James Shackelford Heating and Cooling, LC v. AT&T CORP et al

Filing 24

ORDER AND OPINION denying 13 Defendants' motion to compel arbitration, and resetting deadlines for Rule 26 conference and joint proposed scheduling order. Signed on 11/21/2017 by District Judge Ortrie D. Smith. (Kitsmiller, Julia)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
JAMES SHACKELFORD HEATING
AND COOLING, LC,
Plaintiff,
vs.
AT&T CORPORATION, et al.,
Defendants.

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Case No. 4:17-CV-663-ODS

ORDER AND OPINION (1) DENYING DEFENDANTS’ MOTION TO COMPEL
ARBITRATION AND STAY ACTION, AND (2) RESETTING DEADLINES FOR RULE 26
CONFERENCE AND PARTIES’ JOINT PROPOSED SCHEDULING ORDER
Pending is a motion filed by Defendants asking the Court to compel arbitration.
Doc. #14. For the following reasons, Defendants’ motion is denied.
I. BACKGROUND1
Plaintiff James Shackelford Heating and Cooling, L.C., is a heating, ventilation,
and air-conditioning (HVAC) installation and repair business. Since its inception in
1998, Plaintiff had the same landline phone number (“landline”), which was provided by
Defendants AT&T Corporation, AT&T Mobility LLC, and AT&T Mobility II LLC. In July
2011, Plaintiff moved its shop location, and asked Defendants to relocate its landline.
Defendants initially informed Plaintiff the landline could be relocated. But after Plaintiff
relocated, Defendants explained to Plaintiff the landline could not be relocated.
Defendants offered to have Plaintiff’s landline ported to a cell phone number, meaning
when calls were made to the landline, the call would be received at the cell phone
number. According to the parties’ briefing on the pending motion, Defendants ported
Plaintiff’s landline to a personal cell phone number acquired by Plaintiff’s sole member,
agent, and employee, James Shackelford. Shackelford acquired cell service for his
personal cell phone number from AT&T Mobility LLC beginning in or about June 2010.

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Unless otherwise noted, the facts contained in the background section are taken from
Plaintiff’s Petition. Doc. #1-1.

Relevant to the pending motion, Shackelford agreed, according to Defendants, to
arbitrate disputes arising from his cell service.
After the landline was ported in July 2011, Plaintiff alleges it experienced “an
immediate drop in call volume,” and “repeatedly contacted Defendants to ensure there
was no problem with the ported line.” Plaintiff was assured by Defendants there was no
issue, and the ported landline was working as expected. According to Plaintiff, its call
volume never increased to the previous level, even though it was assured by
Defendants that there was no issue with Plaintiff’s ported landline.
According to Plaintiff’s response to the pending motion, Shackelford encountered
one of Plaintiff’s former clients in 2014. The former client asked Shackelford why
Plaintiff closed its business. Shackelford informed the former client that Plaintiff did not
close. The former client informed Shackelford that any attempt to call Plaintiff’s landline
resulted in an automated notification stating the landline was no longer active, and
offering to connect he caller with other HVAC businesses. Shackelford went to the
client’s home where Shackelford called Plaintiff’s landline from the client’s phone.
Shackelford received the recording explained by the former client.
On February 22, 2017, Plaintiff filed suit against Defendants in the Circuit Court
of Jackson County, Missouri, alleging claims of breach of contract, tortious interference
with business expectancy, negligence, and failure to deliver calls pursuant to section
392.130.1 of the Missouri Revised Statutes. After Defendants were served in July
2017, they removed the matter to this Court in August 2017. After obtaining extensions
of time to respond to Plaintiff’s Petition, on October 4, 2017, Defendants filed a motion
to compel arbitration and stay action, which is now ripe for the Court’s consideration.

II. STANDARD
Whether parties agreed to arbitrate disputes is a question for judicial
determination. Neb. Mach. Co. v. Cargotec Sols., LLC, 762 F.3d 737, 740-41 (8th Cir.
2014) (citation omitted). The Federal Arbitration Act does not set forth the standard a
district court should apply when considering a motion to compel arbitration. Id. at 74142 (citation omitted). Courts that have addressed the issue have applied a summary
judgment standard, particularly when the parties rely upon matters outside the
pleadings. See Meierhenry Sargent LLP v. Williams, No. 16-4180, 2017 WL 1653312,
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at *3 (D. S.D. May 1, 2017) (collecting cases). Neither party establishes what standard
is applicable here. But both sides rely upon at least one matter outside the pleadings –
to wit, the agreement between Shackelford and AT&T. Given the parties’ reliance on
matters outside the pleadings and other courts’ application of a summary judgment
standard under similar circumstances, the Court will apply a summary judgment
standard, resolving all factual disputes in the non-moving party’s favor. See Neb. Mach.
Co., 762 F.3d at 742; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 588-89 (1986).

III. DISCUSSION
Under the Federal Arbitration Act, a court’s role is “limited to determining (1)
whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement
encompasses the dispute.” Pro Tech Indus. v. URS Corp., 377 F.3d 868, 871 (8th Cir.
2004); see also Int’l Bhd. of Elec. Workers v. Hope Elec. Corp., 380 F.3d 1084, 1098-99
(8th Cir. 2004). This is because arbitration is a matter of consent. Absent an
enforceable agreement to arbitrate a particular dispute, neither party can compel
arbitration of that dispute. See Bank of Am., N.A. v. UMB Fin. Servs., Inc., 618 F.3d
906, 911 (8th Cir. 2010) (quoting Berkley v. Dillard's Inc., 450 F.3d 775, 777 (8th Cir.
2006)); Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 299-300 (2010).
State law must be applied to determine if a binding agreement exists. Arthur Anderson
LLP v. Carlisle, 556 U.S. 624, 629-31 (2009); Bank of Am., 618 F.3d at 911.
“[T]raditional principles of state law allow a contract to be enforced by or against
nonparties to the contract through assumption, piercing the corporate veil, alter ego,
incorporation by reference, third-party beneficiary theories, waiver and estoppel.” Bank
of Am., 618 F.3d at 911 (citation omitted).
Defendants do not maintain Plaintiff was a signatory to a written agreement to
arbitrate. However, as part of his personal cell phone service contract with AT&T
executed in June 2010, Shackelford purportedly agreed to arbitrate claims arising from
that contract. Although Plaintiff was not a signatory to that agreement, Defendants
argue Plaintiff is a third-party beneficiary to the agreement. Thus, according to
Defendants, Plaintiff is required to arbitrate the claims in this lawsuit.

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The arbitration clause states “AT&T and you agree to arbitrate all disputes and
claims between us,” including “claims arising out of or relating to any aspect of the
relationship between us, whether based in contract, tort, statute, fraud,
misrepresentation or any other legal theory.” Doc. #14-1, at 31. Claims arising before
or after the agreement are also subject to arbitration. Id. The arbitration agreement
defines “AT&T” and “you” to include “respective subsidiaries, affiliates, agents,
employees, predecessors in interest, successors, and assigns, as well as all authorized
or unauthorized users or beneficiaries of services…under this or prior Agreements
between” Shackelford and AT&T. Id.
A signatory to an agreement seeking to arbitrate with a non-signatory to the
agreement must establish one of the following theories: (1) incorporation by reference,
(2) assumption, (3) agency, (4) veil-piercing/alter ego, and (5) estoppel. Reid v. Doe
Run Resources Corp., 701 F.3d 840, 846 (8th Cir. 2012) (citations omitted). “Missouri
recognizes an estoppel theory where the party must directly benefit from the contract.”
Id. (citing Nitro Distrib. v. Dunn, 194 S.W.3d 339, 348 (Mo. banc 2006)).
Defendants maintain Plaintiff is a third-party beneficiary to Shackelford’s cell
phone service agreement. However, simply being a third-party beneficiary is not
sufficient to bind a non-signatory to an arbitration agreement. Cent. Tr. Bank v. Graves,
495 S.W.3d 797, 03 (Mo. Ct. App. 2016) (emphasis in original) (citations omitted). To
bind a third-party beneficiary, “the terms of the contract must clearly express intent to
benefit that party or an identifiable class of which the party is a member.” Nitro Distrib.,
194 S.W.3d at 345 (citation omitted). When the contract does not contain an express
declaration of intent to bind a third-party beneficiary, “there is a strong presumption that
the third party is not a beneficiary and that the parties contracted to benefit only
themselves.” Id. (citation omitted). The Missouri Supreme Court determined “a mere
incidental benefit to the third party is insufficient to bind that party.” Id. (citation omitted).
Defendants argue the arbitration agreement clearly expresses intent to bind
Plaintiff to arbitrate disputes because Plaintiff was a “user” or “beneficiary” of
Shackelford’s cell phone service. In support of this argument, Defendants cite an
Eastern District of Missouri case, Solis v. AT&T Mobility LLC, No. 15-CV-1343, 2015
WL 6739141 (E.D. Mo. Nov. 3, 2015). In Solis, the Court found a non-signatory to
AT&T’s arbitration agreement was bound because the non-signatory was a third-party
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beneficiary to the signatory’s cell phone service contract. Id. at *1-2. Significantly, the
non-signatory personally used the signatory’s cell phone services, and had a cell phone
number on the signatory’s cell phone contract. Id. at *1. Further, AT&T was obligated
to provide cell phone service to the non-signatory’s cell phone number unless the cell
phone number was suspended or terminated. Id. at *2. The matter before this Court
differs from Solis. Here, Plaintiff did not have a telephone line included as part of or
charged to Shackelford’s cell phone contract. Additionally, Plaintiff’s use of
Shackelford’s cell phone service was limited to calls received by Shackelford as a result
of Defendants porting Plaintiff’s landline to Shackelford’s cell phone number.
Moreover, the arbitration agreement does “not clearly express intent to benefit”
Plaintiff, and therefore, Plaintiff cannot be bound to arbitrate. Nitro Distrib., 194 S.W.3d
at 345 (citation omitted). To the extent Plaintiff is a “beneficiary” or “user,” as argued by
Defendants, the benefit received by Plaintiff was incidental. The incidental benefit
originated from Defendants’ failure to relocate Plaintiff’s landline and Defendants’
porting of Plaintiff’s landline to an already existing cell phone number acquired by
Shackelford. Thus, Plaintiff only benefitted if phone calls to its landline were forwarded
to Shackelford’s personal cell phone number. As the Missouri Supreme Court has held,
mere incidental benefit to a third party is not sufficient to bind that third party to
arbitration. Id. (citation omitted).
Setting aside the lack of a clearly expressed intent to bind Plaintiff, neither AT&T
nor Shackelford intended to bind Plaintiff to arbitration when the cell phone service
contract was executed. At that time, the parties agreed AT&T would provide cell phone
service to Shackelford, and Shackelford would pay for those services. Shackelford
acquired the cell phone service for his personal cell phone; he did not obtain the service
on behalf of Plaintiff. And there is no evidence Shackelford was acting as an agent of
Plaintiff when he acquired the cell phone service or executed the cell phone service
contract. While the arbitration agreement may be enforceable against Shackelford, the
Court finds the arbitration agreement is not enforceable against Plaintiff.
Even if the arbitration agreement could be enforced against Plaintiff, the
arbitration agreement does not encompass Plaintiff’s claims. Plaintiff’s claims arise
from Defendants’ alleged failure to properly port its landline. Doc. #1-1. As a result of
Defendants’ alleged failure, Plaintiff alleges phone calls to its landline were not
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forwarded or sent to Shackelford’s personal cell phone number.2 Instead, phone calls
to Plaintiff’s landline were allegedly directed to a pre-recorded message, informing the
caller that Plaintiff was no longer in business, and offering to connect the caller to
another HVAC business. Assuming Plaintiff’s allegations are true, which the Court must
do at this juncture, Plaintiff’s claims arise from Defendants’ actions (or inactions) with
regard to Plaintiff’s landline, not Shackelford’s cell phone service. Plaintiff’s claims do
not arise from phone calls it actually received on Shackelford’s cell phone. Thus, the
arbitration agreement does not encompass Plaintiff’s claims. For this additional reason,
Defendants’ motion to compel arbitration is denied.

IV. RESETTING DEADLINES
During the pendency of Defendants’ motion and pursuant to the parties’ request,
the Court stayed the deadlines for the parties’ Rule 26(f) conference and joint proposed
scheduling order. Doc. #21. With the denial of Defendants’ motion, those deadlines
must be reset. The Rule 26(f) conference shall take place on or before December 22,
2017. The parties shall file their joint proposed scheduling order on or before January
5, 2018. The parties are directed to the Court’s August 10, 2017 Order (Doc. #4) for
specifics pertaining to the Rule 26(f) conference and joint proposed scheduling order.

V. CONCLUSION
For the foregoing reasons, Defendants’ motion to compel arbitration is denied.
The parties are directed to hold their Rule 26(f) conference by December 22, 2017, and
submit their joint proposed scheduling order by January 5, 2018.
IT IS SO ORDERED.

DATE: November 21, 2017

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/s/ Ortrie D. Smith
ORTRIE D. SMITH, SENIOR JUDGE
UNITED STATES DISTRICT COURT

Furthermore, Plaintiff’s landline was ported to Shackelford’s personal cell phone
number only because (1) Defendants could not deliver on their promise to relocate
Plaintiff’s landline, and (2) Defendants suggested porting Plaintiff’s landline to a cell
phone number. Thus, Plaintiff only utilized Shackelford’s personal cell phone number
because of Defendants’ failure to deliver and suggestion.
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