Vernon et al v. Qwest Communications International Inc. et al
ORDER on Defendants' Renewed Motion to Compel Arbitration. This court will GRANT the Qwest Defendants' Renewed 132 Motion to Compel Arbitration and stay this matter pending further proceedings, by Magistrate Judge Craig B. Shaffer on 3/8/12.(lsw, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 09-cv-01840-RBJ-CBS
RORY PATRICK DURKIN,
BYRAN SANDQUIST, and
TED MOORE, on behalf of themselves and all others similarly situated,
QWEST COMMUNICATIONS INTERNATIONAL, INC., a Delaware corporation;
QWEST SERVICES CORPORATION, a Colorado corporation;
QWEST CORPORATION, a Colorado corporation;
QWEST COMMUNICATIONS CORPORATION, a Delaware corporation; and
QWEST BROADBAND SERVICES, INC., a Delaware corporation;
ORDER ON DEFENDANTS’ RENEWED
MOTION TO COMPEL ARBITRATION
Magistrate Judge Shaffer
THIS MATTER comes before the court on Defendants Qwest Communications
International, Inc., Qwest Services Corporation, Qwest Corporation, Qwest Communications
Corporation, and Qwest Broadcast Services, Inc.’s (collectively “the Qwest Defendants” or
“Qwest”) Renewed Motion to Compel Arbitration (doc. #132) filed on May 25, 2001. Plaintiffs
Robin Vernon, Rory Patrick Durkin, Byran Sandquist and Ted Moore filed their Response to
Defendants’ [Renewed] Motion to Compel Arbitration (doc. #138) on June 15, 2011, and
Plaintiffs’ Designation of Supplemental Authority (doc. #150) on September 30, 2011. The
Qwest Defendants filed a Reply in Support of their Renewed Motion to Compel Arbitration (doc.
#144) and their Designation of Supplemental Authority (doc. #151) on July 5, 2011 and October
2, 2011, respectively. Plaintiffs filed yet another Designation of Supplemental Authority (doc.
#161) on February 28, 2012 to apprise this court of a recent Opinion and Order entered in a very
similar case, Richard Grosvenor v. Qwest Corporation, et al., Civil Action No. 09-cv-02848MSK-KMT.
Pursuant to an Order of Reference to Magistrate Judge (doc. #8) dated August 11, 2009,
this matter was referred to the Magistrate Judge to, inter alia, “hear and determine pretrial
matters, including discovery and other non-dispositive motions,” and to “conduct hearings,
including evidentiary hearings, and submit proposed findings of fact and recommendations for
rulings on dispositive motions.” The court heard oral argument on the pending motion during a
hearing on October 7, 20011. I have carefully reviewed the parties’ briefs and attached exhibits,
the entire case file, and the applicable case law, and considered the arguments presented at the
October 7, 2011 hearing.
While the parties are well versed in the underlying circumstances of the pending
litigation, a brief recitation of its procedural history may assist the uninitiated reader. This action
was transferred from the Western District of Washington to the District of Colorado on August
4, 2009 following dismissal with prejudice of Plaintiffs’ first claim for relief, and dismissal
without prejudice of Plaintiff Vernon’s claims for unjust enrichment and violation of
Washington’s Consumer Protection Act, as well as Plaintiff Durkin’s claim under the Minnesota
Prevention of Consumer Fraud Act. See doc. #65. When the case was transferred, Plaintiffs’
First Amended Complaint was the operative pleading.
Plaintiffs filed their Second Amended Class Action Complaint (doc. #20) on September
2, 2009, as a “multi-state consumer class action on behalf of Qwest internet service customers
who are subject to an invalid $200 Early Termination Fee (‘ETF’) if they cancel their internet
service before the end of a purported contractual commitment, in most cases, two years.”
Plaintiffs asserted that the $200 fee was imposed regardless of the customer’s reasons for
cancelling service, the time remaining on the subscriber’s alleged commitment, and “the lack of
an agreement signed by the customer agreeing to such terms.” The Second Amended Class
Action Complaint asserts claims for declaratory relief (Count One on behalf of all Plaintiffs),
unjust enrichment (Count Two on behalf of all Plaintiffs), violation of the Colorado Consumer
Protection Act (Count Three on behalf of all Plaintiffs), and violation of the Washington
Consumer Protection Act (Count Four on behalf of Plaintiffs Vernon and Sandquist). Plaintiffs
specifically seek a declaration that the arbitration and class action waiver provisions and the
alleged ETF imposed by Qwest on its customers are unenforceable, violate public policy, and are
unconscionable, injunctive relief as to the same provisions, and an award of actual, statutory,
exemplary damages, and attorneys fees and costs.
The Qwest Defendants filed a Motion to Compel Arbitration (doc. #26) on September 15,
2009, arguing that Plaintiffs’ claims all arise out of and are subject to the parties’ Subscriber
Agreement and its mandatory arbitration clause. In summary, the Qwest Defendants assert that,
based upon Plaintiffs’ consent to the terms and conditions of the Subscriber Agreement, the
arbitration clause is enforceable under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq.,
and that federal and Colorado law preclude a finding of unconscionability as to the arbitration
clause’s class action ban. Briefing on that motion did not close until September 7, 2010 with the
filing of Defendants’ Notice of Supplemental Authority in Support of Their Motion to Compel
Arbitration (doc. #107).
In the mean time, Plaintiffs filed their Third Amended Class Action Complaint (doc. #54)
on November 5, 2009. The Third Amended Class Action Complaint
(1) amend[s] the allegations of Plaintiff Ted Moore to reflect his recent payment
of the ETF; (2) amend[s] the allegations of Plaintiff Bryan Sandquist to make
clear he paid the ETF after he moved to Washington; (3) amend[s] the allegations
of Plaintiffs Robin Vernon, Bryan Sandquist and Ted Moore to allege facts
relating to the materiality of Qwest’s failure to disclose the term commitment and
ETF, as well as the anxiety and stress they suffered as a result of Qwest’s
attempts to collect the invalid ETFs; and (4) amend[s] Plaintiffs’ claim under the
Colorado Consumer Protection Action (sic) to clarify the basis of their claim that
Qwest’s conduct is “unfair and deceptive.”
See Plaintiffs’ Motion to Amend Second Amended Class Action Complaint (doc. #41), at 2.
On September 8, 2010, the Qwest Defendants filed a Motion to Stay Ruling on
Defendants’ Motion to Compel Arbitration (doc. #109), in light of the United States Supreme
Court’s decision to grant certiorari in AT&T Mobility, LLC v. Concepcion,
U.S. , 130 S.Ct.
3322 (May 24, 2010) to address whether the FAA preempts states from invalidating arbitration
clauses that include a class action ban. The district judge granted that motion with an Order
(doc. #110) dated September 29, 201, staying this action “through the Supreme Court’s
resolution of AT&T Mobility, LLC v. Concepcion” and striking the Qwest Defendants’ thenpending Motion to Compel Arbitration, “with leave to re-file within twenty-one days of the
Supreme Court’s” decision in Concepcion. Consistent with the district court’s directive, the
Qwest Defendants filed their Renewed Motion to Compel Arbitration on May 25, 2011. The
associated briefing and attached exhibits comprise more than 732 pages of the court record.
As a threshold matter, this court must address its authority under 28 U.S.C. § 636. A
review of the case law reveals that courts are divided on whether motions to compel arbitration
are dispositive for purposes of 28 U.S.C. § 636(b)(1). Compare Wilken Partners, L.P. v.
Champps Operating Corp., 2011 WL 1257480, at *1 (D. Kan. 2011) (noting that “district courts
that have considered the nature of an order to stay proceedings pending arbitration and to compel
arbitration have concluded that these are non-dispositive orders”) and Coxcom, Inc. v. Egghead
Telecom, Inc., 2009 WL 4016629, at *1 (N.D. Okl. 2009) (suggesting that “[c]ourts generally
regard a motion to compel arbitration either as a case dispositive matter or a matter not within
the statutory authority of a U.S. Magistrate Judge to resolve by Order”). See also Chen-Oster v.
Goldman, Sachs & Co., 785 F. Supp. 2d 394, 399 n.1 (S.D.N.Y. 2011) (finding persuasive those
cases concluding that motions to compel are not case-dispositive) and BBCM, Inc. v. Health
Systems International, LLC, 2010 WL 4607917, at *1 n.1 (N.D. Iowa 2010) (the magistrate
judge, after noting a split of authority, issued a report and recommendation “out of an abundance
Unfortunately, the Tenth Circuit has not weighed in on this precise issue. In the absence
of controlling authority, I am persuaded by Magistrate Judge Bostwick’s analysis in Jackman v.
Jackman, 2006 WL 3792109, at *1-2 (D. Kan. 2006). There, as in this case, the arbitration
provision in question explicitly stated that the arbitration would be governed by the Federal
Arbitration Act and that judgment on any arbitration award may be entered by any court of
competent jurisdiction. The arbitration provision in the Qwest Subscriber Agreement also
acknowledges that “[a]rbitration is final and binding” and will be “conducted by the American
Arbitration Association (“AAA”).” Judge Bostwick noted that in P & P Industries, Inc. v. Sutter
Corp., 179 F.3d 861, 866-67 (10th Cir. 1999), the Tenth Circuit held that a district court has the
authority to confirm an arbitration award pursuant to Section 9 of the FAA where the parties
“have agreed, explicitly or implicitly, that any eventual arbitration award shall be subject to
judicial confirmation.” That implicit consent may be evidenced by the parties’ acknowledgment
that the arbitration shall be final and binding, or by their agreement that the arbitration shall be
governed by the rules and procedures of the AAA. Id. Cf. Will v. Parsons Evergreene, LLC,
2011 WL 2792398, at *1 (D. Colo. 2011) (concluding that the district court was the appropriate
forum from which to obtain an order confirming an arbitration award where the parties’
arbitration agreement stipulated that the arbitration award would be final and binding, and that
judgment on the award “may be entered in any federal or state court having jurisdiction”). Judge
Bostwick concluded that “because an Article III judge will ultimately be required to confirm,
modify, or vacate any arbitration award, the order to stay proceedings and compel arbitration is
non-dispositive and is within the magistrate’s authority.” Jackman v. Jackman, 2006 WL
3792109, at *2.
The Tenth Circuit has held that a motion may be considered dispositive for purposes of
28 U.S.C. § 636(b)(1) if it has an “identical effect” as one of the motions excepted in that statute.
First Union Mortgage Corp. v. Smith, 229 F.3d 992, 995 (10th Cir. 2000), citing Ocelot Oil Corp.
v. Sparrow Industries, 847 F.2d 1458, 1462 (10th Cir. 1988). Measured by that standard, I find
that the instant motion to compel arbitration is non-dispositive, as an Article III judge ultimately
will be required to confirm, modify or vacate any arbitration award involving the parties to this
action.1 Cf. All Saint’s Brands, Inc. v. Brewery Group Denmark, A/S, 57 F. Supp.2d 825, 833
(D. Minn. 1999); Herko v. Metropolitan Life Insurance Co., 978 F. Supp. 141, 142 n.1
Turning to the substance of the parties’ arguments, the Qwest Defendants insist that the
arbitration clause as drafted is fully enforceable under recent Supreme Court precedents.
Relying on the decisions in AT&T Mobility, LLC. v. Concepcion,
(2011) and Stolt-Nielsen S.A. v. AnimalFeeds International Corp.,
U.S. , 131 S.Ct. 1740
U.S. , 130 S.Ct. 1758
(2010), Qwest maintains that consumer plaintiffs cannot invalidate arbitration agreements that
preclude class actions by raising state law unconscionability arguments, and cannot force an
opposing party to arbitrate claims on a class basis unless the parties expressly agreed to
incorporate class procedures in the arbitration provision itself. Defendants assert that Plaintiffs
freely entered into a binding contract after receiving legally sufficient notice of the terms of the
Subscriber Agreement, and cannot now avoid their contractual obligations by suggesting the
arbitration clause is unconscionable because of the procedural and substantive ramifications of
the arbitration process.
In summary, Plaintiffs raise various arguments in opposition to the Renewed Motion to
Compel Arbitration. Plaintiffs insist that the agreement to arbitrate is unenforceable because the
Subscriber Agreement containing the arbitration provision was never actually presented to
customers. Plaintiffs also argue that the dispute resolution provision is illusory to the extent that
Qwest reserved to itself the unfettered right to amend the arbitration provision. Plaintiffs argue
Should the district judge reach a different conclusion as to the applicability of 28 U.S.C.
§ 636(b)(1)(A), my decision may be reviewed de novo pursuant to Fed. R. Civ. R. 72(b)(3).
that the dispute resolution provision is both procedurally and substantively unconscionable, and,
therefore, unenforceable. Finally, Plaintiffs assert that Defendants waived their right to compel
arbitration by filing motions to dismiss in this action.
The “liberal federal policy favoring arbitration” is well-recognized. Moses H. Cone
Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (2008), superseded by statute
on other grounds by 9 U.S.C. § 16(b)(1). As arbitration typically is a matter of contract, see
Rent-A-Center, West, Inc. v. Jackson,
U.S. , 130 S.Ct. 2772, 2776 (2010), in deciding
whether there is an enforceable agreement to arbitrate, “courts generally . . . should apply
ordinary state-law principles that govern the formation of contracts.” First Options of Chicago,
Inc. v. Kaplan, 514 U.S. 938, 944 (1995). The court’s application of state law principles must
also give “due regard . . . to the federal policy favoring arbitration.” Volt Information Sciences,
Inc. v. Board of Trustees, 489 U.S. 468, 475-76 (1989). See also J.A. Walker Co., Inc. v.
Cambria Corp., 159 P.3d 126, 128 (Colo. 2007) (“Colorado law favors the resolution of disputes
through arbitration.”). However, the Federal Arbitration Act provides that arbitration
agreements may be unenforceable “upon such grounds as exist at law or in equity for the
revocation of any contract.” See 9 U.S.C. § 2. Grounds for invalidating an arbitration agreement
would include “generally applicable contract defenses, such as fraud, duress, or
unconscionability.” Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 686-87 (1996). Thus,
a court may refuse to enforce an arbitration agreement where the non-moving party presents
“well supported claims that the agreement to arbitrate resulted from the sort of fraud or
overwhelming economic power that would provide grounds ‘for the revocation of any contract.’”
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 627 (1985) (but noting
that “absent such compelling considerations, the [FAA] itself provides no basis for . . . skewing
the otherwise hospitable inquiry into arbitrability”).
Recent Supreme Court decisions have considered the scope and enforceability of
arbitration provisions in commercial and consumer contracts. In Stolt-Nielsen S.A. v.
AnimalFeeds International Corp.,
U.S. , 130 S.Ct. at 1773, the Supreme Court re-affirmed
that “arbitration ‘is a matter of consent, not coercion’” and that “private agreements to arbitrate
are enforced according to their terms.” Given that parties are “generally free to structure their
arbitration agreements as they see fit,” the Supreme Court concluded that under the FAA, a party
cannot be compelled to submit to class arbitration unless “there is a contractual basis for
concluding that the party agreed to do so.” Id. at 1775 (emphasis in original). Less than two
months later, in Granite Rock Company v. International Brotherhood of Teamsters,
130 S.Ct. 2847, 2859 (2010), the Supreme Court acknowledged that the presumption favoring
arbitration in the FAA “reflects, and derives its legitimacy from, a judicial conclusion that
arbitration of a particular dispute is what the parties intended because their express agreement to
arbitrate was validly formed . . .and is legally enforceable.”
Last year, the Supreme Court again addressed the enforceability of arbitration provisions
with its decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. at 1740. In that case, the
Ninth Circuit had held that a consumer arbitration clause was unconscionable because the
provision disallowed classwide arbitration proceedings. Under California law, a court may
decline to enforce any contract found “to be unconscionable at the time it was made” or may
“limit the application of any unconscionable clause.” Id. at 1746. In reversing the Ninth Circuit
and finding that California law was preempted by the Federal Arbitration Act, the Supreme
Court observed that
The “principle purpose” of the FAA is to “ensur[e] that private arbitration
agreements are enforced according to their terms. This purpose is readily
apparent from the FAA’s text. . . . In light of these provisions, we have held that
parties may agree to limit the issues subject to arbitration, to arbitrate according
to specific rules, and to limit with whom a party will arbitrate its disputes.
The point of affording parties discretion in designing arbitration processes is to
allow for efficient, streamlined procedures tailored to the type of dispute.
Id. at 1749 (emphasis in original) (internal citations omitted). From this essential premise, the
Supreme Court concluded that “[r]equiring the availability of classwide arbitration interferes
with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”
Id. at 1748. The Supreme Court acknowledged the economic reality that lawyers would have
“little incentive . . . to arbitrate on behalf of individuals when they may do so for a class and reap
far higher fees in the process.” Id. at 1750. However, the Court also recognized that class-wide
arbitration would sacrifice the informality of arbitration and inevitably make “the process
slower, more costly, and more likely to generate procedural morass than final judgment.” Id. at
The Factual Record
Although the parties understandably have differing views as to the appropriate legal
analysis, the underlying facts are largely undisputed.
In December 2005, following the deregulation of the high speed internet services
industry, Qwest sent letters to all of its internet subscribers explaining that their service would
henceforth be governed by a Subscriber Agreement. This letter explained that existing
customers who made no changes to their service would become subject to the new Subscriber
Agreement on November 16, 2006. Customers who made any changes to their service, such as
upgrading to high speed internet, would be governed by the Subscriber Agreement at the time
those changes were made. The December 2005 letter advised customers that with transfer of
their service to the new Subscriber Agreement, “Qwest will assume you have accepted these
terms unless you contact Qwest within 30 days of your transfer date.” Customers also were told
that “more information on Qwest High-Speed Internet service terms and conditions” could be
found “at www.qwest.com/legal.” The Qwest Defendants insist that “[a] customer who did not
want to be governed by the Subscriber Agreement was allowed to cancel their service without
penalty.” See Affidavit of Travis Leo in Support of Defendants’ Motion to Compel Arbitration
(doc. #27), at ¶8 and Exhibit A thereto.
The Subscriber Agreement informs subscribers that
BY ENROLLING IN, ACTIVATING, USING OR PAYING FOR THE
SERVICE AND/OR EQUIPMENT, FAILING TO RETURN THE EQUIPMENT
AND CANCEL SERVICE WITHIN 30 DAYS AFTER ORDERING SERVICE
OR EQUIPMENT, OR INSTALLING THE EQUIPMENT YOU AFFIRM THAT
YOU UNDERSTAND AND AGREE TO THE TERMS AND CONDITIONS IN
THIS AGREEMENT, EVEN IF YOU CHOOSE NOT TO READ IT.
FURTHER, YOU AFFIRM THAT YOU UNDERSTAND AND AGREE TO
THE PRICES, CHARGES, AND OTHER TERMS AND CONDITIONS
QUOTED TO YOU DURING THE ORDERING PROCESS AND ON
www.qwest.com/legal/highspeedinternetsubscribers agreement/ and
www.qwest.com/legal, ALL OF WHICH ARE INCORPORATED BY
Id. at ¶16 and Exhibit B thereto.
The Subscriber Agreement expressly provides that all disputes other than those related
solely to collection of debt shall be resolved through individual arbitration or proceedings in
small claims court:
17. Dispute Resolution and Arbitration; Governing Law. PLEASE READ
THIS SECTION CAREFULLY. IT AFFECTS RIGHTS THAT YOU MAY
OTHERWISE HAVE. IT PROVIDES FOR RESOLUTION OF DISPUTES
THROUGH MANDATORY ARBITRATION WITH A FAIR HEARING
BEFORE A NEUTRAL ARBITRATOR INSTEAD OF IN A COURT BY A
JUDGE OR JURY OR THROUGH A CLASS ACTION.
(a) Arbitration Terms. You agree that any dispute or claim arising out of or
relating to the Services, Equipment, Software, or this Agreement (whether based
in contract, tort, statute, fraud, misrepresentation or any other legal theory) will be
resolved by binding arbitration. The sole exceptions to arbitration are that either
party may pursue claims: (1) in small claims court that are within the scope of its
jurisdiction, provided the matter remains in such court and advances only
individual (non-class, non-representative, non-consolidated) claims; and (2) in
court if they relate solely to the collection of any debts you owe to Qwest.
(i) Arbitration Procedures. . . . The arbitration shall be conducted by the
American Arbitration Association (“AAA”). The Federal Arbitration Act,
9 U.S.C. Sections 1-16, not state law, shall govern the arbitration of the
dispute. Colorado state law, without regard to choice of law principles,
shall otherwise govern and apply to any and all claims or disputes . . . .
Arbitration is final and binding. Any arbitration shall be confidential and
neither you nor Qwest may disclose the existence, content or results of
any arbitration, except as may be required by law or for purposes of
enforcement of the arbitration award. The arbitrator may award any relief
or damages that a court could award, except an arbitrator may not award
relief in excess of or contrary to what this Agreement provides. Judgment
on any arbitration award may be entered in any court having jurisdiction.
(ii) Costs of Arbitration. The party requesting arbitration must pay the
applicable AAA filing fee, except that if you are an individual using the
Services for household or personal use and you initiate arbitration against
Qwest: (1) you must pay one-half the arbitrator’s fee up to a maximum of
$125 if your claim does not exceed $10,000; (2) you must pay one-half the
arbitrator’s fees up to a maximum of $375 if your claim is more than
$10,000 but less than $75,000; and (3) you must pay an Administrative
Fee in accordance with the AAA’s Commercial Fee Schedule if your
claim exceeds $75,000, or if your claim is non-monetary. Except as
provided in the preceding sentence, each party shall pay its own expenses
of the arbitration, including the expense of its own counsel, witnesses, and
presentation of evidence at the arbitration.
(b) Waiver of Jury and Class Action. By this Agreement, both you and Qwest
are waiving rights to litigate claims or disputes in court (except small claims court
as set forth in paragraph (a) above). Both you and Qwest also waive the right to a
jury trial on your respective claims, and waive any right to pursue any claims on a
class or consolidated basis or in a representative capacity.
Id. (emphasis in original).
Starting in the spring of 2006, Qwest introduced a new “Price for Life” program under
which subscribers who agree to purchase high speed internet service for at least two years are
guaranteed a discounted rate for as long as they maintain their high speed internet service
without change. Subscribers who decline to make that two-year commitment are subject to
potential rate increases for their monthly service. Price for Life subscribers who terminate the
contract before the two-year period expires are required to pay a $200 early termination fee. Id.
According to the Qwest Defendants, a customer who signs up for the Price for Life
program over the telephone first speaks to a customer service representative. Once the customer
selects their internet service package, they are transferred to a voice prompt system which
explains that the customer has selected a multi-year package that is governed by the terms of the
Subscriber Agreement. The automated voice prompt reiterates that the customer has “selected a
multi-year agreement for your Qwest High-Speed Internet service,” the “terms and conditions [of
which] are located at www.qwest.com/legal.” The voice prompt also tells the subscriber that
“you can always cancel the service within 30 days without any early termination charge.” Id. at
¶¶ 17 and 18 and Exhibit C thereto.
A customer who enrolls in or upgrades their service via the internet cannot complete the
enrollment checkout process without clicking “I agree” to a box of “Terms and Conditions”
appearing on their computer monitor. The text informs the customer that the terms and
conditions of their service are set forth in the Subscriber Agreement and asks the customer to
“please review the terms, which include arbitration and limits on Qwest liability.” Later on the
same “checkout” page, the customer is told that “your Internet services and equipment are
offered under terms found at www.qwest.com legal/; click Broadband Subscriber Agreement.
Please review the terms, which include arbitration and limits on Qwest liability. If you do not
agree, call Qwest to cancel your service within 30 days.” Id. at ¶19 and Exhibit D thereto.
A customer who purchases internet service is required to install the necessary software
using a QuickConnect installation disc. Id. at ¶20 and Exhibit E thereto. When the installation
disc is loaded into a computer, a window appears on the screen stating:
Please read the Qwest High-Speed Internet (also called Qwest
Broadband) Subscriber Agreement terms, including arbitration
and limits on Qwest liability, at ww.qwest.com/legal (“Qwest
Agreement”) that govern your use and Qwest provision of the
service(s) and equipment you ordered from the list below.
Qwest High-Speed Internet service . . .
Please also read the (1) information on term and early termination
fee . . .
Id. (emphasis in original). The same window informs the customer that “[y]ou may get a paper
copy of the agreements free of charge by printing them from this page and
www.qwest.com/legal.” The customer is told that “[y]our click on the radio button labeled ‘I
accept the terms of the license agreement’ is an electronic signature and acknowledges: (1) you
agree the Qwest Agreement contains the terms under which service and equipment are offered
and provided to you, (2) you understand and agree to such terms (even if you don’t read them)
. . . .” Customers cannot complete the software installation process without accepting the terms
of the Subscriber Agreement, however, upgrading to high-speed internet service does not require
reinstallation of the software. Id.
The Qwest Defendants claim that every customer who places an order for Qwest service
receives a Welcome Letter. Id. at ¶21 and Exhibit F thereto. The Welcome letter expressly asks
the customer to “**Please review the important information enclosed and on the back of the
letter about security codes, services and terms for use.” Elsewhere, the Welcome Letter notes
that the customer’s internet “service and related products are offered under the High-Speed
Internet Subscriber Agreement terms, which are located at
www.qwest.com/legal/highspeedinternetsubscriberagreement. Please review the terms, which
include arbitration and limits on Qwest liability. If you do not agree, call Qwest to cancel your
service within 30 days.” Id. (emphasis in original).
According to Qwest, all customer orders placed over the telephone or via the internet are
entered into Qwest’s Service Order Processing Software with a universal service order code
corresponding to the service or product ordered. Qwest then employs a mechanized process to
generate a Welcome Letter conforming to the customer’s specific order. In 2006, 2007 and
2008, Qwest’s vendor, RR Donnelley Business Communications Services (“BCS”) retrieved
from a secure, internet-accessible site information concerning residential orders. BCS then
processed Welcome Letters using a template and instructions provided by Qwest, inserted those
Welcome Letters into envelopes and sent out the Welcome Letters by mail. See Affidavit of
Brian Bennett, attached as Exhibit 12 to Defendants’ Renewed Motion to Compel Arbitration.
Qwest believes, based upon established quality assurance protocols and available BCS records,
that Welcome Letters were sent to Plaintiffs Vernon, Durkin, Sandquist and Moore. See
Affidavit of Lucia Beardsley, attached as in Support of Defendants’ Motion to Compel
Arbitration (doc. #82-5).
Plaintiff Robin Vernon and her husband initially ordered internet service from Qwest in
2005 and enrolled in the Price for Life program over the internet in April 2007. Id. at ¶9. See
also Affidavit of Jesse Kohler in Support of Defendants’ Motion to Compel Arbitration (doc.
#82-1) at ¶6. The Vernons canceled that service in May 2008. One week later, Ms. Vernon
received a bill that included a $200 fee for cancellation of their internet service. During her
deposition, Ms. Vernon could not recall receiving a Welcome Letter and insisted that she never
received a written contract for her internet service. See Deposition of Robin Vernon, at 26,
marked as Exhibit 5 (doc. #132-5) to Defendants’ Renewed Motion to Compel Arbitration.
Defendants maintain that Qwest’s records show that the Vernons affirmatively accepted the
Subscriber Agreement by clicking “accept” while configuring their computer for high-speed
internet service. See Affidavit of Jesse Kohler in Support of Defendants’ Motion to Compel
Arbitration (doc. #82-1) at ¶¶ 7 and 8.
Plaintiff Durkin had been a Qwest internet customer since 2004, and in May 2007
contacted Qwest by telephone to upgrade to high-speed service. See Affidavit of Lucia
Beardsley in Support of Defendants’ Motion to Compel Arbitration (doc. #82-5) at ¶11. See also
Affidavit of Jesse Kohler in Support of Defendants’ Motion to Compel Arbitration (doc. #82-1)
at ¶4. Mr. Durkin insists that he did not receive a written contract in 2007 or at any time
thereafter. Mr. Durkin testified at his deposition that he could not recall receiving a Welcome
Letter, but conceded that “if I received it, I wouldn’t have gone and looked at the subscriber
agreement anyway.” See Deposition of Rory P. Durkin, at 39, attached as Exhibit 2 (doc. #1322) to Defendants’ Renewed Motion to Compel Arbitration. Plaintiff Durkin also acknowledged
that he received the installation disc which he used to configure his computer. Id. at 23. See
also Affidavit of Jesse Kohler in Support of Defendants’ Motion to Compel Arbitration (doc.
#82-1) at ¶¶ 7 and 8. Asked if he affirmatively accepted the terms and conditions of the
Subscriber Agreement, Mr. Durkin testified that he “got the service and if that’s the only way
that I can get the service, then I must have clicked it.” See Deposition of Rory P. Durkin, at 45,
attached as Exhibit 2 (doc. #132-2) to Defendants’ Renewed Motion to Compel Arbitration.
Although Mr. Durkin acknowledged that he was familiar with “click to accept” agreements, he
also said it was not his normal practice to review a contract before “click[ing] to accept.” As
Durkin freely conceded, “Nobody does. It’s ridiculous to.” Id. at 43 and 46. Mr. Durkin also
testified that he “probably” did not print out the terms of the Subscriber Agreement while in the
process of configuring his computer. Id. at 89. When Mr. Durkin attempted to cancel his
internet service in February 2008, he was told he would have to pay a $200 termination fee.
Plaintiff Sandquist signed up for Qwest internet service over the telephone in July 2007.
See Affidavit of Lucia Beardsley in Support of Defendants’ Motion to Compel Arbitration (doc.
#82-5) at ¶14. See also Affidavit of Jesse Kohler in Support of Defendants’ Motion to Compel
Arbitration (doc. #82-1) at ¶4. Mr. Sandquist denies that he was transferred to a voice prompt
system, insisting instead that he placed his order with a live operator. Although Mr. Sandquist
does not specifically recall seeing a Welcome Letter, he could not definitively say whether or not
he received such a letter in the mail. See Deposition of Bryan S. Sandquist, at 20, attached as
Exhibit 4 (doc. #132-4) to Defendants’ Renewed Motion to Compel Arbitration. Mr. Sandquist
admitted receiving an installation disc in the mail, which he used to install the high speed
internet software on his computer. Id. at 11. See also Affidavit of Jesse Kohler in Support of
Defendants’ Motion to Compel Arbitration (doc. #82-1) at ¶¶ 7 and 8. Mr. Sandquist testified
that he understood that by hitting the “click to accept” button, he was entering into an agreement.
See Deposition of Bryan S. Sandquist, at 19, marked as Exhibit 4 (doc. #132-4) to Defendants’
Renewed Motion to Compel Arbitration. After Plaintiff Sandquist cancelled his internet service
in December 2008, he received a bill that included a $200 termination charge.
Plaintiff Moore changed his Qwest high speed internet service in June 2006 with a
telephone call. See Affidavit of Lucia Beardsley in Support of Defendants’ Motion to Compel
Arbitration (doc. #82-5) at ¶16. See also Affidavit of Jesse Kohler in Support of Defendants’
Motion to Compel Arbitration (doc. #82-1) at ¶4. Mr. Moore testified that he understood that by
“clicking to accept,” he was accepting the terms and conditions associated with that transaction.
See Deposition of Theodore Moore, at 103 and 104 attached as Exhibit 3 (doc. #132-3) to
Defendants’ Renewed Motion to Compel Arbitration. After Mr. Moore cancelled his internet
service in May or June of 2009, he received a final bill that included an early termination penalty
of $200. Mr. Moore could not recall receiving a Welcome Letter, but insists, like the other
Plaintiffs, that he would not have knowingly agreed to a contract that included a two-year
commitment or an early termination penalty.
Whether Plaintiffs Agreed to the Arbitration Clause?
Plaintiffs contend that they were never presented with the Subscriber Agreement and its
dispute resolution provision and, therefore, never assented to those terms. “[A] party cannot be
required to submit to arbitration any dispute which he has not agreed so to submit.” AT&T
Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986) (quoting
Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)). It necessarily
follows that “if there was never an agreement to arbitrate, there is no authority to require a party
to submit to arbitration.” National Railroad Passenger Corp. v. Boston & Maine Corp., 850
F.2d 756, 761 (D.C. Cir. 1988).
As the party seeking to compel arbitration, Qwest must come forward with “evidence
sufficient to demonstrate an enforceable arbitration agreement.” See Smart-Text Corp. v.
Interland, Inc., 296 F. Supp. 2d 1257, 1263 (D. Kan. 2003). The Qwest Defendants satisfied by
presenting evidence sufficient to demonstrate the existence of an arbitration agreement. Cf.
Hines v. Overstock.com, Inc., 380 Fed. Appx. 22, 24 (2d Cir. 2010) (to sustain its prima facie
burden, the party seeking to compel arbitration must simply show that an arbitration agreement
existed, not that the argument would be enforceable). The burden thus shifts to Plaintiffs “to
raise a genuine issue of material fact as to the making of the agreement, using evidence
comparable to that identified in Fed. R. Civ. P. 56.” See Grosvenor v. Qwest Communications
International, Inc., 2010 WL 3906253, at *5 (D. Colo. 2010). I should compel arbitration if
there is “‘no genuine issue of fact concerning the formation of the agreement’ to arbitration.”
Kirleis v. Dicki, McCamey & Chilcote, P.C., 560 F.3d 156, 159 (3rd Cir. 2099). “The district
court, when considering a motion to compel arbitration which is opposed on the ground that no
agreement to arbitrate had been made by the parties, should give to the opposing party the
benefit of all reasonable doubts and inferences that may arise.” Three Valleys Municipal Water
District v. E.F. Hutton & Co., 925 F.2d 1136, 1141 (9th Cir. 1991) (quoting Par-Knit Mills, Inc.
v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3rd Cir. 1980).
“Generally, courts ‘should apply ordinary state-law principles that govern the formation
of contracts’ to determine whether a party has agreed to arbitrate a dispute.’” Hardin v. First
Cash Financial Services, Inc., 465 F.3d 470, 175 (10th Cir. 2006). In determining whether a
contract existed between the parties, “evidence of the parties’ conduct, their oral statements and
their writings, and other evidence illuminating the circumstances surrounding the making of an
agreement are admissible to clarify the intent and purpose of the parties.” I.M.A., Inc. v. Rocky
Mountain Airways, Inc., 713 P.2d 882, 888 (Colo.1986). “The formation of a contract requires a
bargain in which there is a manifestation of mutual assent to the exchange and a consideration.”
Pierce v. St. Vrain Valley School District RE-1J, 981 P.2d 600, 603 (Colo. 1999). While assent
may be implied from the totality of circumstances and the acts of the parties, it must appear in
some form. Mumm v. Adam, 307 P.2d 797, 801 (Colo. 1957). An party may demonstrate assent
to the terms of an offer either by promising to perform or by actually performing. Industrial
Products International, Inc. v. Emo Trans, Inc., 962 P.2d 983, 988 (Colo. App. 1997). An
objective manifestation of assent is not rebutted by that same party’s uncommunicated,
subjective intent. Avemco Insurance Co. v. Northern Colorado Air Charter, Inc., 38 P.3d 555,
559 (Colo. 2002).
While general contract formation principles and more specifically the requirement of
mutual assent have not changed with the emergence of e-commerce, see, e.g, Van Tasssell v.
United Marketing Group, LLC, 795 F. Supp. 2d 770, 789 (N.D. Ill. 2011), courts are being asked
to apply those common law principles to ever-evolving transactional settings. Consumers may
be presented with a “clickwrap” or “click-through” agreement in which the internet purchaser is
required to affirmatively click an “I agree” box after being presented with a list of terms and
conditions of use. See, e.g., Kwan v. Clearwire Corp., 2012 WL 32380, at *7 (W.D. Wash.
Alternatively, consumers may be presented with a “browsewrap” agreement, in which
terms and conditions of use are posted on a website accessible through a hyerlink at the bottom
of the subscriber’s computer screen. Id. Unlike the “clickwrap” agreement which requires a
manifestation of assent through affirmative action, the consumer in a “browsewrap” agreement
conveys assent simply by using the product. Under either scenario, however, the threshold issue
is the same: did the consumer have reasonable notice, either actual or constructive, of the terms
of the putative agreement and did the consumer manifest assent to those terms. Cf. One Beacon
Insurance Co. v. Crowley Marine Services, Inc., 648 F.3d 258, 268-69 (5th Cir. 2011).
Courts also have been confronted with hybrid arrangements, in which the customer must
take affirmative action – pressing a “click” button – but, like a browsewrap agreement, the terms
being accepted do not appear on the same screen as the accept button, but are available with the
use of hyperlink. Under this hybrid arrangement, the customer is told that consequences will
necessarily flow from his assenting click and also is placed on notice of how or where to obtain a
full understanding of those consequences. See, e.g., Fteja v. Facebook, Inc., 2012 WL 183896,
at *10 (S.D.N.Y. 2012); Swift v. Zynga Game Network, Inc., 2011 WL 3419499, at *7 (N.D. Cal.
2011) (finding formation of a valid contract where the software in question involved a “modified
clickwrap” process in which the terms of service were not visible on the page but were
accessible via a hyperlink).
Plaintiffs maintain that the Subscriber Agreement and arbitration clause were never
“presented” to them during the ordering, welcoming and installation process. Plaintiffs further
contend that proper “presentation” or “delivery” of the Subscriber Agreement and arbitration
clause required that these provisions “appear on the same scroll down or page as the ‘I Accept’
and the ‘I Do Not Accept’ buttons” during the installation process. In advancing this argument,
Plaintiffs’ Response relies heavily on Judge Miller’s September 30, 2010 Order in Grosvenor v.
Qwest Communications International, Inc., 2010 WL 3906253 (D. Colo. 2010), which found
there were genuine issues of material fact as to the circumstances under which Mr. Grosvenor
agreed to the Subscriber Agreement. After further discovery, the parties in Grosvenor filed new
motions for summary judgment addressing whether Mr. Grosvenor and Qwest had a binding and
enforceable agreement to arbitrate. Judge Krieger2 decided that issue with an Opinion and Order
February 23, 2012. In that Order, Judge Krieger concluded that Mr. Grosvenor
objectively manifested his assent to contract terms that were clearly disclosed in the Welcome
Letter sent to subscribers. Judge Krieger’s analysis of that issue is equally applicable to the facts
in this case.
Where a party seeks to enforce terms or conditions incorporated by reference in a
contract, “it must be clear that the parties to the agreement had knowledge of and assented to the
incorporated terms.” Taubman Cherry Creek Shopping Center, LLC v. Neiman-Marcus Group,
Inc., 251 P.3d 1091, 1095 (Colo. App. 2010). However, as noted previously, evidence of assent
may be gleaned from the totality of the circumstances. Under the particular facts of this case, I
conclude that Plaintiff had reasonable notice of the Subscriber Agreement and the arbitration
Qwest customers were made aware of the Subscriber Agreement through multiple
communications. The December 2005 letter sent to existing Qwest customers explained that
high speed internet services would henceforth be governed by a Subscriber Agreement that could
be found at “www.qwest.com/legal.” The same letter told customers they could cancel their
With Judge Miller taking inactive senior judge status, Mr. Grosvenor’s lawsuit was
reassigned to Judge Krieger on August 2, 2011.
service without penalty if they did not wish to accept the terms and conditions set forth in that
Agreement. The record indicates that Plaintiffs Vernon and Durkin were Qwest customers as of
December 2005. Customers who signed up for the Price for Life program, either by telephone or
by internet, also were advised that they would be subject to the Subscriber Agreement that could
be found at “www.qwest.com/legal.” Customers who purchase internet services through Qwest
must install software. The installation disc specifically informs subscribers that they should read
the Subscriber Agreement accessible at “www.qwest.com/legal.” The same window on the
installation program highlights for the customer the fact that the terms and conditions of the
service “includ[e] arbitration and limits on Qwest liability.” Each of the Plaintiffs concedes that
they received and used the installation disc and affirmatively clicked the “I accept” button.
Finally, Qwest has presented evidence indicating that a Welcome Letter was sent to each
Plaintiff. That Welcome Letter, once again, urged the customer to review the terms and
conditions of their service set forth in the Subscriber Agreement “located at
www.qwest.com/legal.” Bischoff v. DirecTV, Inc., 180 F. Supp. 2d 1097, 1105 (C.D. Cal. 2002)
(holding that an arbitration agreement was enforceable even though the customer received the
contract after purchasing the necessary equipment and after the satellite programming had been
Defendants have offered evidence describing their routine practice of mailing Welcome
Letters to customers. That evidence is sufficient to establish a prima facie showing that
Plaintiffs were made aware of the Subscriber Agreement. Cf. Schwartz v. Comcast Corp., 256
Fed. Appx. 515, 518-19 (3rd Cir. 2007) (holding that evidence of defendant’s standard policy of
providing a “welcome packet” to its subscribers was relevant to show that the plaintiff did in fact
receive that material). See also Campbell v. IBM Corp., 867 P.2d 77, 80 (Colo. App. 1993)
(“There is a rebuttable presumption that a letter which was properly addressed, stamped and
mailed was duly delivered to the addressee.”).
While the Subscriber Agreement and arbitration clause may not have been physically
presented to each Plaintiff3 and did not automatically appear on the subscriber’s computer screen
during the software installation process, those terms and conditions were not hidden or difficult
to find. Cf. Schwartz v. Comcast Corp., 256 Fed. Appx. at 520 (holding that the parties were
bound by an enforceable agreement where the Subscriber Agreement was posted on defendant’s
website at all times and, therefore, the terms of that Agreement were available to the plaintiff);
Burcham v. Expedia, Inc., 2009 WL 586513, at *2 (E.D. Mo. 2009) (“[a] customer on notice of
contract terms available on the internet is bound by those terms”); Bar-Ayal v. Time Warner
Cable Inc., 2006 WL 2990032, at *9-11 (S.D.N.Y. 2006) (while plaintiff may have been
required to scroll through 38 screens to review the Customer Agreement on defendant’s website,
held that the Agreement “was not hidden or hard to find”). Even if Plaintiffs had only received
the Welcome Letter, at that point they were fully capable of finding the Subscriber Agreement
and arbitration provision on the Qwest website. See Wildman v. Pacific Coast Independent
Brokerage, Inc., 2001 WL 881738, at *1-2 (9th Cir. 2001) (district court did not err in compelling
arbitration where non-movant failed to read documents containing arbitration provisions and had
reasonable opportunity to discover the terms of the contract); Elsken v. Network Multi-Family
During the time frame, June of 2006, when Plaintiff Moore changed his Qwest high
speed internet service, Qwest included the Subscriber Agreement with the Welcome Letter sent
to the customer. See Affidavit of Lucia Beardsley (doc. #82-5) at ¶ 18, attached as Exhibit 5 to
Defendants’ Reply in Support of Their Motion to Compel Arbitration.
Security Corp., 49 F.3d 1470, 1473-74 (10th Cir. 1995) (holding that plaintiff remained bound by
provisions in a Services Agreement even though she did not read the contract).
While Plaintiffs Durkin, Sandquist and Vernon could not recall whether or not they
received the Welcome Letter, that assertion is not sufficient to defeat the Qwest Defendants’
motion. Cf. Blau v. AT&T Mobility, 2012 WL 10546, at *4 (N.D. Cal. 2012) (“”If a party could
get out of a contract by arguing that he did not recall making it, contracts wold be meaningless.
It is not even relevant if Plaintiffs did not read the agreements before signing them.”). See also
Spivey v. Adaptive Marketing LLC, 622 F.3d 816, 820 (7th Cir. 2010) (holding that plaintiff’s
equivocal deposition testimony when asked whether he denied receiving defendant’s welcome
kit supported a presumption that the welcome kit actually was received); Federal Kemper Life
Assurance Co. v. Ellis, 28 F.3d 1033, 1040 (10th Cir. 1994) (held that defendant’s simple denial
of receipt did not create an issue for the jury as to whether notice was mailed in the face of
plaintiff’s evidence of standard mailing procedures).
Colorado law recognizes that “one generally cannot avoid contractual obligations by
claiming that he or she did not read the agreement.” Loden v. Drake, 881 P.2d 467, 469 (Colo.
App. 1994). See also Barciak v. United of Omaha Life Insurance Co., 777 F. Supp. 839, 843 (D.
Colo. 1991) (presumption that one who signs contract read and understood each of its terms).
Plaintiffs cannot demonstrate a lack of mutual assent simply by claiming that they “cannot
recall” seeing or reviewing the Subscriber Agreement at the time they accepted the benefits of
the Price for Life program. While the Qwest Defendants undoubtedly could provide more “user
friendly” access to the Subscriber Agreement, the undisputed facts in this case demonstrate that
Plaintiffs had reasonable notice and access to the terms and conditions of the arbitration clause.
Cf. One Beacon Insurance Co. v. Crowley Marine Services, Inc., 648 F.3d at 263 and 268-70
(holding that a party had reasonable notice of an arbitration clause, even though reviewing the
pertinent terms and conditions required the party to access a website and then take several
successive steps to pull up those terms and conditions).
Like Judge Krieger’s Opinion and Order in Grosvenor, I also find that Plaintiffs Vernon,
Durkin, Sandquist and Moore manifested their assent to the terms and conditions of the
Subscriber Agreement and the arbitration provision therein. It is undisputed that each of the
Plaintiffs continued to use the high speed internet service for several months after installing the
necessary software and receiving a Welcome Letter. Cf. Williams v. Metropcs Wireless, 2010
WL 1645099, at *6 (S.D. Fla. 2010) (holding that the plaintiff was bound by the terms and
conditions of an arbitration provision where she had access to her service plan and thereafter
continued to pay her bills); Burcham v. Expedia, Inc., 2009 WL 586513, at *3 (E.D. Mo. 2009)
(“It is standard contract doctrine that when a benefit is offered subject to stated conditions, and
the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the
taking constitutes an acceptance of the terms, which accordingly become binding on the
offeree.”); Enderlin v. XM Satellite Radio Holdings, Inc., 2008 WL 830262, at *6 (E.D. Ark.
2008) (holding that plaintiff had assented to an arbitration clause where he had an opportunity to
read those terms and conditions on defendant’s website and then continued to receive services
from the defendant). Based upon the factual record presented by the parties, I find Plaintiffs
voluntarily accepted the Subscriber Agreement and the arbitration provision that the Qwest
Defendants seek to enforce with the instant motion.
Whether the Arbitration Clause is Illusory?
Even assuming they accepted the arbitration clause, Plaintiffs argue that denial of the
Renewed Motion to Compel Arbitration is mandated by the Tenth Circuit’s decision in Dumais
v. American Golf Corp, 299 F.3d 1216, 1219 (10th Cir. 2002), which held that “an arbitration
agreement allowing one party the unfettered right to alter [an] arbitration agreement’s existence
or its scope is illusory.” Plaintiffs’ most recent Designation of Supplemental Authority further
suggests that I should be guided by that portion Judge Krieger’s recent Order in Grosvenor,
which found that “Qwest retained an unfettered ability to modify the existence, terms and scope
of the arbitration clause, [thus rendering the provision] illusory and unenforceable.” This court
acknowledges, as Judge Krieger did in Grosvenor, an obligation to follow controlling Tenth
Circuit precedent. However, the doctrine of stare decisis does not override my responsibility to
independently review and apply judicial precedents in light of the particular facts of this case.
Cf. Citizens United v. Federal Election Commission,
U.S. , 130 S.Ct. 876, 920 (2010)
(noting that “stare decisis is neither an ‘inexorable command’ nor ‘a mechanical formula of
adherence to the latest decision’”).
Section 4 of the Subscriber Agreement states, in pertinent part, that subject to applicable
rules and laws, Qwest may
(a) at any time, effective upon posting to www.qwest.com/legal or any written
notice to you, including e-mail: (i) stop offering the Service and/or rental
Equipment, (ii) modify the Service and/or any of the terms and conditions of this
Agreement, and/or (iii) reduce MRCs and NRCs. Please check such Web site and
your e-mail regularly for changes.
(b) upon 30 days notice to you: (i) increase MRCs and/or NRCs or (ii) change this
Agreement or the Service in a way that directly results in a material and adverse
economic impact to you. Qwest may reduce the foregoing notice period where
commercially reasonable and/or if such increase is based upon Regulatory
Your continued use of the Service and/or Equipment constitutes acceptance of
those changes. You must immediately stop using the Service and Equipment and
cancel your Service if you do not agree to the changes. Any changes or other
terms you make to this Agreement or propose in any other documents, written or
electronic, are void.
See Exhibit A (doc. #138-2) attached to Plaintiffs’ Response to Defendants’ Motion to Compel
Arbitration. Plaintiffs construe the foregoing provision as establishing “no restrictions, temporal
or otherwise” on Qwest’s ability “to change the existence, scope or terms of the Dispute
Resolution.” See Plaintiffs’ Response to Defendants’ Motion to Compel Arbitration, at 10-11.
Defendants, on the other hand, suggest that the Subscriber Agreement does not give Qwest an
“unfettered right” to change the scope and existence of the arbitration clause because such a
change invariably would have a material and adverse economic impact on the subscribers, thus
requiring 30 days advance notice. Qwest also insists that its rights under Section 4 have no
practical effect on the named Plaintiffs as they terminated their high speed internet service and,
therefore, the Qwest Defendants were bound by the arbitration provision in effect as of the date
the service was terminated.
In determining whether the arbitration provision in the Subscriber Agreement is illusory,
my analysis must start with a consideration of applicable state law principles. Cf. White v. Four
B Corp., 2011 WL 4688843, at *2 (D. Kan. 2011). Because a contract requires a bargained-for
benefit or detriment, “words of promise which by their terms make performance entirely optional
with the ‘promisor’” cannot serve as consideration for an enforceable agreement, and any
purported “agreement” would be illusory. Stated differently, an illusory contract is said to lack
mutuality of obligation. But see DeFeyter v. Riley, 606 P.2d 453, 454 (Colo. App. 1979)
(holding that “[a] promise exchanged for a promise imposes mutual obligations and is sufficient
consideration to render the contract enforceable”). At the heart of the mutuality requirement is
the notion of fundamental fairness.
This court, once again, must look to Colorado common law principles for guidance in
applying the doctrine of mutuality.4
In the context of arbitration agreements, states are split on what the term
“mutuality” means. Most states (e.g., Colorado, Illinois,5 New York6) consider an
arbitration clause to be mutual if the agreement as a whole evidences an exchange
of promises, whatever the promises are. Other states . . . consider an arbitration
clause to be mutual only when each party agrees that all of its claims against the
other shall be arbitrable. That is to say, the arbitration must be bilateral. If one
party preserves the right not to arbitrate certain claims, then it is not bilateral and
there is no mutuality.
Veliz v. Cintas Corp., 2004 WL 2452851, at *12 (N.D. Cal. 2004), order modified on
reconsideration on other grounds by 2005 WL 1048699 (N.D. Cal. 2005). In Colorado, “every
contractual obligation need not be mutual as long as each party has provided some consideration
to the contract.” Rains v. Foundation Health Systems Life & Health, 23 P.3d 1249, 1255 (Colo.
App. 2001). Thus in Rains, where the defendant agreed to provide medical insurance coverage
and the plaintiff agreed to pay premiums for that coverage, the Colorado Court of Appeals
suggested that an arbitration provision was not unfair or unenforceable “simply because it does
It is worth noting that in advancing their argument that the arbitration provision is
illusory, Plaintiffs’ Response brief does not cite to a single Colorado state court decision.
See, e.g., Molton, Allen & Williams, LLC v. Continental Casualty Insurance Co., 2010
WL 780353, at *5-6 (N.D. Ill. 2010) (noting that under controlling Illinois law, an arbitration
provision that compelled one party to submit all disputes to arbitration while allowing the other
party the choice of pursuing arbitration is not invalid for lack of mutuality of remedy or
obligation where the broader contract was supported by consideration).
See, e.g., Sablosky v. Edward S. Gordon Co., 535 N.E.2d 643, 646 (N.Y. Ct. App.1989)
(“Mutuality of remedy is not required in arbitration contracts. If there is consideration for the
entire agreement that is sufficient; the consideration supports the arbitration option, as it does
every other obligation in the agreement.”)
not require defendant to arbitrate.” Id. See also Bonanno v. Quizno’s Franchise Co., LLC, 2009
WL 1068744, at *21 (D. Colo. 2009) (noting Colorado does not require bilaterality for a contract
to be enforceable and therefore a class action bar that worked solely or primarily to defendant’s
advantage did not render that provision substantively unfair).
In this case, I find that Plaintiffs and Qwest each made promises under the terms of the
Subscriber Agreement. Under the Price for Life program, Defendants promised to provide the
Plaintiffs with high speed internet service at a guaranteed discounted rate, in return for Plaintiffs’
promise to make required monthly payments and not change their internet service for at least two
years. These mutual promises were sufficient under Colorado law to make the Subscriber
Agreement enforceable. See City of Colorado Springs v. Mountain View Electric Association,
Inc., 925 P.2d 1378, 1383 (Colo. 1995) (“A promise exchanged for a promise imposes mutual
obligations and is sufficient consideration to render a contract enforceable.”). Cf. Teter v. Glass
Onion, Inc., 723 F. Supp. 2d 1138, 1159 (W.D. Mo. 2010) (“Consideration is found where both
parties have obligated themselves by mutual promises that impose some legal duty or liability on
each promisor.”). Under Colorado law, the arbitration provision is enforceable even if that
particular clause lacks mutuality, and therefore the arbitration provision is not illusory.
While Colorado law disposes of Plaintiffs’ “mutuality” argument, I would be remiss in
not addressing Plaintiffs’ reliance on the Tenth Circuit’s decision in Dumais. For the following
reasons, I find that Dumais is distinguishable.
The district court in Dumais held that the arbitration agreement in that case was not
enforceable because it did not apply equally to both the plaintiff-employee and the defendantemployer. Dumais v. American Golf Corp., 150 F. Supp. 2d at 193. In support of that holding,
the district court relied exclusively on Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d
1126 (7th Cir. 1997). Upon closer examination, however, it is clear that the Seventh Circuit
reached its decision in Gibson by applying Indiana law and took pains to acknowledge that “we
need look no further than the state law of contracts that generally governs arbitration
agreements.” Id. at 1130. Two of the three appellate decisions cited with favor by the Tenth
Circuit in Dumais, 299 F.3d at 1219, explicitly turn on an application of the common law of the
forum state. See Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d 306, 315 (6th Cir. 2000)
(applying Kentucky and Tennessee common law); Gibson v. Neighborhood Health Clinics, Inc.,
121 F.3d at 1130 (applying Indiana common law). Obviously, the trial and appellate courts in
Dumais had no reason to consider Colorado’s interpretation of the mutuality requirement in
deciding a case involving parties in the District of New Mexico.
I take further guidance from the Tenth Circuit’s post-Dumais decision in Hardin v. First
Cash Financial Services, Inc., 465 F.3d at 470. In that case, the defendant moved to compel
arbitration after a former employee sued her employer for sex discrimination. The arbitration
provision in question gave the employer the unilateral right to terminate the parties’ agreement
“and/or to modify or discontinue the [dispute resolution program].” Id. at 478. The employer’s
right, however, was subject to a ten-day notice requirement. The defendant in Hardin also was
precluded from amending the agreement if it had actual notice of a potential dispute or claim, or
as to any claims that arose before the date of termination or amendment of the agreement or
dispute resolution program.7 The Plaintiff in Hardin argued that the dispute resolution program
The court has not been provided with any evidence suggesting that Qwest ever
attempted to modify the arbitration provision prior to Plaintiffs’ initiating the instant lawsuit.
was illusory by virtue of the unilateral discretion accorded the employer.
The Tenth Circuit began its analysis in Hardin by acknowledging that it should “apply
ordinary state law principles that govern the formation of contracts.” Id. at 475. The appellate
court then looked to the law of the forum state, Oklahoma, in concluding that “an arbitration
agreement allowing a defendant company the unilateral right to modify or terminate the
agreement is not illusory so long as reasonable restrictions are placed on this right.” Id. at 479.
The Tenth Circuit also distinguished its earlier decision in Dumais by noting that the defendant
in Hardin did not have an “unfettered right” to modify the arbitration provision by virtue of the
notice provisions. Cf. Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 174374 (5th Cir. 2004) (declining to follow Dumais where the contracts in question gave the
defendant companies the right to change the terms upon notice to the customer of the proposed
changes); Hancock v. American Telephone and Telegraph Company, Inc., 2011 WL 3626785, at
*6-7 (W.D. Okl. 2011) (rejected a challenge to an arbitration provision as illusory after noting
that the service provider was required to give customers advance notice of any material changes
and that customers could reject any proposed change by terminating their service); Lumuenemo
v. Citigroup, Inc., 2009 WL 371901, at *5 (D. Colo. 2009) (holding that an arbitration agreement
was not illusory where it gave the drafting party the right to modify the agreement under certain
In this case, Section 4 of the Subscriber Agreement states that the Qwest Defendants’
right to make material and adverse changes to the terms and conditions of that Agreement is
conditioned upon prior notice and the subscriber’s right to reject those changes by immediately
discontinuing and cancelling their service. Given these restrictions, it would be incorrect to
characterize Section 4 as giving Qwest “unfettered rights” to change the terms of the Subscriber
Agreement or the arbitration provision. For the foregoing reasons, I do not find that the
arbitration provision is illusory or unenforceable on that basis.
Is The Arbitration Clause Unconscionable?
Plaintiffs argue that notwithstanding the Supreme Court’s decision in Concepcion, this
court must independently determine whether the arbitration provision in the Subscriber
Agreement is unconscionable and, therefore, unenforceable under section 2 of the Federal
Arbitration Act. See 9 U.S.C. § 2 (noting that an arbitration clause shall be valid and enforceable
“save upon such grounds as exist at law or in equity for the revocation of any contract’). See
also Doctor’s Associates, Inc. v. Casarotto, 517 U.S. at 687 (holding that “generally applicable
contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate
arbitration agreements without contravening” the FAA). More specifically, Plaintiffs contend
that the arbitration provision is procedurally unconscionable because it was presented on a “take
it or leave it” basis, Plaintiffs were not provided with an opportunity to read and become familiar
with the provision, and the provision was drafted in a way that would be difficult for a layperson
to comprehend. Plaintiffs argue that the arbitration provision is substantively unconscionable
because: (1) by permitting only individual arbitration or proceedings in small claims court,
Qwest “forecloses the most viable means for consumers to challenge Qwest’s unlawful ETF”
(15); (2) “the small amounts at stake would make challenges to Qwest’s ETF very difficult for
consumers,” even if the Subscriber Agreement had imposed fair terms for individual arbitrations;
(3) the totality of the dispute resolution provisions make the Agreement substantively unfair; (4)
the Subscriber Agreement interferes with the public policy of protecting consumers; and (5) the
dispute resolution provision is not commercially reasonable.
In determining whether contract defenses, such as unconscionability, may be invoked to
invalidate an arbitration provision, federal courts look to applicable state law for guidance. See,
e.g., Jaimez v. MBNA America Bank, N.A., 2006 WL 470587, at *3 (D. Kan. 2006) (citing Perry
v. Thomas, 482 U.S. 483, 492 n.9 (1087)). In AT&T Mobility, LLC v. Concepcion, 131 S.Ct at
1746, the Supreme Court noted that under California law, a finding of unconscionability requires
“procedural” and “substantive” elements, “the former focusing on ‘oppression’ or ‘surprise’ due
to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.” Colorado law
similarly holds that both procedural and substantive unconscionability are required for a contract
to be unenforceable.
In order to support a finding of unconscionability, there must be evidence of some
overreaching on the part of one of the parties such as that which results from an
inequality of bargaining power or under other circumstances in which there is an
absence of meaningful choice on the part of one of the parties together with
contract terms which are unreasonably favorable to that party.
Davis v. M.L.G Corp., 712 P.2d 985, 991 (Colo. 1986) (citing California precedents) (emphasis
added). See also Bailey v. Lincoln General Insurance Co., 255 P.3d 1039, 1055 (Colo. 2011)
(noting that “[a] party asserting that a contract is unconscionable must prove both procedural and
substantive unconscionability”). During the oral argument on October 7, 2011, Plaintiffs’
counsel conceded that his clients were required to show that the Qwest arbitration clause is both
procedurally and substantively unconscionable. The issue of unconscionability raises a question
of law for which Plaintiffs bear the burden of persuasion. Cf. Bernal v. Burnett, 2011 WL
2182903, at *4 (D. Colo. 2011). This court finds that Plaintiffs have not sustained that burden.
The Colorado Supreme Court has suggested that substantive unconscionability might be
demonstrated where there is an “absence of evidence that the provision was commercially
reasonable or should reasonably have been anticipated” or where the terms of the contract
suggest a lack of “substantive fairness.” Davis v. M.L.G Corp., 712 P.2d at 991. The foregoing
elements do not characterize the arbitration provision in this case. While Plaintiffs are precluded
from pursuing relief on a class-wide basis, that limitation does not establish substantive
unconscionability. Cf. Hancock v. American Telephone and Telegraph Company, Inc., 2011 WL
3626785, at *8 (W.D. Okl. 2011) (holding that a clause prohibiting the customer’s participation
in class action or class arbitration proceedings does not render the clause unenforceable or
unconscionable); Enderlin v. XM Satellite Radio Holdings, Inc., 2008 WL 830262, at *13 (E.D.
Ark. 2008) (concluding that the inclusion of a class-action waiver in an arbitration clause did not
make the provision unconscionable). Plaintiffs’ argument that the small amounts at stake make
pursuing relief on an individualized basis difficult and commercially unreasonable also is
unavailing. Cf. Bonanno v. Quizno’s Franchise Company, LLC, 2009 WL 1068744, at *20-21
(refusing to find that a franchise agreement was substantively unfair simply because individual
lawsuits might be more expensive or because the class action bar might potentially benefit the
franchiser at the expense of the franchisees). Finally, Plaintiffs maintain that the totality of the
dispute resolution provisions make the Agreement substantively unfair and contrary to public
policy. But see AT&T Mobility, LLC v. Concepcion, 131 S.Ct. at 1749-51 (observing that “[a]
prime objective of an agreement to arbitrate is to achieve ‘streamlined proceedings and
expeditious results’” and suggesting that “the switch from bilateral to class arbitration sacrifices
the principal advantage of arbitration - its informality- and makes the process slower, more
costly, and more likely to generate procedural morass than final judgment”). In sum, Plaintiffs’
claim of substantive unfairness attempts to resurrect policy arguments rejected by the majority in
Concepcion. Those arguments have no more traction under the facts of this case.
Plaintiffs’ procedural unconscionability challenge is equally unpersuasive. Factors that
may point to procedural inequities include:
a standardized agreement executed by parties of unequal bargaining power; lack
of opportunity to read or become familiar with the document before signing it;
use of fine print in the portion of the contract containing the provision; . . . the
relationship of the parties, including factors of assent, unfair surprise, and notice;
and all the circumstances surrounding the formation of the contract, including its
commercial setting, purpose and effect.
Davis v. M.L.G Corp., 712 P.2d at 99 (internal citations omitted). While it cannot be disputed
that the Subscriber Agreement and arbitration provision were prepared by Qwest and offered on
a “take it or leave it” basis, those characteristics, without more, do not suffice to qualify the
Subscriber Agreement as a contract of adhesion under Colorado law. Cf. Clinic Masters, Inc. v.
District Court In and For El Paso County, 556 P.2d 473, 475-76 (Colo. 1976) (noting, for
example, that the respondent could have obtained comparable services elsewhere and was
advised of all the terms of the contract before entering it). See also Bar-Ayal v. Time Warner
Cable, Inc., 2006 WL 2990032, at *16 (“[m]ere inequality in bargaining power . . . is not a
sufficient reason to hold that arbitration agreements are never enforceable”).
As noted previously, Plaintiffs’ arguments regarding notice and assent are not supported
by the material facts in this case. Plaintiffs had a reasonable opportunity to become familiar with
the terms and conditions of the Subscriber Agreement, having received multiple communications
that alerted them to the existence of the arbitration provision and limitations on Qwest’s liability.
Cf. Bernal v. Burnett, 2011 WL 2182903, at * 6-7 (holding that the parties’ arbitration agreement
was not unconscionable, notwithstanding the fact that the provision was set forth in a
standardized agreement prepared exclusively by the defendants and that plaintiffs had submitted
affidavits stating they were not aware of the arbitration provision or did not remember seeing the
arbitration provision; noted the absence of any evidence that the plaintiffs “were subject to
significant external pressure driving them to sign the documents without taking time to review
them and/or have someone else review them”).
I find that Plaintiffs have failed to carry their burden of persuasion as to both the alleged
procedural and substantive unconscionability of the arbitration provision in the Subscriber
Agreement. Cf. Swift v. Zynga Game Network, Inc., 2011 WL 3419499, at *10 (holding that
plaintiff’s opposition to defendants’ motion to compel arbitration failed based upon her inability
to show both procedural and substantive unconscionability).
Have the Qwest Defendants Waived Their Arbitration Rights?
Finally, Plaintiffs contend that the Qwest Defendants waived any right to arbitration
established under the Subscriber Agreement by first filing a motion to dismiss in the Western
District of Washington, and then filing a motion to dismiss after the action was transferred to the
District of Colorado. Defendants counter that they have repeatedly asserted their rights to
arbitrate and that Plaintiffs have not suffered any prejudice from Qwest’s litigation approach.
It is well-settled that a party may waive their rights under an arbitration clause. Metz v.
Merrill, Lunch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482, 1489 (10th Cir. 1994). In assessing a
claim of waiver, the court should consider
(1) whether the party’s actions are inconsistent with the right to arbitrate; (2)
whether “the litigation machinery has been substantially invoked” and the parties
“were well into preparation of a lawsuit” before the party notified the opposing
party of an intent to arbitrate; (3) whether a party either requested arbitration
enforcement close to the trial date or delayed for a long period before seeking a
stay; (4) whether a defendant seeking arbitration filed a counterclaim without
asking for a stay of the proceeding; (5) “whether important intervening steps [e.g.,
taking advantage of judicial discovery procedures not available in arbitration] had
taken place;” and (6) whether the delay “affected, misled, or prejudiced” the
Id. While these factors are instructive, “there is no bright line to assist a court in determining
whether a party has waived arbitration.” Coxcom, Inc. v. Egghead Telecom, Inc., 2009 WL
4016629, at *5 (N.D. Okl. 2009). Any “doubts concerning whether there has been a waiver are
resolved in favor of arbitration,” and “waiver is not lightly inferred.” Id.
Plaintiffs’ waiver argument must, in the first instance, be measured against the court’s
own docket. Within approximately two months of the filing of the initial Complaint in the
Western District of Washington on October 15, 2008, the Qwest Defendants simultaneously filed
a Motion to Stay Proceedings and Compel Arbitration (doc. #1-36), a Motion to Dismiss (doc.
#1-34) and a Motion to Transfer (doc. #1-33). Cf. Gratzer v. Yellow Corp., 316 F. Supp. 2d
1099, 1105 (D. Kan. 2004) (declining to find waiver where defendant moved to compel
arbitration and either dismiss or stay the action within two months of the complaint being filed).
On December 19, 2008, the parties filed a proposed Stipulation and Order (doc. #1-40) under
which the parties would “engage in discovery limited to issues relevant to the enforceability of
the arbitration clause in the Defendants’ Subscriber Agreement.” The court in the Western
District of Washington entered an order on January 9, 2009 establishing a schedule for briefing
the pending motions and conducting discovery limited to the Motion to Compel Arbitration.
After Plaintiffs filed their First Amended Complaint and Defendants filed new Motions to
Dismiss and to Transfer, the Western District of Washington issued an Order (doc. #1-60)
staying all discovery and precluding the Qwest Defendants from filing “any motion to compel
arbitration until after the Court rules on the pending motions to dismiss and/or transfer.” Cf.
Baker v. Conoco Pipeline Co., 280 F. Supp. 2d 1285, 1300 (N.D. Okl. 2003) (“Compliance with
court-imposed deadlines does not support a waiver of arbitration rights.”).
On August 17, 2009, the parties filed in this court a Stipulated Motion to File Second
Amended Complaint and Motion to Compel Arbitration (doc. #13). Under the parties’ proposed
stipulation, Plaintiffs were given until September 1, 2009 to file a Second Amended Complaint,
while Defendants were permitted until “September 15, 2009, to file their Motion to Compel
Arbitration or other response to the Second Amended Complaint.” The Qwest Defendants filed
that Motion to Compel Arbitration (doc. #26) on September 15, 2009. On October 9, 2009, the
parties submitted a proposed Scheduling Order (doc. #40) that specifically requested, for
purposes of judicial economy and efficiency, that this court “limit discovery and proceedings in
this matter to facts and issues related to Qwest’s Motion to Compel Arbitration.” On October
27, 2009 the parties filed a Joint Motion for Extension and Stipulation Concerning Motion to
Amend (doc. #48), in which they proposed that Plaintiffs be permitted to file a Third Amended
Complaint, that Defendants’ then-pending Motion to Compel Arbitration (doc. #26) apply to the
Third Amended Complaint, and that Defendants not be required to file a responsive pleading
directed to the Third Amended Complaint until there was ruling on the pending Motion to
Compel Arbitration. I granted that Joint Motion on November 2, 2009.
Measuring the Metz factors against the procedural history of this case, I am hard pressed
to find any objective or legal basis upon which to grant Plaintiffs’ waiver challenge. Since the
action commenced in October 2008, the Qwest Defendants have filed no less than three motions
to compel arbitration. Rather than pursuing a strategy of undue delay or invoking the Subscriber
Agreement’s arbitration provision only after the parties were well-invested in the pretrial
process, the Qwest Defendants joined in a proposed stipulation (within 65 days of the filing of
the original Complaint) under which the parties agreed to limit discovery to issues relevant to the
enforceability of the arbitration clause. More to the point, there is no reason to believe, and no
facts to show, that Plaintiffs have been misled or suffered any prejudice from the Qwest
Defendants’ repeated efforts to enforce the arbitration provision in the Subscriber Agreement.
Put more simply, Plaintiffs have failed to marshal any facts or legal arguments that would
warrant a finding of waiver. Cf. Peterson v. Shearson/American Express, Inc., 849 F.2d 464,
466 (10th Cir. 1988) (noting that a party asserting a waiver of arbitration has a “heavy burden of
Accordingly, for the foregoing reasons, this court will GRANT the Qwest Defendants’
Renewed Motion to Compel Arbitration (doc. #132), and stay this matter pending further
DATED this 8th day of March, 2012.
BY THE COURT:
s/ Craig B. Shaffer
United States Magistrate Judge
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