Davis v. Sprint Nextel Corporation et al

Filing 24

ORDER - Defendants' Motion to Compel Arbitration and Dismiss or Stay Case (Doc. 8 ) is GRANTED. This action is STAYED pending arbitration. The parties shall update the Court on the status of arbitration in ninety (90) days. Signed on 11/26/2012 by District Judge Dean Whipple. (Willis, Kathy)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
SHERIDAN L. DAVIS, individually, and on
behalf of all others similarly situated,
Plaintiff,
v.
SPRINT NEXTEL CORPORATION, et al.,
Defendants.

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No. 12-01023-CV-W-DW

ORDER
Before the Court is Defendants’ Motion to Compel Arbitration and Dismiss or
Stay Case (Doc. 8). For the following reasons, Defendants’ motion is granted.1
I. BACKGROUND
Plaintiff Sheridan Davis filed her class action Petition for Damages in the Circuit
Court of Jackson County, Missouri, alleging Sprint charged late fees to its cellular phone
service users when such late fees should not have been imposed. Plaintiff has brought
claims for breach of contract (Count I), breach of covenant of good faith and fair dealing
(Count II), violation of Missouri Merchandising Practices Act (Count III), unjust
enrichment and money had and received (Count IV), fraud (Count V) and fraudulent
concealment (Count VI). Sprint removed to this Court under the Class Action Fairness
Act and subsequently filed the present motion to compel arbitration.

1

The Court will also refer to the defendants collectively as "Sprint."

Sprint maintains that this Court must compel arbitration of Plaintiff’s claims
pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq. and the parties’
agreement. Sprint maintains that Plaintiff entered into a Subscriber Agreement with
Sprint, the Terms & Conditions of which include an arbitration agreement. The
arbitration agreement provides that the parties agree to finally settle all disputes only by
arbitration. Plaintiff argues that arbitration of her claims is not required because the
arbitration agreement is unconscionable and therefore unenforceable.
II. DISCUSSION
The FAA reflects a strong federal policy in favor of arbitration and provides that
agreements to arbitrate are "valid, irrevocable, and enforceable." See 9 U.S.C. § 2; see
also AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745 (2011). Accordingly, if
a valid and enforceable arbitration agreement exists, any dispute that falls within the
scope of that agreement must be submitted to arbitration. Lyster v. Ryan’s Family Steak
Houses, Inc., 239 F.3d 943, 945 (8th Cir. 2001).
However, the FAA also provides that an arbitration agreement may be declared
unenforceable on any ground that exists at law or in equity for revocation of a contract.
See § 2. Section 2 "permits agreements to arbitrate to be invalidated by ‘generally
applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by
defenses that apply only to arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue." Concepcion, 131 S. Ct. at 1746 (quoting Doctor’s
Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)).

In the 2011 case AT&T Mobility LLC v. Concepcion, the Supreme Court
reviewed an arbitration agreement found in cellular telephone contracts. The arbitration
agreement had been found unconscionable by a federal district court in California and the
U.S. Court of Appeals for the Ninth Circuit because the agreement did not permit
classwide arbitration. Id. at 1745. The Supreme Court reversed, holding that the FAA
preempted a California judicial rule that deemed unconscionable class arbitration waivers
in consumer contracts and stating that the FAA preempts any state rule which "stands as
an obstacle to the accomplishment and execution of [the FAA’s] full purposes and
objectives . . . ." See id. at 1753.2
The effect of Concepcion was described by the Missouri Supreme Court in Brewer
v. Missouri Title Loans, 364 S.W.3d 486 (Mo. 2012). Where a party raises an
unconscionability defense to an arbitration agreement, Concepcion requires the court to
analyze the facts of the particular case to determine if the defense stands as an obstacle to
the accomplishment of the FAA. See Brewer, 364 S.W.3d at 491-92. Put another way,
Concepcion instructs that, instead of limiting its unconscionability
considerations to the presence of the class waiver, the trial court should
have assessed whether the arbitration agreement was enforceable in
light of . . . ordinary state-law principles that govern contracts but that
do not single out or disfavor arbitration.
Robinson v. Title Lenders Inc., 364 S.W.3d 505, 517 (Mo. 2012).
With these considerations in mind, the Court turns to the arbitration agreement at

2

As declared by the Supreme Court in Concepcion, the overarching purpose of the FAA
"is to ensure the enforcement of arbitration agreements according to their terms so as to
facilitate streamlined proceedings." Id. at 1748.

issue in this case. Upon review of the parties’ arguments and the law, the Court finds that
the arbitration agreement is not unconscionable.3
Plaintiff argues that the arbitration agreement is unconscionable because: it is
contained in an adhesion contract, which is presented in a standardized form to all
consumers and is non-negotiable; a large disparity in bargaining power exists between the
parties to the contract; the contract spans dozens of pages and contains fine print; Sprint
limited its damage exposure by stating that it would not be liable for incidental,
consequential, punitive or special damages and also stated that its liability is limited to no
more than the proportionate amount of the service charges attributable to the affected
period; and the agreement bars any classwide action. Plaintiff also claims the arbitration
agreement is unenforceable because it requires the arbitration to be administered by the
National Arbitration Forum, which has withdrawn from the consumer arbitration field.
Finally, Plaintiff argues that Sprint should be estopped from seeking arbitration because it
has instituted legal actions against others without first resorting to arbitration.
As previously stated, one basis of Plaintiff’s unconscionability argument is that the
arbitration agreement bars any classwide action. "Concepcion instructs clearly that a
court cannot invalidate an arbitration agreement on the sole basis that it contains a class

3

Courts have typically addressed the issue of unconscionability under Missouri law
through the lens of procedural and substantive unconscionability. See Brewer, 364 S.W.3d at
493 n.3. However, the Missouri Supreme Court recently stated that, pursuant to the opinion in
Concepcion, it would no longer focus on a discussion of procedural and substantive
unconscionability and instead would limit its discussion to the facts related to unconscionability
impacting the formation of the contract. Id. It advised Missouri courts to do the same in future
decisions. Id. Accordingly, the Court will not analyze the issue through the lens of procedural
and substantive unconscionability in this Order.

waiver." Robinson, 364 S.W.3d at 514-15. However, as described below, the Court does
not find the arbitration agreement unconscionable on the various grounds that Plaintiff
has raised. Accordingly, the existence of a class action wavier does not make this
arbitration agreement unconscionable.
While the Court agrees that the contract was presented to Plaintiff in a
standardized, non-negotiable form and that Sprint wields greater bargaining power than
Plaintiff, these facts do not establish unconscionability under Missouri law. See Fallo v.
High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009) (non-negotiable contract presented by
party with superior bargaining power was not unconscionable because the terms were
clear and any reasonable person would expect that disputes would be arbitrated under the
contract); Kenner v. Career Educ. Corp., No. 11-CV-997-AGF, 2011 WL 5966922, at *4
(E.D. Mo. Nov. 29, 2011); Robinson, 364 S.W.3d at 515, 517 n.14 ("As such, postConcepcion, a court should not invalidate an arbitration agreement in a consumer contract
simply because it is contained in a contract of adhesion or because the parties had unequal
bargaining power, as these are hallmarks of modern consumer contracts generally.").
The arbitration agreement in this Subscriber Agreement is not hidden. The
arbitration agreement is titled "Dispute Resolution" in large, bold font and is printed in
the same text size as the other contract terms. Any reasonable person would expect
disputes would be arbitrated under the contract, and Plaintiff has not alleged that Sprint
used any high-pressure sales tactics to coerce her into signing the Subscriber Agreement.
See Fallo, 559 F.3d at 878; Robinson, 364 S.W.3d at 517 n.4.

The Court finds this Subscriber Agreement to be less like the unconscionable
agreement in Brewer v. Missouri Title Loans4 and more like the agreement in
Concepcion. In both this agreement and the Concepcion agreement, the cellular
telephone companies provided informal resolution processes that allowed the parties to
attempt to resolve the dispute prior to the initiation of arbitration proceedings. In both
agreements, arbitration would occur in the county of the consumer’s residence and either
party could bring a claim in small claims court in lieu of arbitration. Further, both
agreements provided that the cellular telephone company would cover some, if not all, of
the consumer’s arbitration costs.5
Conversely, the unconscionable agreement in Brewer contained no informal
resolution process and required that each party bear all its own costs for the arbitration.
Further, the title company reserved the right to forego arbitration and litigate in court
while barring the borrower from doing so. The Missouri Supreme Court found that such
an arbitration agreement provides no viable means of dispute resolution for the borrower.6
4

The Missouri Supreme Court had previously issued an opinion in Brewer in 2010, in
which it struck the arbitration agreement in the contract as unconscionable. However that
decision was vacated and remanded by the U.S. Supreme Court for further consideration in light
of Concepcion. After the Missouri Supreme Court again found the arbitration agreement
unconscionable, Missouri Title Loans sought a petition for writ of certiorari to the U.S. Supreme
Court in the second Brewer decision. That petition was denied on October 1, 2012.
5

In the Concepcion agreement, AT&T agreed to pay all costs of arbitration for nonfrivolous claims. In the agreement at issue here, Sprint agrees to cover "any arbitration
administrative or filing fees above: (a) $25 if [the consumer is] seeking less than $1,000 from
[Sprint]; or (b) the equivalent court filing fees for a court action in the appropriate jurisdiction if
[the consumer is] seeking $1,000 or more from [Sprint]."
6

Indeed, no borrower had ever utilized the arbitration clause to recover from the title
company. See Brewer, 364 S.W.3d at 495.

The Court finds that the same cannot be said for the arbitration agreement at issue here.
Plaintiff also points to language in the Subscriber Agreement that limits Sprint’s
damages as a basis for the unconscionability of the arbitration agreement. "[I]ssues of
remedy go to the merits of the dispute and are for the arbitrator to resolve in the first
instance." Arkcom Digital Corp. v. Xerox Corp., 289 F.3d 536, 539 (8th Cir. 2002)
(noting that whether the arbitration agreement validly limits remedies does not affect the
validity of the agreement to arbitrate); see also Chisholm v. Career Educ. Corp., No. 11CV-994-HEA, 2011 WL 5524552, at *2 (E.D. Mo. Nov. 14, 2011); KCMS Contracting,
Inc. v. Triage Mgmt. Servs., Inc., No. 10-CV-182-ODS, 2010 WL 2008844, at *2 (W.D.
Mo. May 18, 2010); Grossman v. Thoroughbred Ford, Inc., 297 S.W.3d 918, 924 (Mo.
Ct. App. 2009). Because issues concerning damages are for the arbitrator to decide and
do not affect the validity of the arbitration agreement, Sprint’s limits on damages do not
render this arbitration agreement unconscionable.
Plaintiff also argues that the arbitration agreement is unenforceable because the
Subscriber Agreement requires that the arbitration will be administered by the National
Arbitration Forum ("NAF"). Plaintiff maintains that as of July 24, 2009, NAF ceased all
consumer arbitrations. The text of the arbitration agreement regarding the selection of an
arbitrator is as follows:
(4) The arbitration will be administered by the National Arbitration
Forum ("NAF") under its arbitration rules. If any NAF rule conflicts
with the terms of the Agreement, the terms of the Agreement apply. .
..
(5) Unless we each agree otherwise, the Arbitration will be conducted
by a single neutral arbitrator and will take place in the county of your

last billing address. The federal or state law that applies to the
Agreement will also apply during the arbitration.
In analyzing similar language in an arbitration agreement, the U.S. District Court
for the District of Minnesota held that the agreement did not mandate that NAF be
selected as the exclusive arbitrator, it only required that NAF administer the arbitration
agreement. See Meskill v. GGNSC Stillwater Greeley LLC, 862 F. Supp. 2d 966, 972-74
(D. Minn. 2012). As such, it found the arbitration agreement enforceable because it
suggested that an entity other than NAF could conduct the arbitration. Id. The district
court cited to several cases that support the proposition that "when an arbitration clause
selects an arbitral’s forum’s rules but does not expressly designate that forum to hear the
matter, arbitration may be compelled notwithstanding the forum’s unavailability." Id. at
972. Here, the agreement states that the arbitration will be administered by NAF under its
rules, but as to what entity will actually conduct the arbitration, it only requires that "a
single neutral arbitrator" conduct the proceedings. The Court agrees with the reasoning
set forth in Meskill, and finds that the arbitration agreement permits arbitration to be
conducted by an entity other than NAF, therefore the agreement in enforceable.
Finally, Plaintiff argues that the Court should not compel arbitration on estoppel
grounds. Plaintiff states that: "Although no discovery has commenced in this case and
Plaintiff has not had the opportunity to complete its investigation, upon information and
belief, it appears that Sprint has pursued delinquent subscribers in Missouri state court,
rather than proceeding to arbitration." As support, Plaintiff claims that a search on
Missouri case.net reveals cases where Sprint sued subscribers by assigning its collection

rights to third parties to bring a court action on Sprint’s behalf. Although Sprint is not
named as a party to these actions, Plaintiff claims that Sprint has assigned its rights so as
to effectively circumvent the terms of Sprint’s arbitration agreements. Sprint has
submitted an affidavit in which the Outside Collection Agency Manager at Sprint avers
that Sprint does not pursue its individual liable customers in civil actions for collections
on past due accounts.
Courts have typically placed a heavy burden on those seeking to prove waiver of
arbitration. See Chisholm, 2011 WL 5524552, at *2; Newsom v. Anheuser-Busch Cos.,
Inc., 286 F. Supp. 2d 1063, 1067 (E.D. Mo. 2003). Further, any doubts concerning the
question of arbitrability should be resolved in favor of arbitration. See Kenner, 2011 WL
5966922, at *4. In a typical waiver claim, the party seeking to avoid arbitration attempts
to prove that the other party acted inconsistently with its right to arbitrate in the present
proceeding, such as by initiating the litigation or participating in the litigation through
extensive motion practice or discovery. Although Plaintiff does not argue a waiver claim
in that she suggests Sprint acted inconsistently with the arbitration agreement in a case
other than the present one, her argument rests on a premise similar to waiver, thus the
Court finds that she faces the same heavy burden as would apply in a wavier claim.
Plaintiff has not met this heavy burden in proving Sprint acted inconsistently with
the arbitration agreement. She has not provided evidence that Sprint was a party to
litigation where an arbitration agreement similar to the present one was in effect. Further,
she has not stated whether the alleged lawsuits were filed in small claims court, which

would be permissible under the arbitration agreement here. Accordingly, the Court finds
that Sprint’s motion to compel arbitration should not be denied on estoppel grounds.
III. CONCLUSION
For the reasons described in this Order, the Court finds that a valid and enforceable
arbitration agreement exists and that this dispute must be submitted to arbitration. Under
the FAA, the proper course of action is to stay these proceedings pending completion of
arbitration. See 9 U.S.C. § 3; see also Green v. SuperShuttle Int’l, Inc., 653 F.3d 766,
769-70 (8th Cir. 2011). Accordingly, Defendants’ Motion to Compel Arbitration and
Dismiss or Stay Case (Doc. 8) is GRANTED and this action is STAYED pending
arbitration. The parties shall update the Court on the status of the arbitration in ninety
(90) days.
SO ORDERED.

Date:

November 26, 2012

/s/ Dean Whipple
Dean Whipple
United States District Judge