased an iPhone from an Apple retail store in
Oak Brook, Illinois on July 2, 2007. He paid $533.93-$499.00
plus sales tax of $34.93. The sales receipt from the Apple
store, which Trujillo provided as part of a supplement to his
response to ATTM's motion to compel arbitration, stated that
he could return the iPhone by July 16, 2007 but would be
charged a “$49.90 fee if opened,” i.e., if the box in which the
device was sold had already been opened. Pl. Suppl. Resp. to
Def. Mot. to Compel Arb., Ex. B.
It appears Trujillo bought the iPhone as a gift for Dawn
Trujillo, a non-party to this *982 lawsuit. Their exact
relationship has not been addressed but is of no consequence
to the current dispute. ATTM's records show that Dawn
Trujillo later activated that iPhone on her pre-existing account
with ATTM.
3. Availability of ATTM service terms to Trujillo in
connection with his iPhone purchase
In its opening and reply briefs, ATTM argued that before
Trujillo bought the iPhone, he had access, by two separate
means, to ATTM's terms of service, which contains the
arbitration provision that serves as the basis for its motion
to compel Trujillo to arbitrate his claims. ATTM also argued
that Trujillo had the opportunity to read the terms of service
in full when he initiated service for the iPhone with ATTM.
Thus, ATTM argued, Trujillo could not contend that ATTM's
service agreement, including its arbitration requirement, was
hidden or that he was unaware of it.
To support its argument, ATTM submitted with its opening
brief an affidavit from an ATTM in-house attorney named
Neal Berinhout. Berinhout swore that he had personal
knowledge of the facts stated in his affidavit. Berinhout Affid.
¶ 2. In his affidavit, Berinhout stated that ATTM's records
reflected that Trujillo had purchased an iPhone at a retail store
on an unspecified date and then activated wireless service
online on July 5, 2007. Id. ¶ 7.
Berinhout stated that in the course of purchasing an iPhone
from a retail store, “customers also receive an iPhone rate plan
and a separate document summarizing the activation process,
available rate plans, and the return policy.” Id. ¶ 8. Berinhout
included copies of these documents with his affidavit. The
document concerning the iPhone activation process states that
wireless service for the device can be obtained only from
ATTM and that a two-year service agreement is required.
Id., Ex. B. This same document also states that one activates
the device online, via the Internet. Id. It also states, in bold
print, that “You can return your iPhone within 14 days
for a full refund, but there is a 10% restocking fee if the
box has been opened.” Id. The other document, identifying
the rate plan, states that “[a]n early termination fee of $175
applies if service is terminated before the end of the contract
term,” which as noted earlier is two years. Id., Ex. A. It
states that this fee will be waived “[i]f [the] phone is returned
within 14 days in like-new condition with all components”
and that the “activation fee” of $36 would be refunded if the
phone is returned within three days. Id. The rate plan states,
however, that “[a]ll other charges apply” and that “[s]ome
dealers impose additional fees.” Id. The documents make no
reference to the requirement of arbitration.
In his affidavit, Berinhout stated that “[t]he ATTM Terms of
Service booklet, which contains the terms and conditions of
wireless service”-including the arbitration provision at issue
in this case-is “available in the store and online by going
to http://www.wireless.att.com and clicking on ‘Wireless
© 2011 Thomson Reuters. No claim to original U.S. Government Works.
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
Service Agreement’ at the bottom of the web page.” Id. ¶ 9.
Berinhout included with his affidavit a copy of the terms of
service that he said were in effect “at the time that Mr. Trujillo
purchased his iPhone....” Id. ¶ 9 & Ex. C.
In his response to ATTM's motion, Trujillo raised no issue
regarding the accuracy of Berinhout's affidavit. In reviewing
the briefs, however, the Court became concerned about the
evidentiary foundation for Berinhout's statements regarding
Trujillo's claimed access to the ATTM terms of service
before or when he purchased the iPhone. Those statements
bore directly on the issue of procedural unconscionability,
*983 a centerpiece of Trujillo's attempt to avoid arbitration.
The Court entered an order in which it said that it “[could
not] imagine how [Berinhout,] an in-house lawyer from AT
& T Mobility [,] possibly could have personal knowledge
regarding whether a copy of [the] agreement was available
in any given Apple store at a particular point in time” or
even whether Apple had a habit or practice of keeping such
documents in its stores. Trujillo v. Apple Computer, Inc., No.
07 C 4946, 2008 WL 2787711, at *3 (N.D.Ill. Apr. 18, 2008).
The Court's order also addressed other issues, including the
accessibility and availability of the purported online version
of ATTM's terms of service-which ATTM contended Trujillo
could have found and examined before or contemporaneously
with his iPhone purchase. The Court directed the parties to
file supplemental submissions.
ATTM's supplemental submission filed pursuant to the
Court's order established that Berinhout, contrary to his
sworn statement, lacked personal knowledge regarding the
availability of the terms of service to Trujillo before he
bought the iPhone at issue in this case. ATTM's supplemental
submission also established the falsity of Berinhout's earlier
sworn statements that the terms of service booklet with the
relevant arbitration provision was available in the store where
Trujillo bought the iPhone and was also available online.
With its supplemental submission, ATTM submitted a new
affidavit from Berinhout. In that affidavit, Berinhout stated
that contrary to his earlier sworn statement, he had “since been
informed that the Apple store in Oak Brook, Illinois where
plaintiff Jose Trujillo purchased his iPhone does not keep
ATTM's Terms of Service Booklet in stock.” Berinhout 2d
Suppl. Affid. ¶ 3. Berinhout thereby conceded that his initial
affidavit was false in two significant respects. First, Trujillo
did not, in fact, have access to a paper copy of the agreement
before or when he bought the iPhone. Second, contrary to
Berinhout's earlier sworn statement, he actually had lacked
personal knowledge of what was and was not available at
retail stores-in particular at Apple retail stores.
ATTM also included in its supplemental submission a
footnote (!!) in which it stated, contrary to the clear import
of Berinhout's initial affidavit, that a person who searched
online for its terms of service as of July 2007 would not
have found the version of those terms of service upon which
ATTM premised its motion to compel arbitration. See ATTM
2d Suppl. Brief (filed May 5, 2008) at 2 n. 2, citing Harry
Bennett Affid. ¶ 6. This statement established the falsity
of Berinhout's sworn statement that the agreement with
the relevant arbitration provision had been available online.
ATTM attempted to dismiss this as inconsequential, on the
ground that the obsolete terms of service that a searcher
could have found still “would have placed the prospective
consumer on notice” of an arbitration requirement. Id. It is
abundantly clear from ATTM's supplemental submissions,
however, that contrary to its earlier statements to the Court,
Trujillo had no access-none-to the purported contract upon
which the obligation to arbitrate the dispute in this case is
claimed to rest, either before or at the time he purchased the
iPhone from the Apple store.
With its supplemental submission, ATTM also provided
an affidavit from Harry Bennett, who is responsible for
overseeing the business group that maintains ATTM's
website. Bennett gave no indication that the web site
contained any information that would direct a visitor to the
terms of service. Rather, he stated that to find the terms of
service on the *984 website, one would have to use the
“search” tool and type in an appropriate query, such as “terms
of service,” “agreement,” or “conditions.” Harry Bennett
Affid. ¶ 6. Even then, as noted above, a visitor would have
found terms of service that were already obsolete. Bennett's
affidavit suggested that yet another statement in Berinhout's
initial affidavit was false-namely his contention that as of the
date Trujillo purchased his iPhone, ATTM's terms of service
were readily available via a single click on a link clearly
marked on the company's website.
4. Dawn Trujillo's purchase of an iPhone and its
activation by Jose Trujillo
Due to Berinhout's apparent 180-degree turn from the sworn
statements in his original affidavit, the Court (at a hearing
on May 8, 2008) directed ATTM to file additional papers
explaining why Berinhout's story had changed. In response,
ATTM made a further supplemental submission in which
it contended that in making his first affidavit, Berinhout
© 2011 Thomson Reuters. No claim to original U.S. Government Works.
4
Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
assumed Trujillo had bought his phone at an ATTM store
because the company's records reflected that he received
service on an iPhone purchase at an ATTM store. ATTM gave
no real explanation for how it or Berinhout had managed, up
until that point, to miss the fact that Trujillo had specifically
stated in his complaint that he had purchased the iPhone from
an Apple retail store and that the purchase receipt he had
submitted in opposition to the motion to compel arbitration
was from an Apple store.
ATTM stated in its new submission that it had investigated
further and determined that the Apple store receipt that
Trujillo had submitted “actually corresponds to an iPhone
that was activated by ... Dawn Marie Trujillo.” ATTM 3d
Suppl. Brief at 3. It now appears, based on the more complete
and accurate factual record currently before the Court, that
Trujillo gave the iPhone that he purchased from the Apple
store to Dawn Trujillo as a gift. Dawn Trujillo then activated
service for that iPhone online, via her preexisting ATTM
account. Diane Bonina, another ATTM in-house attorney,
states in an affidavit attached to one of ATTM's supplemental
submissions that Dawn Trujillo has been an ATTM customer
since November 2005 and that with her December 2006 bill
she received a copy of the terms of service that include the
arbitration provision at issue in this case. Bonina Affid. ¶¶ 16,
21-22. (Dawn Trujillo is not, however, a plaintiff in this case.)
It appears that around the same time that Trujillo gave the
iPhone he had purchased to Dawn Trujillo, she purchased an
iPhone from an ATTM store and gave it to Trujillo as a gift.
It further appears that Trujillo then activated service for that
iPhone online, in the process opening a new ATTM account
for himself. With its new submission, ATTM submitted an
affidavit from Ramoncito Balce, the manager of an ATTM
store in Elmhurst, Illinois. Balce states that ATTM records
reflect that Dawn Trujillo came to the store on June 29,
2007, the first day iPhones were offered for sale, “in order to
purchase an iPhone to use in connection with her preexisting
ATTM account.” Balce Affid. ¶ 3. The store had already sold
all of its iPhones, so (according to records Balce reviewed) a
cashier at the store arranged to have a phone shipped to Dawn
Trujillo at her home. She paid for the device at the store that
same day. Id.
According to Balce, ATTM records reflect that about one
week later, Jose Trujillo activated the iPhone that Dawn
Trujillo had purchased, id. ¶ 4-which, the Court notes, is
not the phone upon which Trujillo bases his claim in this
case. Balce says that the company's records reflect *985
that on July 5, 2007, an employee at the Elmhurst ATTM
store created a tentative account number for Trujillo and ran
a credit check on him, a step required when a new customer
wishes to avoid paying a deposit before commencing service.
Id. ¶¶ 6-7. According to Balce, “[i]t is store policy not to run
a credit check for a customer unless the customer is present
in the store.” Id. ¶ 8. Balce says that the iPhone that Dawn
Trujillo purchased was activated later on July 5, via an online
transaction. Id. ¶ 9. About fifteen minutes after the activation,
ATTM personnel were asked to change the phone number
assigned to the iPhone. Id. ¶ 10. It is a reasonable inference
from Balce's affidavit that Jose Trujillo went to the Elmhurst
ATTM store on July 5, 2007 to have a credit check done so
he could initiate service on the iPhone that Dawn Trujillo had
given him. The Court also assumes for purposes of discussion
that Trujillo activated that iPhone online himself; ATTM so
argues, and Trujillo does not argue otherwise.
Balce says that the ATTM store he manages “keeps in stock
whatever version of ATTM's Terms of Service booklet that is
then in effect” and that “[c]opies of that booklet are available
for customers to review and take with them.” Balce Affid.
¶ 2. Neither Balce nor ATTM, however, provided the Court
with any information about what Balce meant by “available”specifically, how the terms of service were available at the
store, or whether and how the booklet's availability was called
to the attention of a customer who, like Trujillo, comes in to
have a credit check done in order to set up service.
5. More regarding availability of ATTM service terms to
Trujillo
ATTM's additional supplemental submission contained
yet another affidavit from Berinhout, who attempted to
explain his earlier errors (as discussed above). In that
affidavit, Berinhout conceded still more inaccuracies in his
earlier submissions. As noted earlier, Berinhout's second
supplemental affidavit (filed on May 5, 2008) included a
sworn statement that contrary to his original sworn affidavit,
he had “since been informed that the Apple store in Oak
Brook, Illinois where plaintiff Jose Trujillo purchased his
iPhone does not keep ATTM's Terms of Service booklet
in stock.” Berinhout 2d Suppl. Affid. ¶ 3. This statement
suggested that the unavailability of the ATTM terms of
service had simply been an oversight on the part of the Oak
Brook Apple store. In his third supplemental affidavit (filed
on May 19, 2008), however, Berinhout made it clear that
there was more to it than that: “I have subsequently learned
that there is not a joint Apple/ATTM policy requiring that
ATTM's terms of service be available in Apple retail stores....
Thus, contrary to my original understanding, a customer who
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
purchases an iPhone from an Apple retail store does not obtain
ATTM's terms of service in the store.” Berinhout 3d Suppl.
Affid. ¶ 11. In short, no one-not just Trujillo-who purchases
an iPhone at an Apple store had access to the terms of service
at that store.
In this same affidavit, Berinhout conceded two more
significant inaccuracies in his original affidavit. First, he
stated that in light of the fact that Trujillo purchased his
iPhone in an Apple store, he (Berinhout) actually had no
clue whether Trujillo would have received the ATTM rate
plan and activation process documents referenced earlier.
Id. ¶ 12. Second, Berinhout stated, in effect, that the
statement in his first affidavit that the terms of service were
available on ATTM's web site via a single click on a box
entitled “Wireless Service Agreement” was literally true but
nonetheless misleading: true because it actually described
the state of affairs as of the date of the affidavit (October
2007), *986 but misleading because that was not the state
of affairs in July 2007, the relevant time for purposes of
the present motion. Rather, that one-click reference was not
added to ATTM's web site until September 2007. Id. Thus
the aforementioned statement in Berinhout's first affidavit,
included for the obvious purpose of convincing the Court
of the ease of accessing the terms of service online, in fact
amounted to misdirection.
6. Trujillo's activation of the iPhone he received as a gift
As noted earlier, it appears that Trujillo performed the online
transaction necessary to activate service on the iPhone that
Dawn Trujillo gave him as a gift-which, the Court again
notes, is not the iPhone on whose purchase Trujillo bases
his claims in this case. To complete the online activation
process, the customer must click on a box stating that “I
have read and agree to the AT & T Service Agreement.” The
text of that agreement is contained in a window immediately
above the box. The agreement is relatively lengthy, and only
a small portion of it can be viewed in the window at any
one time. To view the entire agreement, the customer must
scroll down through the agreement. The portion viewable
when the agreement first appears contains a paragraph stating
the following: 2
PLEASE READ THIS SOFTWARE LICENSE
AGREEMENT (“LICENSE”) CAREFULLY BEFORE
USING YOUR iPHONE, BY USING YOUR iPHONE,
YOU ARE AGREEING TO BE BOUND BY THE
TERMS OF THIS LICENSE. IF YOU DO NOT AGREE
TO THE TERMS OF THIS LICENSE, DO NOT USE
THE iPHONE. IF YOU DO NOT AGREE TO THE
TERMS OF THE LICENSE, YOU MAY RETURN THE
iPHONE TO THE PLACE WHERE YOU OBTAINED IT
FOR A REFUND.
Berinhout 1st Affid., Ex. 4. A bit further on, assuming
the customer scrolls down through the agreement, it states
that “[b]y checking ‘I have read and agree to the service
agreement’, you will be bound to the following for the
two-year term of the agreement: 1) the Terms of Service,
including the binding arbitration clause....” Id.
Contained in the agreement-about two-thirds of the way
through, as best as the Court can determine from what
ATTM has provided-the arbitration provision appears. It
begins with a heading that reads, in bold print, “DISPUTE
RESOLUTION BY BINDING ARBITRATION.” Id. In a
summary of the provision, the agreement states that if ATTM
is unable to resolve a dispute to the customer's satisfaction,
“we each agree to resolve those disputes through binding
arbitration or small claims court instead of in courts of general
jurisdiction” and that “[a]ny arbitration under this Agreement
will take place on an individual basis; class arbitrations and
class actions are not permitted.” Id. These terms are repeated
in more detail in the full text of the arbitration provision,
which also contains other terms relating to expenses, costshifting, and the like. Id. The agreement also states that
ATTM and the customer “agree to arbitrate all disputes and
claims between us.” Id. (emphasis in original).
*987 No ATTM affiant directly states that Trujillo, or for
that matter anyone, checked the box stating that “I have
read and agree to the AT & T Service Agreement.” But
as suggested above, one reasonably may infer that someone
checked that box-Berinhout stated that if a customer does not
check the box, he may not activate his iPhone, Berinhout 1st
Affid. ¶ 10-and that it was Trujillo who did so when the phone
that Dawn Trujillo had given him was activated.
Discussion
As noted earlier, Trujillo has asserted, against both ATTM
and Apple, claims under the Illinois Consumer Fraud Act
and for fraud, breach of contract, breach of implied warranty,
and unjust enrichment. His complaint states that his claims
concern the iPhone that he purchased from the Apple retail
store-the one that he gave as a gift to Dawn Trujillo.
After Apple removed the case to federal court, ATTM moved
to compel Trujillo to arbitrate his claims against ATTM and
to dismiss those claims. (Apple has moved separately for
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
summary judgment; the Court will address that motion in a
separate order.) ATTM seeks to require Trujillo to arbitrate
his claims as an individual and not on behalf of a class, or to
seek relief in small claims court, pursuant to the terms of the
ATTM service agreement and the Federal Arbitration Act, 9
U.S.C. § 4.
Before reaching the merits of ATTM's motion to compel
arbitration, the Court pauses to discuss further the disturbing
events that caused the process of briefing and deciding the
motion to be so elongated.
1. The Berinhout affidavits
It is abundantly clear that Berinhout's initial affidavit
was false in several material respects. To catalog the
misrepresentations:
-Berinhout falsely stated under oath that he had “personal
knowledge” of the facts in his first affidavit, including
what documents customers who purchase iPhones receive,
what documents are available in retail stores, and the online
availability of the terms of service at issue in this case. Via
his later explanations of other misstatements, Berinhout
has made it clear that the information he said he knew
personally was, in fact, second- or third-hand information.
-Berinhout stated under oath that an ATTM rate plan
and activation directions were provided to a customer
purchasing an iPhone at a retail store. Now he says he has
no idea whether this was so.
-Berinhout swore, without qualification, that ATTM's terms
of service were available to iPhone purchasers at retail
stores. Now he says that he actually has no idea whether
the terms of service were available at the store where
Trujillo purchased his iPhone. He also now says that there
was no understanding between ATTM and Apple that the
latter would have ATTM's service terms available at Apple
stores.
-Berinhout said under oath that the agreement with the
arbitration provision on which ATTM premises its motion
*988 to compel was available online at the time of
Trujillo's purchase. He now admits that this agreement was
not available.
-Berinhout stated under oath that when Trujillo purchased his
iPhone, the ATTM terms of service were available online
in a quick and easy manner, via a clearly marked oneclick reference on the company's website. This, too, was
untrue; in fact, the terms of service could be found only by
performing a search using proper search terminology.
These statements were critical to ATTM's motion to compel
arbitration. A key thrust of Trujillo's opposition to arbitration
was that the arbitration agreement was hidden from him
prior to or at the time of his purchase of the iPhone. To
anticipate this contention, and later in response to it, ATTM
attempted to convince the Court that Trujillo had ready
access to the agreement in several different ways. Had the
Court simply relied on Berinhout's affidavit-as he and ATTM
obviously intended-it would have decided the motion to
compel arbitration based on false premises.
One might be tempted to chalk this up to a simple lack
of foundation for Berinhout's original statements-in other
words, to mere lack of direct knowledge. That would be
bad enough, but there is more to it than that. Berinhout
affirmatively misrepresented to the Court that the information
in his affidavit was based on his personal knowledge. In
fact, it was-as Berinhout no doubt knew at the time-based
on second- and third-hand information. Berinhout may have
had some direct knowledge about ATTM policy, but the
aforementioned statements involved how things actually
happened in the field. The distinction between policy and
execution had to have been obvious to Berinhout as a lawyer
making statements under oath to a court. And it ought to have
been equally obvious to the lawyers representing ATTM in
this case.
Berinhout's explanation for why he-as opposed to someone
who actually had personal knowledge-submitted the initial
affidavit is just as troubling. Berinhout states that
[i]n order to limit the costs and business disruptions that
take place when ATTM responds to challenges to the
arbitration agreements between ATTM and its customers,
I decided to assume principal responsibility for attesting
to various aspects of the formation and substance of these
agreements. Accordingly, I served as the primary declarant
in support of ATTM's motion to compel arbitration in this
case.
Berinhout 3d Suppl. Affid. ¶ 5. Though this statement
may explain Berinhout's role from a business standpoint, it
displays a shocking disregard of the requirements of the rules
of evidence. There is no such thing as a “primary declarant”
entitled to present as personal knowledge information
communicated to him by others-no matter what “costs”
or “disruptions” are involved. See Fed.R.Evid. 602; cf.
Fed.R.Civ.P. 56(e) (requiring personal knowledge of facts
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
stated in affidavit submitted in connection with summary
judgment motion). When an affiant-in particular, a lawyerswears under oath that he has personal knowledge of the facts
he cites, that tells the Court that he has first-hand information,
not information collected by others behind the curtain and
then communicated by the declarant.
One has the right to expect better, both from Berinhout,
a lawyer acting as a witness *989 before a court, and
from the lawyers who presented his sworn statements to
this Court. In the Court's view, the conduct of ATTM
(including its counsel) provides a sufficient basis for serious
consideration of the imposition of a sanction, under Federal
Rule of Civil Procedure 11(b)(3) and 11(c) and/or the Court's
inherent authority to sanction litigation conduct that is done
vexatiously or in bad faith. See generally Chambers v.
NASCO, Inc., 501 U.S. 32, 43-46, 111 S.Ct. 2123, 115
L.Ed.2d 27 (1991); Greviskes v. Universities Research Ass'n,
Inc., 417 F.3d 752, 758 (7th Cir.2005). Such a sanction, were
the Court to impose one, could be monetary, to compensate
Trujillo and his counsel for the extra work to which they were
put due to ATTM's actions, or non-monetary, for example
striking ATTM's arbitration defense. The Court will consider
these matters in due course. For the time being, howeverand even though striking the arbitration defense is a possible
sanction-the Court will go on to consider the merits of that
defense based on the record as it now appears.
2. Availability of contract terms to Trujillo
1 What, then, did Trujillo see or have access to before or
when he purchased the iPhone? Based on the record now
before the Court, at the time he purchased from the Apple
store the iPhone that he gave to Dawn Trujillo, Trujillo
did not see and did not have access to a paper copy of
any documents explaining or referencing ATTM's terms of
service, including in particular the arbitration requirement.
It has been established beyond peradventure that no such
documents were available at the Apple store where Trujillo
made the iPhone purchase that forms the basis of his claims
in this case.
ATTM also relies on the claimed availability of its terms
of service online, that is, via the Internet. This contention
has been undermined by the revelation of Berinhout's
misstatements-assuming the argument had merit to begin
with, a point the Court need not determine definitively. As
noted earlier, the only version of the terms of service that
Trujillo would have seen had he known to search online on
or about the date that he purchased the iPhone was an out-
of-date version. But just as importantly for present purposes,
ATTM has offered no evidence-none-regarding how Trujillo
would have known, before or when he purchased the iPhone,
that the service terms were available on the Internet, let
alone how to find them. ATTM has submitted no evidence
suggesting that customers in Apple stores (or, for that matter,
in ATTM stores) are advised by signs, placards, customer
representatives, or in any other way that the company's
terms of service can be examined online. Indeed, ATTM
submitted no such evidence even after the Court, in its
April 18, 2008 order, specifically called into question the
availability of the terms of service online. See Trujillo, 2008
WL 2787711, at *5 (“[O]n the present record, the proposition
that Trujillo actually could have found the agreement on-line
is nothing more than supposition. That proposition assumes,
without support in the record as it now stands, that someone
in Trujillo's position (or perhaps the standard is that of a
reasonable consumer) would have been able to figure out how
to find it.”).
One might suggest that given the ubiquity of computers and
access to the Internet, someone in Trujillo's position could
have figured out on his own where to look online and what
to look for. Putting aside the sufficiency of that proposition
from a legal standpoint to establish access to ATTM's service
terms, it utterly fails as a matter of evidence. Specifically,
ATTM has offered no evidence that assists in bridging the
gap from the theoretical availability of the obsolete version
of the terms *990 of service online (along with millions
of other websites and documents) to a finding that Trujillo
actually had access to it: it has offered no evidence that he
was aware of the online version, that he was advised of it,
or that, as a reasonable consumer, he should have known of
it. As the Court stated in its prior ruling, “[c]ourts typically
do not rely on facts that are in the air, or that can be figured
out by the deciding judge, when those facts have not been
presented to the court by the parties as evidence that each
side has had the opportunity to address.” Id. at *5. The only
evidence before the Court is contained in one of ATTM's
supplemental submissions, via the affidavit of Harry Bennett.
And it appears from Bennett's affidavit that the terms of
service were not easily accessible on ATTM's website, even
if one knew to look there in the first place. Rather, one would
have had to perform a search using proper terminology. In
any event, ATTM has offered no evidence, and no legal
authority, that the theoretical availability, via a proper search
on the Internet, of an obsolete version of an agreement counts
for anything in determining enforceability of a related but
different agreement to arbitrate.
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
For these reasons, the Court finds that ATTM has failed to
show that the terms of the contract at issue were known or
available to Trujillo before he purchased the iPhone at the
Apple store. And ATTM has offered no evidence that Trujillo
had any involvement in Dawn Trujillo's activation of service
on that iPhone or that he had ever seen her terms of service in
connection with her prior dealings with ATTM.
Trujillo did go to an ATTM store, it appears, on July 5, 2007
to have a credit check done so he could activate service on
the iPhone Dawn Trujillo had given him as a gift. To the
extent ATTM suggests that Trujillo had access to the terms
of service at the ATTM store that day, however, the Court
rejects the argument. Though store manager Balce says the
terms of service booklet was “available” at the store, as noted
earlier this does not suffice to show that Trujillo got it or even
that it was available to him. For all the Court knows based on
the current record, the terms of service were behind a counter
somewhere. Despite the several opportunities that ATTM
had to supplement its evidentiary showing, it has offered no
evidence that the store's practice was to bring the document to
the attention of persons who, like Trujillo, came to the store
to have a credit check done.
Trujillo did, however, have access to ATTM's terms of
service, including the arbitration requirement, when he
activated service on the iPhone that Dawn Trujillo gave him
as a gift. It is noteworthy, however, that this was several
days after he had purchased and, presumably, had given to
Dawn Trujillo the iPhone on whose purchase Trujillo bases
his claims in this case.
3. Arbitrability of Trujillo's claims
As noted earlier, Trujillo clearly states, in his amended
complaint and in his briefing on the motion to compel
arbitration, that his claim is based on the iPhone that he
purchased, not on the one that he received as a gift from
Dawn Trujillo. Though Trujillo gave that iPhone away as
a gift, ATTM does not suggest that this prevents him from
having standing to sue or from asserting a viable legal claim.
Indeed, there is no reason to believe that this state of affairs
would have such an effect on Trujillo's suit. The Court does
not see why a person who, due to a merchant's deception,
purchases as a gift for someone else an item that turns out to be
something other than what it was represented to be should be
any less able to sue for fraud *991 than a person who makes
such a purchase for himself. This state of affairs might affect
Trujillo's damages and/or his ability to represent others in a
class action, but ATTM makes no contention that it prevents
him from suing altogether.
2 The fact that Trujillo's suit is based on the iPhone he
purchased and gave as a gift does, however, have significant
implications with regard to ATTM's motion to compel
arbitration. Indeed, were it not for the fortuity that Trujillo
later received a different iPhone as a gift and then signed
up for service with ATTM, ATTM would not even have
a straight-faced argument in favor of arbitration. Trujillo
entered into no agreement with AT & T in connection with
his purchase of the iPhone at issue in this case. Indeed, as the
Court has found, he lacked access to ATTM's terms of service
prior to, at the time of, or in connection with that purchase,
and there is no evidence that he had any idea that ATTM
required arbitration of disputes. A party cannot be compelled
to arbitrate a dispute that he has not agreed to arbitrate. See,
e.g., Int'l Bhd. of Elec. Workers, Local 21 v. Ill. Bell Tel. Co.,
491 F.3d 685, 687 (7th Cir.2007) (citing AT & T Techs., Inc.
v. Comm'c'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct.
1415, 89 L.Ed.2d 648 (1986)). For this reason, if Trujillo had
not received an iPhone as a gift and contracted for service
with ATTM, there would be no basis to compel arbitration of
his claims.
Trujillo did, however, enter into an agreement with ATTM to
arbitrate disputes, albeit in connection with his activation of
service on a different iPhone from the one whose purchase
is the basis of his claims in this lawsuit. He does not argue
that this agreement does not apply to his claims regarding his
purchase of the iPhone for Dawn Trujillo. Rather, he argues
that the ATTM agreement cannot be enforced because it is
unconscionable.
3 4 Under the Federal Arbitration Act, arbitration clauses
“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. The party resisting arbitration bears
the burden of showing that the claim at issue is unsuitable
for arbitration. Green Tree Fin. Corp.-Ala. v. Randolph, 531
U.S. 79, 91, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). When
that party challenges the validity of the agreement to arbitrate,
a court applies the relevant state law principles that govern
the formation of contracts. First Options of Chi. v. Kaplan,
514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
General state-law contract defenses such as fraud, duress,
or unconscionability may operate to invalidate arbitration
agreements, allowing a party to avoid having to arbitrate his
dispute. Doctor's Assocs. v. Casarotto, 517 U.S. 681, 687, 116
S.Ct. 1652, 134 L.Ed.2d 902 (1996).
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
Trujillo asserts that ATTM “has not learned from its
mistakes,” Pl. Resp. at 2-a reference to a ruling by the
Illinois Supreme Court that held the class-arbitration waiver
contained in an earlier version of the service agreement to
be unconscionable under Illinois law. See Kinkel v. Cingular
Wireless LLC, 223 Ill.2d 1, 306 Ill.Dec. 157, 857 N.E.2d
250 (2006). ATTM counters that the arbitration provision
contained in the service agreement Trujillo accepted is
strongly “pro-consumer” and has more than corrected for the
shortcomings the court in Kinkel found in the earlier version
(although it still contains a class-arbitration waiver). ATTM
also argues that section 2 the FAA, 9 U.S.C. § 2, would
expressly preempt Illinois law if its arbitration clause were
held unconscionable under that law. It further argues that the
doctrine of conflict preemption leads to this same result.
*992 a. Unconscionability
5
6
7
Unconscionability under Illinois law has
both procedural and substantive facets; “[a] finding of
unconscionability may be based on either procedural or
substantive unconscionability, or a combination of both.”
Kinkel, 223 Ill.2d at 22, 306 Ill.Dec. 157, 857 N.E.2d at
263 (citing Razor v. Hyundai Motor Am., 222 Ill.2d 75, 99,
305 Ill.Dec. 15, 854 N.E.2d 607, 622 (2006)). Procedural
unconscionability exists when a contract provision is so
difficult to locate, read, or understand that a party “cannot
fairly be said to have been aware he was agreeing to
it.” Id. (quoting Razor, 222 Ill.2d at 100, 305 Ill.Dec. 15,
854 N.E.2d at 622). Procedural unconscionability analysis
takes into account the relative bargaining power of the
parties to the agreement and inquires whether there has
been “some impropriety during the process of forming the
contract depriving a party of a meaningful choice.” Id. at
23, 306 Ill.Dec. 157, 857 N.E.2d at 264 (quoting Frank's
Maintenance, 86 Ill.App.3d at 989, 42 Ill.Dec. 25, 408 N.E.2d
at 410).
Trujillo contends that procedural unconscionability pervaded
the process by which he signed up for ATTM's service. He
contends that he had no access to ATTM's service agreement
until after the iPhone purchase upon which he bases his claims
in this case. Trujillo also contends that ATTM's status as
the only licensed provider of wireless service for the iPhone
deprived him of real choice. Finally, he contends that the
arbitration clause was “crammed into a small print online text
box that is so small one can only see a few lines ... at a time”
and was thus “concealed” in a maze of fine print. Pl. Resp.
at 14. Therefore, Trujillo asserts, even if he technically had
access to the arbitration clause, this should not preclude a
finding of procedural unconscionability because ATTM's use
of the text box shows that “a merchant offering a take-itor-leave-it contract ... has many ways to hide onerous terms
without entirely denying the consumer any access to the
provision.” Id. at 15.
The Court has found that Trujillo did not have access to the
ATTM service agreement prior to or at the time he purchased
the iPhone from the Apple store. Rather, the first time that
Trujillo saw or reasonably could be considered to have access
to the ATTM agreement was when he signed up for service
after he received as a gift a different iPhone, the one that Dawn
Trujillo had purchased. Though a straight-faced argument
could be made that this contract does not bind Trujillo to
arbitrate disputes arising from his purchase of a completely
different iPhone, as noted earlier Trujillo does not make that
argument. His belated access to the agreement does, however,
directly impact the unconscionability analysis.
Under Illinois law, the unavailability of the ATTM service
agreement to Trujillo before he purchased the iPhone is
a critical factor in determining the issue of procedural
unconscionability. See Razor, 222 Ill.2d at 100-01, 305
Ill.Dec. 15, 854 N.E.2d at 623. In Razor, the Illinois Supreme
Court concluded that a warranty containing a disclaimer of
consequential damages had not been “made available to the
plaintiff at or before the time she signed the sale contract
for an automobile, because it was contained in an owner's
manual in the automobile's glove compartment, where it was
unavailable to the consumer until after she took delivery.”
Id. Though the court acknowledged that the waiver was in
understandable language and was easy to read-a contention
likewise made by ATTM in the present case-these facts
“simply do[ ] not matter,” the court said, “if the consumer did
not have the opportunity to see the language before entering
into the contract to purchase the car.” *993 Id. at 101, 305
Ill.Dec. 15, 854 N.E.2d at 623 (emphasis in original). The
waiver was ineffective, the court said, because it was not
“provided to the purchaser at or before the time that the
purchase occurs.” Id. at 103, 305 Ill.Dec. 15, 854 N.E.2d at
624.
As in Razor, other circumstances in the present case
buttress the conclusion that the circumstances rendered the
arbitration requirement and class action waiver procedurally
unconscionable. Trujillo presumably could have declined to
click on the “agreement” box when he went online to activate
service on the iPhone that Dawn Trujillo had given him. By
then, however, he had already purchased the iPhone that he
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
gave Dawn as a gift and upon whose purchase he bases his
claims in this case. By the time Trujillo first saw or had
access to ATTM's service agreement, he could do nothing
to unwind the earlier purchase. Based on the information
that Trujillo had, it appeared that he would have received
something less than 100 cents on the dollar if Dawn's iPhone
had been returned: the sales receipt said that only ninety
percent of the purchase price would be returned. Though
ATTM has now, after the fact, offered evidence that Apple
had a practice of waiving the ten percent restocking fee, based
on the record before the Court, that practice was nowhere
disclosed to Trujillo or, for that matter, to any other purchaser
or prospective purchaser.
In Bess v. DirecTV, Inc., 381 Ill.App.3d 229, 319 Ill.Dec.
217, 885 N.E.2d 488 (2008), the Illinois Appellate Court
considered a situation in which it appeared the agreement
governing the terms for television service the plaintiff
purchased was not provided to her until after she activated the
service. The court ruled that this was insufficient to render
the agreement procedurally unconscionable. It noted that
although the plaintiff did not receive the agreement until after
she ordered the service, it provided that it was not binding
until after she read it and continued to receive the service, and
it advised her that if she did not accept the agreement, her
service would be cancelled immediately and she would not
be charged a fee. Id. at 239, 319 Ill.Dec. 217, 885 N.E.2d at
496-97.
The same is not true here. As the Court has noted, by the
time Trujillo first saw or had access to the ATTM agreement,
he had already purchased, from a completely separate entity
(Apple), the iPhone at issue in this case. Unlike in Bess, a fee
of at least ten percent of the device's purchase price would
have been incurred-at least as far as Trujillo knew-had that
iPhone been returned. Indeed, it is possible that a higher fee
would have been incurred depending on the condition of the
iPhone at the time of its return. And based on the rate plan
document that ATTM itself submitted, it is likewise possible
that the ATTM activation fee that Dawn Trujillo had incurred
would have been lost, depending on when the iPhone was
actually returned.
In short, the situation in the present case is nothing like
Bess, in which the plaintiff, had she chosen not to accept
the belatedly-produced agreement, would have incurred no
expense.
ATTM cites, as did the court in Bess, the Seventh Circuit's
decision in Hill v. Gateway 2000, Inc., 105 F.3d 1147,
1149 (7th Cir.1997). In Hill, the court addressed the
enforceability of an arbitration agreement that was inside a
box containing a computer that the plaintiffs had purchased
via telephone. Though the court did not discuss the issue of
unconscionability in so many works, it found the agreement
enforceable despite the fact that the plaintiffs had not seen it
before or when they purchased the product.
Hill does not control the present case. As in Bess, the
agreement in Hill made it *994 clear that the customer could
return the product without penalty (as best as this Court can
determine from Hill ) if he did not accept the agreement's
terms. The same is not true in Trujillo's case. 3 The court
in Hill also stated that “because the Hills knew before they
ordered the computer that the carton would include some
important terms, and then did not seek to discover these in
advance,” it was beside the point whether they would have
suffered a financial penalty had they declined to accept the
agreement. Id. (emphasis in original). The court went on to
state that the plaintiffs could have asked the vendor to send a
copy of any agreement before deciding whether to buy it or
could have consulted public sources, including the vendor's
website, “that may contain this information.” Id. But because
the plaintiffs kept the computer, the court said, they accepted
the terms of the agreement.
As the Court stated in its April 18, 2008 ruling, it is bound
to follow the Seventh Circuit's determination of what Illinois
law is, unless there is an intervening and contrary decision
from the state's highest court. See Reiser v. Residential
Funding Corp., 380 F.3d 1027, 1029 (7th Cir.2004). Razor
is such a decision. As the Court has noted, the dispositive
factor in that case was the unavailability of the agreement
to the consumer until after she had purchased the product.
Although it was presumably just as true in Razor as in
Hill that the consumer could have asked in advance for a
copy of any applicable agreement, or could have checked
a website, the Illinois Supreme Court did not hint that this
was at all significant as a matter of Illinois unconscionability
law. Given this significant intervening decision from Illinois'
highest court, this Court must rely on Razor, to the extent it
is contrary to Hill, in determining what Illinois law holds in
this context.
One other factor leads the Court to consider Razor, rather
than Hill, to be controlling in this case. There is no evidence
that Trujillo actually could have gotten the agreement upon
which ATTM relies in advance of his purchase of the iPhone
from the Apple store. Berinhout, in his most recent affidavit,
states that ATTM actually had no understanding with Apple
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
to make ATTM's terms of service available in Apple stores,
and ATTM has provided no evidence from anyone with
actual knowledge of Apple's practices that the agreement was,
in fact available there. In addition, ATTM's own evidenceat least its belatedly-submitted evidence-establishes that the
agreement upon which it relies was not available online. And
though an earlier, similar agreement might have been findable
somewhere within ATTM's website, ATTM has offered no
evidence reflecting that Trujillo would have had a clue it was
there or, if so aware, could have found it. The Court has a
hard time believing that the theoretical availability, under a
proverbial rock, of an obsolete version of an agreement not
actually shown to the consumer can render it enforceable as
a matter of Illinois law-and in fact no case, including Hill, so
holds.
ATTM suggests that a holding that the unavailability of
its agreement renders it unenforceable against Trujillo will
produce severe consequences and make it unfairly hard for
it and other mass-marketers to do business. Not so. It would
have been relatively simple for ATTM to make its *995
terms of service actually available in Apple stores, given
the companies' exclusive arrangement regarding the iPhoneindeed, Berinhout initially thought, albeit incorrectly, that
such an understanding existed between the two companies.
Or it could have provided the agreement as an insert within
the iPhone's package, which under Hill and Bess likely would
have made it enforceable, at least so long as the consumer
suffered no financial penalty if he chose not to accept the
agreement. Or ATTM and Apple could have made, and
disclosed to consumers, a policy of returning the entirety of
the iPhone's purchase price to the consumer should he choose
not to accept ATTM's terms. In short, the parade of supposed
horribles cited by ATTM-a relatively short parade to begin
with-cannot affect the outcome of the present motion.
For these reasons, the Court concludes that Trujillo has
established, in the particular circumstances of his case, the
procedural unconscionability-and thus the unenforceabilityof ATTM's arbitration requirement. In view of the Court's
conclusion on the claim of procedural unconscionability,
it need not address Trujillo's claim of substantive
unconscionability. Though, as ATTM argues, a “degree”
of procedural unconscionability “may not be sufficient
to render [an agreement] unenforceable,” Wigginton v.
Dell, 382 Ill.App.3d 1189, 321 Ill.Dec. 819, 890 N.E.2d
541, 547 (2008), this is a case in which the finding of
procedural unconscionability concerns such a basic matterthe unavailability of the agreement to the consumer at the
relevant time-that it is enough under Razor to render the
agreement unenforceable, particularly in view of the financial
penalty that Trujillo would have suffered had he declined to
agree to ATTM's terms once he saw them.
b. Preemption
8 Under the Supremacy Clause, U.S. Const. art. VI, cl.
2, federal law may preempt state law in one of three
ways: “expressly, impliedly through the doctrine of conflict
preemption, or through the doctrine of field (also known as
complete) preemption.” McMullen v. Medtronic, Inc., 421
F.3d 482, 487 (7th Cir.2005) (quoting Boomer v. AT & T
Corp., 309 F.3d 404, 417 (7th Cir.2002)). ATTM argues that
the doctrines of express and conflict (or implied) preemption
operate in this case to shield its arbitration clause from a
finding of unconscionability under Illinois law.
ATTM's argument, however, focuses entirely on the claim
of substantive unconscionability. See ATTM Mem. at 11-15;
ATTM Reply at 13-15 (both focusing on substantive
unconscionability generally and the particulars of the class
action waiver in particular). Because the Court has not denied
ATTM's motion to compel arbitration on that basis, and
because the Court has relied not on any doctrine of Illinois law
that targets arbitration agreements for special treatment but
rather on a rule that applies to contracts generally, ATTM's
preemption argument is effectively moot.
Conclusion
For the reasons stated above, the Court denies defendant AT
& T Mobility LLC's motion to compel arbitration and dismiss
action [docket no. 36]. The case is set for a status hearing
on September 29, 2008 at 9:30 a.m. to address further the
sanctions issue discussed earlier in this decision.
Footnotes
1
2
In his original complaint filed in state court, Trujillo named AT & T Inc. as a defendant. In his amended complaint, filed after
Apple removed the case to federal court, Trujillo substituted AT & T Mobility LLC. The Court made an inquiry regarding AT & T
Mobility's citizenship and has determined, based on the results of that inquiry, that the minimal-diversity requirement of the Class
Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2), is met and that no grounds for abstention under that statute exist.
The Court has adjusted the size of the typeface in the text above so that the text of the quoted portion of the agreement includes
the same number of words per line as the opening portion of the agreement, a screen shot of which ATTM provided to the Court.
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Trujillo v. Apple Computer, Inc., 578 F.Supp.2d 979 (2008)
3
ATTM has not advised the Court regarding the actual size of the typeface, and in any event what a particular customer sees likely
would depend on the size of his computer screen and the nature of his default settings.
The ATTM terms of service that Trujillo evidently had the opportunity to review when he signed up for service stated that if he
did not agree, he could return the iPhone for a refund. But the receipt from the Apple store for the iPhone he purchased-the device
whose purchase is at issue in this case-said this would be less than a full refund, as the Court has noted.
End of Document
© 2011 Thomson Reuters. No claim to original U.S. Government Works.
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