Barkwell v. Sprint Communications Company L.P.
Filing
67
ORDER denying 63 Motion to Compel Arbitration. Ordered by Judge Clay D. Land on 1/12/2012. (CGC)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
ERIC BARKWELL and GARY MASSEY, *
on behalf of themselves and all
other similarly situated
*
persons,
*
Plaintiffs,
*
vs.
*
SPRINT COMMUNICATIONS COMPANY,
L.P., et al.,
*
Defendants.
CASE NO. 4:09-CV-56 (CDL)
*
O R D E R
Twenty-four and a half months after this action was removed
to this Court and six months after the Court denied Defendants’
motion for summary judgment,
Company,
L.P.,
Sprint
Nextel
Defendants Sprint Communications
Corporation,
Sprint
Solutions,
Inc., and Sprint Spectrum, L.P. (collectively, “Sprint”) for the
first time filed a Motion to Compel Arbitration (ECF No. 63).
Because Sprint waived its right to arbitration, its motion is
denied.
It is undisputed that until
compel
arbitration,
Sprint’s
Sprint
conduct
in
filed
its
motion to
this
litigation
was
inconsistent with an intent to arbitrate the disputes presented
by the Complaint of Plaintiffs Eric Barkwell and Gary Massey
(collectively, “Plaintiffs”).
Sprint never raised arbitration
as a defense, and
other
pretrial
Sprint
engaged in extensive discovery and
proceedings,
intention to arbitrate.
all
of
which
contradicted
any
Sprint now maintains that until the
Supreme Court decided AT&T Mobility LLC v. Concepcion, 131 S.
Ct. 1740 (2011) on April 27, 2011, the law was unsettled as to
whether the arbitration agreement between Plaintiffs and Sprint
was enforceable notwithstanding the existence of a “class action
waiver” in the agreement.
Sprint relies on precedent pre-dating
the Supreme Court’s decision in Concepcion that construed some
arbitration agreements that included class action waivers to be
unconscionable,
unenforceable.
thus
rendering
the
arbitration
agreement
Sprint argues that since it did not become clear
until Concepcion was decided that the arbitration agreement here
was
likely
enforceable,
Sprint
should
not
be
found
to
have
waived their right to arbitrate, particularly given its pursuit
of arbitration shortly after Concepcion was decided.
the
pending
motion
to
compel
arbitration,
the
To decide
Court
must
determine whether at the time that Plaintiffs entered into the
arbitration
agreements,
those
agreements
were
likely
unenforceable because they included class action waivers.
Since
this determination requires an interpretation of the state law
that
applies
to
each
Plaintiff’s
2
agreement,
the
Court
must
evaluate
Plaintiff
Barkwell’s
claim
under
Georgia
law
and
surrounding
the
describes
the
Plaintiff Massey’s claim under Texas law.1
The
Court
applicable
parties’
with
first
arbitration
conduct
an
sets
to
the
agreements
during
intent
out
this
facts
and
then
litigation
that
arbitrate.
These
is
inconsistent
facts
are
largely
Sprint
charged
undisputed.
FACTUAL BACKGROUND
I.
The Relevant Agreements
In
this
action,
Plaintiffs
fees
that
contracts
between
Plaintiffs
were
not
Plaintiffs
allege
that
authorized
and
by
Sprint.
the
cell
phone
Plaintiff
Eric
Barkwell entered a wireless services agreement with Sprint in
2007 by signing a Subscriber Agreement.
See Barkwell v. Sprint
Commc’ns Co., No. 4:09-CV-56 (CDL), 2010 WL 5069912, at *3 (M.D.
Ga. Dec. 6, 2010).
In 2009, Barkwell switched to a different
cell phone plan and signed another Subscriber Agreement.
Id.
Plaintiff Gary Massey entered a wireless services agreement with
Sprint in 2009 by signing a Subscriber Agreement.
Id.
Later
that year, Massey added a second line to his Sprint plan and
signed
a
second
Subscriber
Agreement.
Id.
Each
of
the
Subscriber Agreements signed by Plaintiffs incorporates a Terms
1
Barkwell entered into the relevant agreement in Georgia, and Massey
entered into his agreement in Texas.
It is undisputed that Georgia
law governs Barkwell’s claim and Texas law governs Massey’s claim.
3
and Conditions document (“Terms & Conditions”), and the Court
previously found that the Subscriber Agreement and the Terms &
Conditions “govern Plaintiffs’ relationship with Sprint.”
Id.
at *4.
Each
of
the
Subscriber
Agreements
signed
by
Plaintiffs
states that the agreements are subject to mandatory arbitration
as set forth in the Terms & Conditions.
Defs.’ Mot. to Compel
Arbitration Ex. C, 2009 Barkwell Subscriber Agreement at BKW
000468, ECF No. 63-4; Defs.’ Mot. to Compel Arbitration Ex. D,
2007 Barkwell Subscriber Agreement at BKW 000005, ECF No. 63-5;
Defs.’
Mot.
Agreement
at
to
Compel
BKW
Arbitration
000544,
ECF
No.
Ex.
E,
63-6.
Massey
Subscriber
The
arbitration
provision in the Terms & Conditions document contains a Dispute
Resolution provision, which states, in relevant part, that the
parties “agree to finally settle all disputes (as defined and
subject to any specific exceptions below) only by arbitration.”
Defs.’ Mot. to Compel Arbitration Ex. B, 2007 Terms & Conditions
at BKW 000498, ECF No. 63-3 [hereinafter 2007 Terms]; accord
Defs.’ Mot. to Compel Arbitration Ex. A, 2009 Terms & Conditions
at BKW 000601, ECF No. 63-2 [hereinafter 2009 Terms]; Defs.’
Reply in Supp. of Mot. to Compel Arbitration Ex. A, 2010 Terms &
Conditions 15 of 17, ECF No. 65-1 [hereinafter 2010 Terms].
The provision states that the “arbitrator must honor the
terms and limitations in the Agreement and can award the same
4
damages and relief [as a court], including any attorney’s fees
authorized by law.”
2007 Terms at BKW 000498; accord 2009 Terms
at BKW 000601; 2010 Terms at 16.
The provision defines disputes
as “any claims or controversies against each other related in
any way to our Services or the Agreement including, but not
limited to, coverage, Devices, privacy, or advertising, even if
it arises after Services have terminated.”
2007 Terms at BKW
000498; accord 2009 Terms at BKW 000602; 2010 Terms at 15 of 17.
The arbitration clause contains the following class action
waiver provision:
We each agree not to pursue arbitration on a c1asswide
basis. We each agree that any arbitration will be
solely between you and us (not brought on behalf of or
together with another individual’s claim). If for any
reason any court or arbitrator holds that this
restriction is unconscionable or unenforceable, then
our agreement to arbitrate doesn’t apply and the
dispute must be brought in court.
2007 Terms at BKW 000499; accord 2009 Terms at BKW 000603; 2010
Terms at 16 of 17.
responsible
for
its
The provision provides that each party is
“respective
costs
relating
to
counsel,
experts, and witnesses, as well as any other costs relating to
the arbitration” but that Sprint will cover “any arbitration
administrative or filing fees” above a certain amount.
2007
Terms at BKW 000499; accord 2009 Terms at BKW 000603; 2010 Terms
at 16 of 17.
5
II.
Procedural Background
Barkwell
brought
this
action
in
the
Superior
Court
of
Muscogee County in April 2009, asserting claims for breach of
contract and “unconscionability.”
Notice of Removal Attach. 1,
Compl., ECF No. 1-1; accord Am. Compl., ECF No. 41 (asserting
claims for breach of contract, breach of contract as a result of
unconscionability and unjust enrichment).
In its Answer, Sprint
raised twenty-eight affirmative defenses, but arbitration is not
one of them.
See generally Answer, ECF No. 1-3.
Sprint removed
the action based on the Class Action Fairness Act, 28 U.S.C. §
1332(d).
See generally Notice of Removal, ECF No. 1.
Sprint
filed various pretrial motions during 2009 but did not reference
the arbitration agreement.
See generally Defs.’ Mot. for J. on
the
7;
Pleadings,
Certification,
ECF
ECF
No.
No.
Plaintiff in May 2010.
the
Amended
Defs.’
11.
to
joined
Massey
Mot.
the
Am. Comp., ECF No. 41.
Complaint,
Sprint
raised
Den.
action
Class
as
a
In its Answer to
twenty-nine
defenses, but arbitration is not one of them.
affirmative
See generally
Answer to Am. Compl., ECF No. 42.
Following
discovery,
Sprint
filed
a
summary
judgment
motion, contending that the acts of which Plaintiffs complained
were permitted by the Terms & Conditions.
Mot.
for
Summ.
J.,
ECF
No.
44.
arbitration agreement in that motion.
6
Sprint
See generally Defs.’
did
not
raise
See generally id.
the
After
the Court denied Sprint’s summary judgment motion, the parties
conferred
order.
and
developed
a
proposed
scheduling
and
discovery
In that proposed order, which was adopted by the Court,
Sprint did not reference the arbitration agreement as a defense.
See generally Scheduling & Disc. Order, ECF No. 57.
Plaintiffs represent that they engaged in mediation with
Sprint during 2011 and that they reached a settlement agreement.
Pls.’ Resp. to Defs.’ Mot. to Compel Arbitration Ex. C, Webb
Decl. ¶¶ 7-11, ECF No. 64-3.
According to Plaintiffs, however,
Sprint
in
contacted
Plaintiffs
that
Plaintiffs
their
claims
early
were
May
subject
2011
to
an
to
advise
arbitration
provision and that Sprint planned to move to compel arbitration.
Id. ¶¶ 12, 14.
DISCUSSION
Section
2
of
the
Federal
Arbitration
agreements to arbitrate “valid,
Act
(“FAA”)
makes
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.
“Although
arbitration agreements governed by the FAA are to be liberally
enforced, courts will not compel arbitration when the party who
seeks to arbitrate has waived its right to do so.”
SunTrust
Banks,
Inc.,
654
F.3d
(citations and footnote omitted).
1194,
1200
(11th
Krinsk v.
Cir.
2011)
The courts apply a two part
test to determine whether a party has waived its contractual
7
right to arbitrate.
totality
of
First, the courts decide if, “under the
the
the
with
inconsistently
circumstances,
the
right.”
arbitration
party
has
Id.
acted
(internal
quotation marks omitted); accord S&H Contractors, Inc. v. A.J.
Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir. 1990).
Second,
the courts “look to see whether, by doing so, that party has in
some way prejudiced the other party.”
Krinsk, 654 F.3d at 1200
(internal
accord
quotation
marks
omitted);
S&H
Contractors,
Inc., 906 F.2d at 1514.
“[A]
party
arbitrate
has
where
its
litigation-manifests
arbitration.”
App’x
921,
acted
inconsistently
conduct-including
an
intent
to
with
its
right
participation
avoid
or
to
to
in
waive
Citibank, N.A. v. Stok & Assocs., P.A., 387 F.
924
(11th
Cir.
2010)
(per
curiam).
In
S&H
Contractors, Inc., for example, the Eleventh Circuit found that
the party seeking arbitration had waived its right to demand
arbitration because it “waited eight months from the time it
filed its complaint to the time it demanded arbitration” and
because the parties engaged in significant discovery during that
time.
S&H Contractors, Inc., 906 F.2d at 1514.
Similarly, the
Eleventh Circuit concluded in Stone v. E.F. Hutton & Co., 898
F.2d 1542, 1544 (11th Cir. 1990) that a party had waived its
right to demand arbitration by delaying “over one year and eight
months
before
seeking
to
enforce
8
its
arbitration
agreement.”
Here, the original Complaint was filed in April 2009 and the
Amended Complaint was filed in May 2010.
Sprint did not seek to
compel arbitration until May 2011—after the parties engaged in
extensive
discovery
and
the
Court
ruled
on
Sprint’s
summary
judgment motion.
Sprint
contends,
however,
that
its
participation
in
litigation should not constitute a waiver because Sprint “had a
reasonable
compelled
basis
under
to
the
believe
law
as
that
it
arbitration
stood
prior
would
to
not
be
Concepcion.”2
Defs.’ Br. in Supp. of Mot. to Compel Arbitration 7, ECF No. 631.
It is true that if a claim is not arbitrable when an action
is commenced, participation in litigation does not constitute a
waiver of arbitration if a change in the law later renders the
claim arbitrable.
Benoay v. Prudential-Bache Sec., Inc., 805
F.2d 1437, 1440 (11th Cir. 1986) (per curiam).
In other words,
litigants are not required “to engage in futile gestures merely
to avoid a claim of waiver.”
omitted).
order
Id. (internal quotation marks
In Benoay, the defendants “could not have obtained an
compelling
arbitration”
under
the
Circuit when the action was commenced.
Court
handed
down
a
decision
2
that
law
Id.
of
the
Eleventh
When the Supreme
rejected
the
Eleventh
In Concepcion, the Supreme Court reviewed a California rule
classifying most collective-arbitration waivers in consumer contracts
as unconscionable and held that the rule was preempted by the FAA.
Concepcion, 131 S. Ct. at 1753.
9
Circuit’s approach, however, the defendants’ right to arbitrate
the claims accrued.
Id.
In this case, Sprint argues that the class action waiver at
issue
here
would
have
been
considered
unconscionable
before
Concepcion because Plaintiffs did not bring their claims under a
fee shifting statute.
Sprint relies upon Dale v. Comcast Corp.,
498 F.3d 1216, 1223-24 (11th Cir. 2007), which holds that class
action waivers in arbitration agreements may be unconscionable
under Georgia law when no remedy exists providing sufficient
certainty that attorney’s fees and costs may be recovered by a
prevailing
consumer
representation.
plaintiff’s
to
enable
the
consumer
to
obtain
The Dale court noted that in Georgia, unless a
claim
arises
under
a
statute
that
allows
a
prevailing party to recover attorney’s fees, the plaintiff may
recover
attorney’s
fees
under
O.C.G.A. § 13-6-11,
which
only
authorizes such recovery when the “defendant has acted in bad
faith,
has
been
stubbornly
litigious,
or
plaintiff unnecessary trouble and expense.”
1223.
the
caused
the
Dale, 498 F.3d at
Sprint argues that the lack of more certainty regarding
recoverability
action
has
waiver
of
attorney’s
unconscionable
and
fees
the
here
makes
arbitration
the
class
agreement
unenforceable under the applicable law that existed prior to the
Concepcion decision.
10
The
Court
finds
Sprint’s
argument
unpersuasive.
First,
Sprint mistakenly applies Georgia law to the claims of both
Barkwell and Massey.
Though Georgia law applies to Barkwell’s
claims,
the
agree
claims.
It
parties
would
not
that
have
Texas
been
law
futile
governs
for
Massey’s
Sprint
arbitration of Massey’s claims prior to Concepcion.
to
seek
Arbitration
clauses with class action waivers are routinely enforced under
Texas law, even in small value consumer cases.
USA
Corp.
v.
Leroy,
105
S.W.3d
190
(Tex.
In AutoNation
App.
2003),
for
example, a consumer challenged the documentary fee charged by a
used car dealer, contending that she was required to pay $45
more than Texas law allowed.
at 194.
her
AutoNation USA Corp., 105 S.W.3d
The consumer argued that the arbitration provision in
contract
with
unconscionable
the
because
car
dealer
prohibiting
class
was
“substantively
treatment
damage consumer claims is fundamentally unfair.”
The
consumer
argued
that
“without
the
class
of
small-
Id. at 199.
action
device,
consumers will be disinclined to pursue individual remedies for
small damages.”
Id. at 200.
The court disagreed and found that
the class action waiver did not render the arbitration agreement
unconscionable or contrary to public policy.
Id. at 200-01; see
also In re Olshan Found. Repair Co., 328 S.W.3d 883 (Tex. 2010)
(upholding
objection
arbitration
in
home
repair
agreements
breach
11
over
of
unconscionability
contract
case
because
homeowners had not established that arbitration costs were so
excessive
as
to
prevent
the
homeowners
from
effectively
vindicating their rights in the arbitral forum); cf. Carter v.
Countrywide Credit Indus., Inc., 362 F.3d 294 (5th Cir. 2004)
(applying Texas law and finding that arbitration clause with a
class action waiver was not unconscionable); In re Green Tree
Servicing LLC, 275 S.W.3d 592, 604 (Tex. App. 2008) (finding
that
arbitration
agreement
in
manufactured
home
retail
installment agreement was not substantively unconscionable).
Texas
courts
enforceability
of
have
a
not
squarely
class
action
addressed
waiver
whether
hinges
on
the
the
availability of attorney’s fees, but the Court notes that Texas
law provides for attorney’s fees and costs in breach of contract
claims.
See Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8);
accord RM Crowe Prop. Servs. Co. v. Strategic Energy, LLC, 348
S.W.3d 444, 452 (Tex. App. 2011) (stating that a person who
prevails on a breach of contract claim may recover reasonable
attorney’s fees and that the court has no discretion to deny
fees that are proper under § 38.002(8)).
Therefore, even if the
Dale
in
v.
Comcast
unconscionable
Corp.
class
rule
action
applied
waivers
Texas,
unless
the
rendering
arbitration
provision provided for attorney’s fees or the claims arose under
a fee shifting statute, the class action waiver here would not
be
unconscionable
given
the
availability
12
of
attorney’s
fees
under Texas law.
For these reasons, it would not have been
clearly futile for Sprint to seek arbitration of Massey’s claims
as soon as they were asserted.
participate
in
arbitration.
its
right
litigation
Sprint, however, continued to
for
an
entire
year
before
seeking
Therefore, the Court concludes that Sprint waived
to
demand
arbitration
of
Massey’s
claims
in
this
action.
The Court also finds that it would not have been clearly
futile for Sprint to seek arbitration of Barkwell’s claims.
In
determining whether an arbitration agreement is unenforceable
because
Court
it
contains
looks
at
the
provisions
available
that
are
remedies
unconscionable,
at
the
time
that
the
the
agreement was entered into and not the specific relief sought in
a subsequently filed complaint.
See Cappuccitti v. DirecTV,
Inc., 623 F.3d 1118, 1126-27 (11th Cir. 2010) (per curiam).
Cappuccitti,
the
plaintiff
challenged
the
cancellation
In
fee
charged by his satellite television provider, and he brought
claims for “Money Had and Received” and “Unjust Enrichment.”
Id. at 1121.
He also sought a declaration that the fee was
unlawful and unenforceable under Georgia law.
specifically
assert
a
claim
under
Georgia’s
Id.
He did not
Fair
Business
Practices Act, which permits a prevailing plaintiff to recover
attorney’s fees.
Id. at 1126.
The Eleventh Circuit found,
however, that the plaintiff could have brought a claim under the
13
Fair
Business
Practices
Act
“on
the
theory
that
the
early
cancellation fee is invalid as unfair or deceptive” under the
Act.
Id. at 1127 (internal quotation marks omitted).
The court
also emphasized that the remedy was available at the time that
the
plaintiff
entered
into
the
allegedly
unconscionable
contract, which is the determinative moment for determining the
unconscionability of the agreement.
Id. at 1126.
Under this
same rationale, the Court finds that when Barkwell entered into
the pertinent agreement here, he had available remedies under
the Georgia Fair Business Practices Act and that one of those
remedies
though
was
he
a
did
claim
not
for
assert
attorney’s
a
claim
fees.3
under
Therefore,
the
Fair
even
Business
Practices Act in his Complaint, the existence of that remedy at
the time he entered into the contract must be considered in
determining whether the agreement was unconscionable.
In light
of that available remedy, the Court finds it would not have been
3
Under the Georgia Fair Business Practice Act, “[u]nfair or deceptive
acts or practices in the conduct of consumer transactions and consumer
acts or practices in trade or commerce are declared unlawful.”
O.C.G.A. § 10-1-393(a). Attorney’s fees are available under the Act.
O.C.G.A. § 10-1-399(d).
Plaintiffs allege that the contractual
provisions regarding Sprint Surcharges are unfair, that Sprint
“unnecessarily and arbitrarily” imposed the Sprint Surcharges, and
that Sprint induced them to enter the agreements without adequately
disclosing its practices related to the Sprint Surcharges. Am. Compl.
¶¶ 68-71, ECF No. 41.
The Eleventh Circuit in Cappuccitti concluded
that, “at least in substance,” similar allegations “stated an unfair
or deceptive acts or practices claim without citing § 10-1-393(a).”
Cappuccitti, 623 F.3d at 1126.
14
clearly
futile
for
Sprint
to
seek
arbitration
of
Barkwell’s
claims prior to the Supreme Court decision in Concepcion.
The Court rejects any suggestion by Sprint that Cappuccitti
is inconsistent with the Eleventh Circuit’s prior decision in
Dale v. Comcast Corp.
To the contrary, the Court finds that it
would have been unreasonable to conclude that Dale foreclosed a
reasonable argument similar to the one adopted by the Court in
Cappuccitti.
First, Dale made it clear that these issues were
fact intensive and must be decided on a “case-by-case basis.”
Dale, 498 F. 3d at 1224 (“[E]nforceability of a particular class
action waiver in an arbitration agreement must be determined on
a case-by-case basis, considering the totality of the facts and
circumstances.”).
The Dale court did not adopt a bright line
rule that applied to every case involving a class action waiver.
Furthermore, the Eleventh Circuit in the more recent Cappuccitti
decision did not change the law, but it instead applied the
well-established principle that the court must examine the facts
and circumstances as they existed at the time the contract was
entered.
Moreover, even if Sprint was reasonable to conclude
that the arbitration agreement was not enforceable before the
Eleventh Circuit issued the Cappuccitti decision, Sprint offers
no reasonable excuse for waiting an additional six months after
that decision to express an intent to seek arbitration.
15
For all
of these reasons, the Court finds that Sprint has waived its
right to compel the arbitration of Barkwell’s claims.
CONCLUSION
As discussed above, Sprint did not timely seek arbitration,
and the Court concludes that Sprint has waived its right to
compel
arbitration.
Therefore,
Sprint’s
Motion
to
Compel
Arbitration (ECF No. 63) is denied.
The
stay
in
this
action
is
lifted.
The
parties
shall
submit a jointly proposed amended scheduling order within 21
days of today’s order setting out a schedule for concluding this
litigation.
IT IS SO ORDERED, this 12th day of January, 2012.
S/Clay D. Land
CLAY D. LAND
UNITED STATES DISTRICT JUDGE
16
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