Lenfest, v. Verizon Communications, Inc.
Filing
41
Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: "For the foregoing reasons, Verizon Enterprise Solutions, LLCs motion to compel arbitration (Docket No. 20 ) is ALLOWED. The case is STAYED pending arbitration. Verizon Enterpri se Solutions, LLC's motion to dismiss (Docket No. 22 ) is DENIED as moot. The parties are directed to submit to this Court a joint status report with respect to the progress of the arbitration proceeding on March 31, 2015 and every six months thereafter. So ordered."(Moore, Kellyann)
United States District Court
District of Massachusetts
)
BRIAN LENFEST, individually and )
on behalf of all others
)
similarly situated,
)
)
Plaintiff,
)
)
v.
)
)
VERIZON ENTERPRISE SOLUTIONS,
)
LLC,
)
)
Defendant.
)
)
Civil Action No.
13-11596-NMG
MEMORANDUM & ORDER
GORTON, J.
Here we have a putative class action brought by Brian
Lenfest (“Lenfest”), who claims that defendant Verizon
Enterprise Solutions, LLC (“Verizon”) violated the Massachusetts
Consumer Protection Act, M.G.L. c. 93A, and was unjustly
enriched by failing to disclose minimum monthly charges for long
distance telephone service.
Pending before the Court is
defendant’s motion to compel arbitration.
For the reasons that
follow, the Court will allow defendant’s motion to compel
arbitration and stay the case during its pendency.1
1
Because it will compel arbitration, the Court will also deny
Verizon’s outstanding motion to dismiss as moot.
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I.
Factual Background and Procedural History
A.
Factual Background
Lenfest is a Boston-based Verizon business customer who,
since 2008, has retained telephone service through Verizon.
The
phone numbers attached to Lenfest’s account were originally
activated in October, 2005 for an account in the name of Nunotte
Zama (“Zama”).
In March, 2008, Lenfest telephoned Verizon and
assumed the ongoing billing and pre-existing charges for Zama’s
Verizon account.
Verizon’s standard business practice requires
both the former and new account holders to contact Verizon and
acknowledge that the new account holder agrees to assume the
existing account holder’s terms and conditions of service.
Lenfest’s account with Verizon remains active.
On each
service bill since June, 2011, Lenfest has been charged a
minimum monthly fee for a “Verizon FirmRate Advantage Plan” long
distance calling plan (“the long distance calling plan”).
That
plan contains a “Minimum Spend Level” (“MSL”) of ten dollars per
month.
Lenfest has not used the long distance calling plan at a
sufficient level to reach the monthly MSL and has, accordingly,
been billed for a “VES FirmRate Advantage Shortfall Charge”
since his renewed enrollment in the long distance calling plan
in June, 2011.
In February, 2012, Lenfest was also charged a
separate $45 usage shortfall fee.
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Verizon has, on two separate occasions, sent a “Fulfillment
Letter” and an accompanying “Service Agreement” to the account
holder associated with Lenfest’s account.
The first fulfillment
letter and service agreement was sent to Zama shortly after
Verizon activated the account and phone numbers in October,
2005.
A second such letter/agreement was sent to Lenfest on
June 24, 2011 upon his renewed enrollment in the long distance
calling plan.
Both fulfillment letters clearly stated “[f]or additional
rate information, please visit our website at verizonld.com.”
Moreover, each fulfillment letter noted that “[l]ong Distance
service provided by Verizon Enterprise Solutions [is] pursuant
to service agreement and tariffs.”
The service agreement accompanying each letter clearly
referenced governing state tariffs and a “Product Guide.”
Both
service agreements also stated
[y]ou acknowledge that it is impractical to print in
this document the complete Product Guide, which
contains service descriptions, charges and other terms
and
conditions
applicable
to
the
Services
and
providing the Product Guides on Verizon’s website and
making it available upon request are reasonable means
of notice and incorporation of those terms. If You do
not know Your plan rates under tariff or if You would
like a copy of Your Product Guide, You may contact Us
either in writing or via telephone at the address or
telephone number on Your bill and We will provide You
with the information You request.
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The tariff and product guide referenced in the service
agreement are located on the verizonld.com website.
The product
guide contains a conspicuous “Alternative Dispute Resolution”
(“ADR”) clause.
The ADR clause provides that
the Parties agree to follow the ADR procedure set
forth herein as their sole remedy with respect to any
controversy or claim arising out of or relating to the
Service Agreement or its breach. The parties agree
that any such claims arising under the Service
Agreement must be pursued on an individual basis in
accordance with the procedure noted below. Even if
applicable
law
permits
class
actions
or
class
arbitrations, the ADR procedure agreed to herein
applies and the parties waive any rights to pursue any
claim arising under the Service Agreement on a class
basis.
The product guide located on the verizonld.com website and
referenced in the service agreement and state tariff has
contained the ADR clause throughout the duration of plaintiff’s
account.
Finding and retrieving the product guide from the
verizonld.com website is, however, a labyrinthine endeavor
requiring the user to navigate through a handful of tabs.
Nevertheless, the product guide is undeniably available on the
website.
In March, 2013, Lenfest emailed Verizon and requested a
copy of his “contract.”
A Verizon customer service
representative understood Lenfest’s question to refer to the
existence of a term agreement and replied that Lenfest was “not
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under contract.”
In fact, the June, 2011, fulfillment letter
sent to Lenfest clearly indicates that he was under no “term
agreement” and thus would not face any early termination fees
upon cancelling his service.
Lenfest’s telephone service with
Verizon was, nevertheless, subject to the service agreement,
tariff and product guide that pertained to all long distance
customers.
B.
Procedural History
On July 3, 2013, Lenfest filed a class action complaint
against Verizon Communications Inc. in this Court, alleging
unfair and deceptive trade practices in violation of M.G.L. c.
93A, §§ 2, 9, 11 (Counts I and II), and unjust enrichment (Count
III).
Lenfest amended his complaint on September 11, 2013 to
substitute Verizon Enterprise Solutions, LLC as the proper
defendant.
On September 25, 2013, Verizon filed both a motion to
compel arbitration and a motion to dismiss the complaint.
The
parties agreed to stay the motion to dismiss until after this
Court ruled on the motion to compel arbitration.
II.
Motion to Compel Arbitration
The essence of Lenfest’s complaint is that Verizon has been
charging him an undisclosed minimum monthly fee for long
distance telephone service that Lenfest has seldom utilized.
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Lenfest contends that he was never provided with a copy of his
terms and conditions of service and never agreed to the ADR
provision located in the online product guide.
In its motion to compel arbitration, Verizon contends that
the facts in this case demonstrate that Lenfest impliedly
assented to the ADR provision in the product guide both by
assuming the pre-existing account in 2008 and continuing service
in 2011 after receiving a renewed fulfillment letter and service
agreement.
Verizon asserts that both the 2005 and 2011
fulfillment letters and accompanying service agreements clearly
refer to the online product guide and its included ADR
provision.
A.
Legal Standard
Arbitration is a matter of contract and a party cannot be
required to submit to arbitration any kind of dispute not
specifically covered by the contract. AT&T Techs., Inc. v.
Commc’ns Workers of Am., 475 U.S. 643, 648 (1986).
Section 2 of
the Federal Arbitration Act (“FAA”) mandates that written
arbitration agreements are valid, irrevocable and enforceable.
9 U.S.C. § 2.
Section 4 of the FAA allows a party aggrieved by
another party’s failure to arbitrate according to the terms of a
written arbitration agreement to petition for a court order
directing that the arbitration proceed. 9 U.S.C. § 4.
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Whether
parties agreed to submit a particular dispute to arbitration is
an issue to be decided by the Court, not the arbitrator. Id.
Should the issue be referred to arbitration, the Court can issue
a stay of the case pending resolution of the arbitration. 9
U.S.C. § 3.
A presumption of arbitrability arises where a contract
contains an arbitration clause. AT&T Techs., 475 U.S. at 650.
That presumption is particularly applicable where the
arbitration clause at issue is broad in scope, such as where it
provides for arbitration of “any” kind of controversy pertaining
to the contract. See id.
Under such agreements, parties should
be required to submit their disputes to arbitration
unless it may be said with positive assurance that the
arbitration
clause
is
not
susceptible
of
an
interpretation that covers the asserted dispute.
Id. (internal quotation and citation omitted).
If there are any
doubts about coverage, the dispute should proceed to
arbitration. See id.
When deciding a motion to compel arbitration, the Court
must determine whether
i) there exists a written agreement to arbitrate, (ii)
the dispute falls within the scope of that arbitration
agreement, and (iii) the party seeking an arbitral
forum has not waived its right to arbitration.
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Combined Energies v. CCI, Inc., 514 F.3d 168, 171 (1st Cir.
2008) (quoting Bangor Hydro-Electric Co. v. New England Tel. &
Tel. Co., 62 F. Supp. 2d 152, 155 (D. Me. 1999)).
B.
Analysis
1. Written Agreement to Arbitrate
Lenfest contends that he never signed a contract with
Verizon and therefore never agreed to the ADR clause in the
product guide.
While it is true that Lenfest never actually
signed an agreement with Verizon, he nevertheless (1) orally
assumed the pre-existing account and its accompanying terms and
conditions in 2008 and (2) was put on notice of the ADR clause
through his receipt of the 2011 fulfillment letter and
accompanying service agreement.
Both facts are sufficient to
bind Lenfest to the arbitration commitment.
In March, 2008, Lenfest orally agreed to assume the
outstanding charges and bind himself to the present terms and
conditions of Zama’s account.
Lenfest was thus subject to the
then-existing terms and conditions of service originally
assented to by Zama. Zurich Am. Ins. Co. v. Watts Industries,
Inc., 417 F.3d 682, 687 (7th Cir. 2005) (non-signatory can be
bound by arbitration agreement through assumption of contract).
Lenfest cannot claim ignorance of the terms and conditions of
his account merely on the grounds that he assumed the account
after its origination.
The terms and conditions were
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encapsulated in the service agreement sent to Zama with the 2005
fulfillment letter, which incorporated by reference the online
product guide containing the ADR provision.
Therefore, upon
assuming Zama’s account, Lenfest agreed to the pre-existing
terms and conditions.
More importantly, Lenfest received a fulfillment letter
himself in June, 2011 shortly before the minimum monthly charges
at issue began appearing on his Verizon invoices.
That
fulfillment letter again referred to the Verizon website for
“additional rate information” and indicated that plaintiff’s
service was subject to the “service agreement and [published]
tariffs.”
The letter was accompanied by a copy of the Verizon
service agreement, which referred to governing state tariffs and
the online product guide.
The service agreement also clearly
explained that
it is impractical to print in this document the
complete Product Guide, [and that providing] the
Product Guide on Verizon’s website [is a] reasonable
means of notice and incorporation of those terms.
The facts therefore indicate that Lenfest received
sufficient notice of the terms and conditions of his long
distance telephone service with Verizon, including the ADR
provision in the product guide. See Lousararian v. Royal
Caribbean Corp., 951 F.2d 7, 11 (1st Cir. 1991) (notice of terms
of a contract depend not on “actual knowledge” but instead turn
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on “the opportunity for such knowledge”).
The fulfillment
letter and service agreement sent to both Zama in 2005 and
Lenfest in 2011 sufficiently incorporated the arbitration clause
by reference. See Awuah v. Coverall N. Am., Inc., 703 F.3d 36,
42-43 (1st Cir. 2012).
Lenfest could have learned that the ADR
clause governed his service with Verizon had he attempted to
locate the product guide on Verizon’s website that was referred
to in his service agreement.
The continued use by Lenfest of Verizon’s services after
both the assumption of the contract in 2008 and receipt of the
fulfillment letter in 2011 manifested his assent to Verizon’s
terms and conditions, including the ADR clause. Schwartz v.
Comcast Corp., 256 F. App’x 515, 518 (3d Cir. 2007).
As a result, it is clear that Lenfest willingly entered
into an agreement that required arbitration and the first prong
of the relevant test is satisfied.
2. Scope of Arbitration Agreement and Waiver of Right
to Arbitrate
The second and third prongs that warrant compelling
arbitration are easily met here.
The ADR clause included in the product guide broadly covers
“any controversy or claim arising out of or relating to the
Service Agreement or its breach.”
that
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The clause further provides
[e]ven if applicable law permits class actions or
class arbitrations, the ADR procedure agreed to herein
applies and the parties waive any rights to pursue any
claim arising under the Service Agreement on a class
basis.
Lenfest’s claim that Verizon charged unreasonable fees for long
distance services and failed to disclose the basis for those
charges plainly falls within the broad scope of the arbitration
provision. See AT&T Techs., 475 U.S. at 650.
Accordingly, the
Court finds that the second prong of the test is met.
Finally, Verizon’s limited involvement in this case is
insufficient to find waiver of the right to arbitrate. See e.g.
Creative Solutions Grp., Inc. v. Pentzer Corp., 252 F.3d 28, 32
(1st Cir. 2001) (discussing factors courts consider in
determining whether waiver has occurred).
Verizon has, in this
case, filed a motion to dismiss and prepared initial corporate
disclosures pursuant to Fed. R. Civ. P. 7.1.
It has not,
thereby, substantially invoked the requisite “litigation
machinery” nor are the parties “well into preparation of a
lawsuit” that would constitute a waiver of the right to
arbitrate. Jones Motor Co., Inc. v. Chauffeurs, Teamsters &
Helpers Local Union No. 633 of N.H., 671 F.2d 38, 44 (1st Cir.
1982)(quoting Reid Burton Constr., Inc. v. Carpenters Dist.
Council, 614 F.2d 698 (10th Cir. 1980)).
In fact, Lenfest does
not even assert that Verizon has waived its right to arbitrate
nor that he has been prejudiced by a delay in such a request.
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Thus, the Court finds that the third prong of the test is
satisfied.
Verizon’s motion to compel arbitration will be allowed.
In
light of this holding the case will be stayed pending
arbitration.
ORDER
For the foregoing reasons, Verizon Enterprise Solutions,
LLC’s motion to compel arbitration (Docket No. 20) is ALLOWED.
The case is STAYED pending arbitration.
Verizon Enterprise
Solutions, LLC’s motion to dismiss (Docket No. 22) is DENIED as
moot.
The parties are directed to submit to this Court a joint
status report with respect to the progress of the arbitration
proceeding on March 31, 2015 and every six months thereafter.
So ordered.
/s/ Nathaniel M. Gorton_____
Nathaniel M. Gorton
United States District Judge
Dated September 29, 2014
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