Solo et al v. United Parcel Service Co.

Filing 104

ORDER Denying Defendant's Motion to Stay or Dismiss Proceedings 76 . Signed by District Judge Denise Page Hood. (LSau)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
JOE SOLO and BLEACHTECH, L.L.C.,
Plaintiffs,
Case No. 14-12719
HON. DENISE PAGE HOOD

v.
UNITED PARCEL SERVICE CO.,

Defendant.
_________________________________________/
ORDER DENYING DEFENDANT’S
MOTION TO STAY OR DISMISS PROCEEDINGS [#76]
I.

INTRODUCTION
This case was randomly reassigned from Judge Gerald E. Rosen to this Court

upon Judge Rosen’s retirement. The case was filed on July 11, 2014. On August 29,
2014, Defendant filed a Motion to Dismiss, and Judge Rosen issued an Order granting
Defendant’s Motion to Dismiss on March 27, 2015. On March 18, 2016, the Sixth
Circuit issued an Opinion reversing Judge Rosen’s Order as to three of the four
counts. The parties filed a joint discovery plan and a scheduling conference was held
on May 17, 2016. Six months later, on November 18, 2016, Defendant filed the

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instant Motion to Stay or Dismiss Proceedings1 (“Motion to Stay”). Dkt No. 76. The
Motion to Stay, which has been fully briefed, is premised on the belief that Plaintiffs’
claims are covered by an arbitration provision, such that Plaintiffs are obligated to
arbitrate those claims.
For the reasons that follow, the Court denies Defendant’s Motion to Stay or
Dismiss Proceedings.
II.

BACKGROUND
Many of the facts of this case and additional procedural history are set forth in

the Sixth Circuit’s Opinion, see Solo v. United Parcel Service Co., 819 F.3d 788, 79193 (6th Cir. 2016), all of which are incorporated herein. The following additional
information is material to addressing the Motion to Stay.
There are three remaining claims for relief on behalf of each Plaintiff and a
putative nationwide class of purchasers for declared value “coverage . . . in excess of
$300.00”: (1) breach of contract; (2) unjust enrichment; and (3) declaratory relief. Dkt.

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The Sixth Circuit has held that a court may not compel parties to arbitrate
outside of its jurisdiction and, instead, must dismiss or stay an action that is subject
to arbitration in another forum. Inland Bulk Transfer Co. v. Cummins Engine Co.,
332 F.3d 1007, 1018 (6th Cir. 2003). Defendant’s motion to dismiss is rooted in
the fact that BleachTech is an Ohio company and Solo is a California resident,
which means that this Court could not compel them to arbitrate in their respective
states of residence (which, according to Defendant, is where the UPS Terms dictate
the arbitrations are to be conducted).
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No. 1, at ¶¶ 45, 53-64, 73-83. All three claims are based on the theory that Defendant
charges more for declared value of packages than permitted by contract. Id. The
Complaint pleads the breach of contract and unjust enrichment claims in the
alternative.
BleachTech alleges it “uses UPS’s package shipping services” and paid
declared value charges on eight packages. Id. at ¶ 16. Solo alleges that from “time to
time [he] ships packages using UPS,” including one package with more than $300 in
declared value on December 26, 2013. Id. at ¶¶ 12-13. Plaintiffs seek to recover for
21 UPS shipments by BleachTech between January 18, 2010 and December 29, 2013,
each with a declared value over $300, and 1 UPS shipment by Solo at The UPS Store
in Marina Del Ray, California on December 26, 2013, a shipment with a declared
value over $300. BleachTech proposes to represent a class of similarly situated
“direct” shippers; Solo proposes to represent a class of similarly situated “indirect”
shippers.
The basic shipping contract between UPS and shippers is comprised of: (1) the
UPS Tariff/Terms and Conditions of Service (“UPS Terms”); (2) the UPS Rate and
Service Guide (“UPS Guide”); and (3) the Source Document used to tender the

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shipment to UPS. Dkt. No. 76, Ex. A §§ 2, 54.2 Shippers can also negotiate
customized agreements that modify provisions or prices set forth in the UPS Terms
or Guide. Even where a shipper has a customized agreement, the UPS Terms still set
forth the “general terms and conditions of contract under which [UPS] is engaged in
the transportation of shipments.” Id. at § 1.
The UPS Terms provide that “[i]n tendering a shipment for service, the shipper
agrees that the version of the [UPS] Terms and the applicable [UPS] Guide in effect
at the time of shipping will apply to the shipment and its transportation.” Id. The UPS
Terms further state that “[a]ll shipments are subject to the terms and conditions
contained in the [UPS] Terms.” Id. at § 54. The UPS Terms are published periodically
in the UPS Guide and the current version is available electronically at all times at
ups.com. Id. at § 1.
As of December 30, 2013, the UPS Terms have contained an agreement to
individually arbitrate all claims arising from or related to UPS services. Id. § 50. The
obligation is mutual. Section 50 provides prominently, in bolded type:
Claimant and UPS agree that, except for disputes that qualify for
state courts of limited jurisdiction (such as small claims, justice of
the peace, magistrate court, and similar courts with monetary limits
on their jurisdictions over civil disputes), any controversy or claim,

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BleachTech signed a customized contract with Defendant in 2012. BleachTech’s
customized contract incorporated the UPS Terms by reference.
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whether at law or equity, arising out of or related to the provision of
services by UPS, regardless of the date of accrual of such dispute,
shall be resolved in its entirety by individual (not class-wide nor
collective) binding arbitration.
Id. “Claimant” is defined as “the person asserting the claim or seeking recourse[.]”
Id.
The UPS Terms include other provisions related to arbitration, including the
following:
•

WAIVING THE RIGHT TO HAVE A TRIAL BY JURY TO
RESOLVE ANY DISPUTE ALLEGED AGAINST CLAIMANT, UPS
OR RELATED THIRD PARTIES;

•

WAIVING THE RIGHT TO HAVE A COURT, OTHER THAN A
STATE COURT OF LIMITED JURISDICTION AS DEFINED
ABOVE, RESOLVE ANY DISPUTE ALLEGED AGAINST
CLAIMANT, UPS OR RELATED THIRD PARTIES; and

•

WAIVING THE RIGHT TO SERVE AS A REPRESENTATIVE, AS
A PRIVATE ATTORNEY GENERAL, OR IN ANY OTHER
REPRESENTATIVE CAPACITY, JOIN AS A CLASS MEMBER,
AND/OR TO PARTICIPATE AS A MEMBER OF A CLASS OF
CLAIMANTS IN ANY CLASS, MASS, CONSOLIDATED OR
COMBINED ACTION OR ARBITRATION FILED AGAINST
CLAIMANT, UPS AND/OR RELATED THIRD PARTIES.

Id. (emphasis in original). The UPS Terms state that “[a]ll issues are for the arbitrator
to decide, except that issues relating to the scope, application, and enforceability of
the arbitration provision are for a court to decide.” Id.
Plaintiffs’ breach of contract claim assumes a contract directly with Defendant.
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Id. at ¶¶ 53-57. The unjust enrichment claim assumes shipment through a third-party
retailer like The UPS Store, and alleges that Defendant charges the retailer the
allegedly-excessive price for declared value service set forth in the Guide and causes
the retailer to charge its customers the rates from the Guide, thereby passing on the
alleged overcharges. Id. at ¶¶ 73-83. Plaintiffs’ unjust enrichment theory seeks to
enforce Defendant’s obligations under the UPS Terms and the UPS Guide. See id.;
Dkt. No. 20 at 18 (“[The] unjust enrichment claim ‘seek[s] recovery solely for the
[carrier’s] alleged breach of its own, self-imposed undertakings.’”).)
III.

APPLICABLE LAW & ANALYSIS

A.

Applicable Law
The Federal Arbitration Act mandates that binding arbitration agreements in

contracts “evidencing a transaction involving commerce . . . shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for
the revocation of any contract.” 9 U.S.C. § 2. The FAA broadly applies to any
transaction directly or indirectly affecting interstate commerce. Allied-Bruce Terminix
Cos. v. Dobson, 513 U.S. 265, 277 (1995). The “central” purpose of the FAA is to
“ensure that ‘private agreements to arbitrate are enforced according to their terms.’”
Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682 (2010) (quoting Volt
Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479
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(1989)); see also Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)
(“Section 2 [of the FAA] embodies the national policy favoring arbitration and places
arbitration agreements on equal footing with all other contracts”); see also AT&T
Mobility LLC v. Concepcion, 563 U.S. 333, 343-45, 352 (2011) (class action waiver
could not invalidate arbitration clause, and to require otherwise would frustrate
Congressional purpose).
In light of the strong federal policy favoring arbitration embodied in the FAA,
parties must be compelled to arbitrate where: (1) a valid, enforceable agreement to
arbitrate exists; and (2) the claims at issue fall within the scope of that agreement.
Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003). Arbitration
clauses will be enforced unless the party resisting arbitration can show that the
arbitration agreement is invalid or does not encompass the claims at issue. Green Tree
Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91-92 (2000). The resisting party’s burden
is significant, as courts are required to “‘rigorously enforce’ arbitration agreements
according to their terms,” Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304,
2309 (2013) (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985)),
and “any doubts concerning the scope of arbitrable issues should be resolved in favor
of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24-25 (1983). See also Glazer v. Lehman Bros., 394 F.3d 444, 450 (6th Cir. 2005).
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B.

Analysis
For purposes of this case, Plaintiffs are focused on shipments they (and other

members of the putative class) made prior to December 30, 2013, the effective date
of UPS Terms containing the arbitration provision.
1.

Defendant’s Positions

Defendant argues that the FAA applies to all of the claims asserted by Plaintiffs
against Defendant, even if the claims stem from transactions made prior to December
30, 2013, because each Plaintiff entered into a valid, enforceable agreement to
arbitrate any claim filed on after December 30, 2013. Defendant relies on the language
in the arbitration provision that “any controversy or claim, . . . regardless of the
date of accrual of such dispute, shall be resolved in its entirety by individual (not
class-wide nor collective) binding arbitration.” Based on that language, Defendant
contends that, whether Plaintiffs’ claims are based on packages shipped before or after
December 30, 2013, the Plaintiffs agreed to arbitrate them.
Defendant asserts that BleachTech manifested its agreement to the arbitration
provision in four ways: (1) based on its customized contract; (2) by utilizing
Defendant to ship goods on or after December 30, 2013 (it is undisputed that
BleachTech did so many times, including by clicking through notifications on
Defendant’s website prior to placing its shipping orders); (3) clicking through specific
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notice of the arbitration several times when processing its shipments, including on
January 9, 13, and 16, 20114; and (4) receiving notice in November 2013 via the first
page of its invoice(s) from Defendant that the pending arbitration provision was being
added and “inviting” BleachTech to review it.
Defendant asserts that Solo manifested his agreement to the arbitration
provision through a third party, The UPS Store, in May 2016, when he shipped a
package via Defendant. Asserting that California law applies to Solo’s claims,
Defendant also suggests that Solo is equitably estopped from avoiding the arbitration
provision in the UPS Terms because his claims are based on or inextricably
intertwined with the obligations imposed by the UPS Terms and Guide.
Defendant relies on a number of cases in support of its argument that Plaintiffs
agreed to arbitrate existing disputes when they accepted the arbitration provision after
December 30, 2013. Defendant suggests that, consistent with the express terms of the
FAA, the Sixth Circuit and its district courts (as well as courts across the nation) apply
arbitration provisions retroactively when they contain language similar to the language
in the UPS Terms, even where the provision does not expressly apply no matter when
the disputes accrue (as Defendant contends is the case here). Citing Watson Wyatt &
Co. v. SBC Holdings, Inc., 513 F.3d 646, 650-52 (6th Cir.2008) (agreement requiring
arbitration of “any dispute or claim arising from or in connection with this agreement
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or the services provided” applied retroactively, i.e., not limited to disputes arising out
of that contract or after that contract was executed); Love v. Merrill Lynch, 2012 WL
1698159, at *4 (S.D. Ohio May 15, 2012) (arbitration clause was retroactive because
it applied to “any controversy which may arise,” and “controversies ‘occurring prior,
on, or subsequent to the date’ of the agreement”); Levin v. Alms & Assocs., 634 F.3d
260, 266-67 (4th Cir. 2011) (arbitration clause contained in only the most recent of
successive contracts providing that “[a]ny dispute shall be submitted to binding
arbitration” was “broad enough to encompass” disputes arising from earlier contracts
without arbitration obligation).3
Another district court recently held that the arbitration provision at issue in this
case “in plain language captures any potential preexisting claims, . . .” Simoni v. UPS,

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Defendant also cites the following cases: Smith/Enron Cogeneration Ltd. v. Smith
Cogeneration Int’l, Inc., 198 F.3d 88, 99 (2d Cir. 1999) (relevant inquiry is whether claims fall
within language used in arbitration clause, not when they arose); Zink v. Merrill Lynch Pierce
Fenner & Smith, Inc., 13 F.3d 330, 332 (10th Cir. 1993) (agreement to arbitrate “[a]ny
controversy . . . arising out of [plaintiff’s] business or this agreement” applied even where facts
“giving rise” to dispute happened before agreement was executed); Belke v. Merrill Lynch,
Pierce, Fenner & Smith, 693 F.2d 1023, 1025 n.4, 1028 (11th Cir. 1982) (arbitration agreement
covering “any controversy between us arising out of your business or this agreement” applied to
disputes relating to acts that pre-dated agreement), abrogated on other grounds by Dean Witter
Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985); In re Verisign, Inc., Deriv. Litig., 531 F. Supp. 2d
1173, 1223-24 (N.D. Cal. 2007) (arbitration agreement covering “[a]ny dispute or claim arising
out of or relating to” the agreement, the services provided thereunder, or “any other services
provided” applied to claims arising from earlier agreements without arbitration provision);
Nanosolutions, LLC v. Prajza, 793 F. Supp. 2d 46, 61-62 (D.D.C. 2011) (arbitration provision in
subsequent agreement, requiring arbitration of “conflicts between parties” and containing no
language limiting subject matter or temporal scope, encompassed claims arising out of earlier
agreement).
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Inc., No. 14-4374 (Dkt. No. 20, August 20, 2015 Hearing on Defendant’s Motion to
Compel Arbitration/Dismiss, Tr. at 24:6-15) (granting defendant’s motion to compel
arbitration).
Defendant concludes that it has not waived its right to arbitrate the disputes at
issue. Hurley v. Deutsche Bank Trust Co. Ams., 610 F.3d 334, 338 (6th Cir. 2010)
(“Because of the presumption in favor of arbitration under the Federal Arbitration
Act,” a party’s waiver of its right to arbitration is “not lightly infer[red]”). In the Sixth
Circuit, a party can waive its right to arbitrate only by: “(1) taking actions that are
completely inconsistent with any reliance on the arbitration agreement; and (2)
delaying its assertion to such an extent that the opposing party incurs actual
prejudice.” Johnson Assocs. v. HL Operating Corp., 680 F.3d 713, 717 (6th Cir. 2012)
(internal quotation marks omitted). “Both inconsistency and actual prejudice are
required.” Shy v. Navistar Int’l Corp., 781 F.3d 820, 827-28 (6th Cir. 2015).
Defendant maintains that it raised the arbitration clause in its first filing and has
repeatedly raised and preserved that right ever since, including in its Answer, in a joint
statement before the scheduling conference, and in person at the scheduling
conference. For that reason, Defendant asserts that it did not delay in asserting its
right to arbitrate and Plaintiffs have not been prejudiced. Defendant also asserts that
it sought to bifurcate discovery to focus only on facts relevant to arbitration but
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Plaintiffs objected and insisted on full merits discovery. Allegedly, Judge Rosen
acknowledged Defendant’s objection at the scheduling conference and, though he
ordered full discovery, also clarified that it would not construe Defendant’s
participation in discovery as a waiver of Defendant’s right to pursue arbitration.
Defendant argues that it did not waive its right to arbitrate by filing a motion to
dismiss. Citing Cooper v. Asset Acceptance, LLC, 532 F. App’x 639 (7th Cir. 2013)
(no waiver where defendant removed to federal court, moved to dismiss, and
participated in several scheduling conferences and discovery before moving to compel
arbitration); Third Nat’l Bank in Nashville v. WEDGE Group, Inc., 749 F.Supp. 851,
852, 854 (M.D. Tenn. 1990) (no waiver where defendant moved to dismiss, district
court granted motion, and Sixth Circuit reversed, after which defendant moved for a
stay of proceedings pending arbitration). Defendant states that the limited discovery
it conducted (Plaintiffs’ shipping histories and relationships with Defendant) was
appropriate before bringing the motion to stay because it confirmed the applicability
of the arbitration provision to this cause of action.
2.

Plaintiffs’ Positions

Relying on Michigan law, Plaintiffs contend that the arbitration provision is
unenforceable because Defendant reserved itself the right to unilaterally modify its
terms without notice. Due to this reservation of a unilateral right to change any term
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means that there is no mutuality - no consideration - to establish an agreement that can
be arbitrated. Citing Volt Info. Sciences, 489 U.S. at 478-79 (“we have recognized that
the FAA does not require parties to arbitrate when they have not agreed to do so,” and
that “[a]rbitration under the Act is a matter of consent, not coercion . . .”).
Plaintiffs argue that there was, and cannot be, an agreement to arbitrate the prearbitration clause shipments made by Plaintiffs – which are the only shipments at issue
in this case. Dkt. No. 85, PgID 1916 (Defendant’s “motion fails because the
Complaint seeks only to pursue claims on behalf of BleachTech and Solo for
shipments made before the . . . arbitration clause even came into play.”). Plaintiffs
argue that Defendant’s position is contradicted by the express provisions of the UPS
Terms upon which Defendant insists support its position: “In tendering a shipment for
service, the shipper agrees that the version of the [UPS] Terms and the applicable
[UPS] Guide in effect at the time of shipping will apply to the shipment and its
transportation.” Dkt. No. 76, Ex. A at § 1. Plaintiffs contend that Defendant’s motion
asks the Court to “honor the provisions of the contract that [Defendant] itself declared
to supply the applicable Terms (sans arbitration), and to that contract some other
Terms (containing the chimerical arbitration clause) that are inconsistent with the
expressly applicable ones.” Dkt. No. 85, PgID 1916.
Plaintiffs assert that Solo did not agree to arbitrate any claims because: (1) The
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UPS Store was not Solo’s agent for purposes of the arbitration provision/agreement;
and (2) equitable estoppel does not operate to bind Solo to arbitrate his claims.
Plaintiffs argue that for shippers like Solo, it was the independently-owned third party
retailer (such as The UPS Store) who contracted with Defendant, not Solo. Plaintiffs
state that Defendant is trying to impute an arbitration agreement to Solo that it (and
Defendant) never agreed to because there is no contract between Defendant and Solo,
as Defendant acknowledged at oral argument before the Sixth Circuit.
Plaintiffs state that Defendant waived any right it had to arbitrate Plaintiff’s
claims based on its failure to do so earlier. Plaintiffs note that: (1) Defendant failed
to “move” for arbitration until two years and four months after the Complaint was
filed (12 of which was while the case was on appeal from its dismissal by Judge
Rosen), and (2) even after the appellate decision, Defendant waited eight months to
file the motion to stay/dismiss. Plaintiffs assert that Defendant’s choice to litigate the
merits through its motion to dismiss, a choice that led to extensive costs and delays,
plus the attendant discovery, discovery disputes, and delay after the case was
remanded, demonstrate actual prejudice to Plaintiffs.
Plaintiff states that it is clear that Defendant knew that it could arbitrate
BleachTech’s claims as early as January 13, 2014. On that date, Defendant’s in house
counsel emailed Defendant’s lead outside litigation counsel information about
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BleachTech, including a screen shot showing BleachTech’s UPS account (shipper)
number [UPS023302] and its location in Seville, Ohio. Plaintiff asserts that means
that, no later than January 13, 2014, Defendant knew BleachTech’s UPS account
number and that BleachTech had continued to ship products with Defendant. And,
that meant those products were being shipped pursuant to the UPS Terms applicable
effective December 30, 2013, which included the arbitration provision Defendant now
seeks to apply. Based on that information, Plaintiffs contend that Defendant knew
about BleachTech’s shipments six months before this action was filed in this Court
(less than a month after the original case was filed in California) and about eight
months before it filed its Rule 12(b)(6) motion to dismiss in this case.
3.

The Court’s Conclusion

The Court finds that Defendant has waived its right to arbitrate by taking
actions inconsistent with reliance on the arbitration provision and delaying its
assertion of the need to arbitrate, to the actual prejudice of Plaintiffs. Specifically,
Defendant did not seek to compel arbitration until more than two years after the
Complaint was filed, as it opted to move for dismissal of the Complaint on the merits.
Defendant took actions inconsistent with reliance on the arbitration provision when
it sought to dismiss the Complaint on the merits, rather than because of the arbitration
provision. And, not only did Defendant wait more than two years to seek to resolve
the litigation pursuant to the arbitration provision, it did not file the instant motion
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regarding the arbitration provision until eight months after the Sixth Circuit remanded
the case to this Court. Such inconsistent actions and inordinate delay resulted in
actual prejudice to Plaintiffs, including costs that they would not have been incurred
had Defendant sought to arbitrate previously. The Court concludes that Defendant’s
motion to stay or dismiss the proceedings is unwarranted.
IV.

CONCLUSION
Accordingly,
IT IS ORDERED that Defendant’s Motion to Stay or Dismiss Proceedings [Dkt

No. 76] is DENIED.
IT IS ORDERED.
S/Denise Page Hood
Denise Page Hood
Chief Judge, United States District Court
Dated: September 6, 2017
I hereby certify that a copy of the foregoing document was served upon counsel of
record on September 6, 2017, by electronic and/or ordinary mail.
S/LaShawn R. Saulsberry
Case Manager

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