Rhodall v. Verizon Wireless of the East LP

Filing 19

ORDER AND OPINION granting 10 Motion to Dismiss to Compel arbitration. Signed by Honorable Margaret B Seymour on 9/9/2011.(asni, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
AIKEN DIVISION
Jasmine M. Rhodall,

)
) C/A No. 1:10-3195-MBS
Plaintiff,
)
)
vs.
)
)
OPINION AND ORDER
Verizon Wireless of the East, L.P., d/b/a
)
Verizon Wireless,
)
)
Defendant.
)
____________________________________)
Plaintiff Jasmine M. Rhodall filed the within action on December 17, 2010 against her former
cellular phone carrier, Defendant Verizon Wireless of the East, L.P. Plaintiff filed an amended
complaint on January 7, 2011.
This matter is before the court on Defendant’s motion to dismiss to compel arbitration, which
motion was filed on January 21, 2011. Plaintiff filed a response in opposition on February 4, 2011,
to which Defendant filed a reply on February 14, 2011. The court held a hearing on April 5, 2011.
The court concludes that Defendant’s motion should be granted.
I. FACTS
Plaintiff alleges that in December 2009 she visited Defendant’s store at Aiken Mall, South
Carolina, where she entered into a Customer Agreement (the “Agreement”) with Defendant for the
purchase of a cellular phone and service. Am. Compl. ¶¶ 5, 6 (ECF No. 7). Plaintiff determined that
the cellular phone and/or service were not satisfactory. Accordingly, she returned the phone to
Defendant’s store and cancelled the Agreement on or about January 28, 2010. Id. ¶ 7. On or about
February 18, 2010, Plaintiff received a billing statement from Defendant that indicated her phone

and account were still active. Id. ¶ 8. Plaintiff discovered that employees of Defendant’s store had
appropriated Plaintiff’s phone and account for their personal use. Id. ¶ 9. Plaintiff notified law
enforcement officials and advised Defendant of the fraudulent actions of the employees of
Defendant’s store. Nevertheless, Defendant continued to bill Plaintiff for calls charged to her
account. Plaintiff’s account incurred charges in excess of $900.00. Id. ¶¶ 10-13. In or around
August 2010, Defendant referred the account to a collection agency. Plaintiff disputed the
delinquency and notified the collection agency of the fraudulent activity. Id. ¶ 14. The collection
agency returned the account to Defendant. Defendant turned the account over to a second collection
agency. Id. ¶ 16.
In September 2010, Plaintiff obtained credit reports showing that Defendant had reported her
account as delinquent and in collection. Id. ¶ 17. Plaintiff disputed Defendant’s reporting to the
credit agencies. However, according to Plaintiff, Defendant failed to conduct an adequate
reinvestigation of her dispute, and verified its reporting as accurate to the credit agencies. Id. ¶ 20,
21. Plaintiff contends that she remains obligated on a fraudulent account, has suffered a loss of
creditworthiness and damage to her reputation, has expended time attempting to rectify the situation,
and has suffered extreme emotional distress. ¶ 22. Plaintiff alleges causes of action for violation
of the Fair Credit Billing Act, 15 U.S.C. ¶ 1620(f); and Fair Debt Collection Practices Act, 15 U.S.C.
¶ 1692a(4) (First Cause of Action); violation of the Fair Credit Reporting Act (Second Cause of
Action); violation of the South Carolina Unfair Trade Practices Act, S.C. Code Ann. §§ 39-5-10 et
seq. (Third Cause of Action); and negligent hiring and supervision (Fourth Cause of Action).
II. DISCUSSION
Defendant brings this motion pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-9.
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The Federal Arbitration Act provides that “[a] written provision in . . . a contract evidencing a
transaction involving commerce to settle by arbitration a controversy thereafter arising out of such
contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist in law or
in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA stands as “‘a congressional
declaration of a liberal federal policy favoring arbitration agreements.’” Cent. W. Va. Energy, Inc.
v. Bayer Cropscience LP, 645 F.3d 267, 272 (4th Cir. 2011) (quoting Moses H. Cone Mem’l Hosp.
v. Mercury Const. Corp., 460 U.S. 1, 24 (1983)). Its “‘primary purpose . . . is to ensure that private
agreements to arbitrate are enforced according to their terms.’” Id. (quoting Stolt–Nielsen S.A. v.
AnimalFeeds Int'l Corp., 130 S. Ct. 1758, 1773 (2010)). In interpreting arbitration agreements, the
courts must resolve any doubts concerning the scope of arbitrable issues in favor of arbitration. Id.
(quoting Moses H. Cone, 460 U.S. at 24–25).
To compel arbitration, Defendant must demonstrate (1) the existence of a dispute between
the parties; (2) a written agreement that includes an arbitration provision that purports to cover the
dispute; (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or
foreign commerce; and (4) the failure, neglect, or refusal of Plaintiff to arbitrate the dispute. See
Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002). “‘To decide whether an
arbitration agreement encompasses a dispute a court must determine whether the factual allegations
underlying the claim are within the scope of the arbitration clause, regardless of the legal label
assigned to the claim.’” Hightower v. GMRI, Inc., 262 F.3d 239, 242 (4th Cir. 2001) (quoting J.J.
Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 319 (4th Cir.1988)). There is no
question that there is a dispute between the parties, as evidenced by the Complaint. Further, there
is no question that Plaintiff refuses to arbitrate the dispute. The first and fourth factors are satisfied.
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As to the third factor, it is well settled that telephones, including cellular telephones, are
instrumentalities of interstate commerce. See United States v. Mandel, No. 09-4116, 2011 WL
3200697 (7th Cir. 2011); United States v. Evans, 476 F.3d 1176 (11th Cir. 2007); United States v.
Marek, 238 F.3d 310 (5th Cir. 2001); United States v. Gilbert, 181 F.3d 152 (1st Cir. 1999); United
States v. Weathers, 169 F.3d 336 (6th Cir. 1999); United States v. Clayton, 108 F.3d 1114 (9th Cir.
1997). The court turns to the second factor, whether there exists a written agreement that includes
an arbitration provision that purports to cover the dispute.
A.

Is There A Written Agreement That Includes an Arbitration Provision
The Agreement provided:
I AGREE TO THE CURRENT VERIZON WIRELESS CUSTOMER
AGREEMENT (CA), INCLUDING THE CALLING PLAN, (WITH
EXTENDED LIMITED WARRANTY/SERVICE CONTRACT, IF
APPLICABLE), AND OTHER TERMS AND CONDITIONS FOR SERVICES
AND SELECTED FEATURES I HAVE AGREED TO PURCHASE AS
REFLECTED ON THE RECEIPT, AND WHICH HAVE BEEN PRESENTED
TO ME BY THE SALES REP, AND WHICH I HAD THE OPPORTUNITY
TO REVIEW. I UNDERSTAND THAT I AM AGREEING TO AN EARLY
TERMINATION FEE PER LINE OF UP TO $175, OR UP TO $350 ON
ADVANCED DEVICES (SEE VERIZON WIRELESS.COM/ADVANCED
DEVICES FOR DETAILS), LIMITATIONS OF LIABILITY FOR SERVICE
AND EQUIPMENT, SETTLEMENT OF DISPUTES BY ARBITRATION AND
OTHER MEANS INSTEAD OF JURY TRIALS AND OTHER IMPORTANT
TERMS IN THE CA.

ECF No. 10-2, 2. It appears that Plaintiff signed the page beneath the referenced language. ECF No.
10-2, 2.
In addition, the Verizon “Customer Agreement Terms & Conditions” provided:
THIS AGREEMENT STARTS WHEN YOU ACCEPT. Paragraphs marked “4”
continue after it ends. You accept when you do any of the following things after an
opportunity to review this agreement:

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• Give us a written or electronic signature;
• Tell us orally or electronically that you accept;
• Activate your service through your wireless device;
• Open a package that says you are accepting opening it; or
• Use your service after making any change or addition when we’ve told you that the
change or addition requires acceptance.
IF YOU DON’T WANT TO ACCEPT, DON’T DO ANY OF THESE THINGS.
You can cancel (if you’re a customer and not assuming another customer’s service)
WITHIN 30 DAYS of accepting. You’ll still be responsible through that date for
the new service and any charges associated with it.
ECF No. 10-3, 1.
Further, the Agreement provided:
4 WE EACH AGREE TO SETTLE DISPUTES ONLY BY ARBITRATION
OR IN SMALL CLAIMS COURT AS PROVIDED BELOW. THERE’S NO
JUDGE OR JURY IN ARBITRATION, BUT AN ARBITRATOR CAN
AWARD THE SAME DAMAGES AND RELIEF, AND MUST HONOR THE
SAME LIMITATIONS IN THIS AGREEMENT, AS A COURT WOULD. IF
AN APPLICABLE STATUTE PROVIDES FOR AN AWARD OF
ATTORNEY’S FEES, AN ARBITRATOR CAN AWARD THEM TOO. WE
ALSO EACH AGREE, TO THE FULLEST EXTENT PERMITTED BY LAW,
THAT:
(1) THE FEDERAL ARBITRATION ACT APPLIES TO THIS AGREEMENT.
EXCEPT FOR QUALIFYING SMALL CLAIMS COURT CASES, ANY
CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY PRIOR AGREEMENT FOR WIRELESS SERVICE
WITH US OR ANY OF OUR AFFILIATES OR PREDECESSORS IN INTEREST,
OR ANY PRODUCT OR SERV ICE PROVIDED UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR SUCH A PRIOR AGREEMENT, OR ANY
ADVERTISING FOR SUCH PRODUCTS OR SERVICES, WILL BE SETTLED
BY ONE OR MORE NEUTRAL ARBITRATORS BEFORE THE AMERICAN
ARBITRATION ASSOCIATION (“AAA”) OR BETTER BUSINESS BUREAU
(“BBB”). . . .
Id.
It appears from plain language set forth hereinabove that the Agreement contained arbitration
provisions that were to survive termination of the Agreement. Plaintiff asserts, however, that
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because she canceled the Agreement within thirty days in accordance with its terms, the arbitration
provisions are not enforceable. Plaintiff argues that the Agreement was cancelled, and that a
cancelled or “void” contract is not a contract at all. Therefore, according to Plaintiff, no contract
exists by which the parties are bound to arbitrate.
In Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006), the Supreme Court
determined that, as a matter of substantive federal arbitration law, an arbitration provision is
severable from the remainder of the contract and is enforceable apart from the remainder of the
contract. The Court noted that, unless the challenge is to the arbitration clause itself, the issue of a
contract’s validity is considered by the arbitrator in the first instance. Id. at 445-46; see also
Snowden v. CheckPoint Check Cashing, 290 F.3d 631 (4th Cir. 2002) (noting that “if a party seeks
to avoid arbitration . . . by challenging the validity or enforceability of an arbitration provision on
any grounds that ‘exist at law or in equity for the revocation of any contract,’ 9 U.S.C. § 2, the
grounds ‘must relate specifically to the arbitration clause and not just to the contract as a whole’”).
This rule of law applies to challenges that, as in this case, would render the contract void or voidable.
Id. at 446-48.
Plaintiff asserts that Defendant “hopes to force Plaintiff, and presumably other customers
who decide not to do business with Defendant after a trial period [to comply] with the same
arbitration provision that applies to those who actually enter into a service plan.” Resp. to Def.’s
Mot. to Dismiss 13 (ECF No. 13). Plaintiff’s contention is of no moment. The Buckeye Check
Cashing Court acknowledged that the rule permits the enforcement of an arbitration agreement in
a contract that the arbitrator later finds to be void. Id. at 448. The court concludes that the parties
entered into a written agreement containing an arbitration provision.
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B.

Does the Dispute Fall Within the Scope of the Agreement
As noted hereinabove, the arbitration provisions cover “any controversy or claim arising out

of or relating to th[e] Agreement . . . or any product or service provided under or in connection with
th[e] Agreement . . . .” Similar arbitration provisions to that contained in the Agreement have been
characterized as “broad arbitration clauses capable of expansive reach.” Pennzoil Exploration &
Production Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1067 (5th Cir. 1998) (citing Prima Paint Corp.
v. Flood & Conklin Mfg. Co., 388 U.S. 395, 397-98 (1967)). Broad arbitration clauses are not
limited to claims that literally arise under the contract but embrace all disputes between the parties
having a significant relationship to the contract, regardless of the label attached to the dispute. Id.
Defendant’s alleged reporting of erroneous information to the various credit agencies
constitutes a controversy “arising out of or relating to” the Agreement and was contemplated by the
parties. See, e.g., Agreement, CA-P7 (ECF No. 10-3) (“Further, you authorize us to . . . share credit
information about you with credit reporting agencies”). Thus, Plaintiff’s statutory claims under the
Fair Credit Billing Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act, and Unfair
Trade Practices Act fall within the ambit of the broad arbitration language. Plaintiff contends,
however, that the actions of Defendant’s agents or employees with respect to the unauthorized use
of the phone and account are not within the scope of the Agreement. However, the fact that Plaintiff
alleges tort claims for negligent hiring and supervision does not take the case out of the scope of
arbitration. The conduct of Defendant’s agents or employees had a significant relationship to the
Agreement. The claims asserted by Plaintiff arise only by virtue of her having entered into the
Agreement in the first instance. The court concludes that the claims asserted by Plaintiff in the
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complaint fall within the scope of the arbitration agreement.
III. CONCLUSION
For the reasons stated, Defendant’s motion to dismiss to compel arbitration (ECF No. 10)
is granted.
IT IS SO ORDERED.

/s/ Margaret B. Seymour
United States District Judge

Columbia, South Carolina
September 9, 2011

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