Cellinfo, LLC v. Am. Tower Corp., CIVIL ACTION NO. 18-11250-WGY

506 F.Supp.3d 61

CELLINFO, LLC, Plaintiff,

v.AMERICAN TOWER CORPORATION, American Tower LLC, American Tower do Brasil - Cessao de Infraestruturas LTDA, and ATC IP LLC, Defendants.

CIVIL ACTION NO. 18-11250-WGY

United States District Court, D. Massachusetts.

Filed November 30, 2020

Angela C. Tarasi, Pro Hac Vice, Brian Eutermoser, Pro Hac Vice, James P. Brogan, Pro Hac Vice, Kevin A. Lake, Pro Hac Vice, King & Spalding LLP, Denver, CO, Kenneth R. L. Parker, Nathaniel J. Lichtin, Parker Keough LLP, Newton, MA, David H. Rich, Todd & Weld, Robbie J. Reutzel, Wolf, Greenfield & Sacks, PC, Boston, MA, Shaun P. Keough, Parker Keough LLP, Orlando, FL, for Plaintiff.

Harold Laidlaw, Pro Hac Vice, Mintz Levin Cohn Ferris Glovsky and Popeo PC, New York, NY, James M. Wodarski, Kristina Cary, Pro Hac Vice, Thomas H. Wintner, Andrew H. DeVoogd, Daniel B. Weinger, Geoffrey A. Friedman, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC, Boston, MA, for Defendants.

MEMORANDUM OF DECISION

YOUNG, D.J.

This case requires analysis of the substantive provisions of the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 3 - 4. Such cases are relatively rare today since the overly expansive interpretation of that Act by a majority of the Supreme Court and the acquiescence of the Congress has led to marginalizing the American jury,¹ once the conscience of the community and the "crown jewel" of American jurisprudence,² the evisceration of our civil rights and consumer protection laws in the workplace and the marketplace,³ barring thousands of Americans from their day in Court,⁴ and largely banishing the lower courts from the development of law in these areas.⁵ As every district judge knows, about all that's left is figuring out whether the parties can somehow be said to have actually agreed to arbitration,⁶ and, if so, sending the parties off to arbitrate and closing the case.⁷

"But let that bide."⁸

This case is different. It presents an issue of first impression in this circuit, viz. can a litigant who is properly sent to arbitration come back to court if it runs out of money? After all, arbitration is a private dispute resolution mechanism and it is expensive⁹ -- this case illustrates just how expensive.

I. The Legal Framework

At first glance this would appear to be quite a dubious proposition. After all, it apparently makes no difference to the Supreme Court majority that consumers, employees and small businesses rarely have the "ability, training, or resources to navigate the arbitration process effectively,"¹⁰ nor that customers complaining about alleged telephone overcharges cannot, as a practical matter, afford to pursue their claims unless they can pursue a class action,¹¹ nor that it is unconscionable and senseless to compel families to arbitrate wrongful death claims against a negligent nursing home¹² -- when in arbitration the families typically would be grossly disadvantaged (lower recovery chills lawyers’ enthusiasm to take cases),¹³ nor that a plaintiff's costs of individually arbitrating a federal statutory claim exceeds the potential recovery,¹⁴ nor that sending "wholly groundless" matters to arbitration would run afoul of the very purpose of arbitration to be expeditious, affordable, and effective.¹⁵

Nevertheless, the Fifth, Eighth, Ninth, and Tenth Circuits have mapped out a path, albeit narrow, to return to court from arbitration.

A. The Lifespan of a "Stay"

"Section 3 of the Federal Arbitration Act allows parties to an arbitration agreement to move the court to ‘stay a judicial proceeding when the matter before the court involves an issue governed by an agreement to arbitrate.’ " CellInfo I, 352 F. Supp. 3d at 132 (quoting Campbell v. General Dynamics Gov't Sys. Corp., 407 F.3d 546, 552 (1st Cir. 2005) ). "Section 4 of the Federal Arbitration Act permits parties ‘aggrieved by another party's refusal to arbitrate to petition a district court to compel arbitration in accordance with the parties’ preexisting agreement." Id. (quoting Campbell, 407 F.3d at 552 ). Sections 3 and 4 should be interpreted together. Marie v. Allied Home Mtge. Corp., 402 F.3d 1, 13 (1st Cir. 2005) ("[T]he Supreme Court has cautioned us to interpret sections 3 and 4 of the FAA together.").

A stay remains "until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration." 9 U.S.C. § 3.

B. When Would a Termination of Arbitration as a Result of Non-Payment Be "in Accordance with the Terms of the Agreement" and Permit Lifting a Stay?

Consulting the decisions below, whether the arbitration "has been had in accordance with the terms of the agreement," depends on whether the non-payment was a failure, neglect, or outright refusal to arbitrate, as opposed to an innocent inability to pay and proceed with the arbitration. See 9 U.S.C. § 4 ; Tillman v. Tillman, 825 F.3d 1069, 1075 (9th Cir. 2016).

Like CellInfo, the district court compelled Tillman to arbitrate. See Tillman, 825 F.3d at 1072-73. In that case, too, the paying party who compelled the arbitration elected not to cover the arbitration fees for Tillman. Id. at 1072, 1074. There, too, the arbitration was terminated due to non-payment pursuant to Rule-57 of the Commercial Arbitration Rules and Mediation Procedures, American Arbitration Association (2013) ("AAA Rule-57"). Id. at 1072. There, too, Tillman, the compelled party, asked to lift the stay and proceed in court. Id. at 1074-75. Under these circumstances, the Ninth Circuit held that the arbitration complied with the terms of the arbitration agreement and the district court properly lifted the stay. Id.

The Ninth Circuit was conscious of the fact that the compelled party was the very one who caused the arbitration to terminate. Lifting the stay was nonetheless appropriate only because the non-paying party acted in good faith during the arbitration and became genuinely unable to afford it.

Our decision that Tillman's case may proceed does not mean that parties may refuse to arbitrate by choosing not to pay for arbitration. If Tillman had refused to pay for arbitration despite having the capacity to do so, the district court probably could still have sought to compel arbitration under the FAA's provision allowing such an order in the event of a party's "failure, neglect, or refusal" to arbitrate. 9 U.S.C. § 4.1. Or, in that context, the court could, and most probably should, dismiss Tillman's complaint under Fed. R. Civ. P. 41(b), for failure to comply with the order to arbitrate despite its ability to do so. Here, however, the district court found that Tillman had exhausted her funds and was "unable to pay for her share of arbitration." As a result, the district court excused Tillman's lack of compliance with its order compelling arbitration under 9 U.S.C. § 4.

See id. at 1075–76 (emphasis in original). In a footnote, the Tillman Court added:

A question may arise in such circumstances as to whether an arbitration "has been had in accordance with the terms of the agreement," 9 U.S.C. § 3, when it has been terminated due to the nonpayment of a party who has the ability to pay but simply chooses not to. Even if such an arbitration has been terminated in accordance with the rules governing the arbitration, as Tillman's arbitration was here, it may be contrary to "the structure and purpose of the FAA" to allow a party to an arbitration agreement to benefit from their intentional noncompliance with an arbitrator's rules. Sink v. Aden Enters., 352 F.3d 1197, 1200 (9th Cir. 2003). But because Tillman was unable to pay, gave notice of her inability to pay during arbitration, and "made genuine efforts to make alternate payment arrangements," id. at 1199, we need not decide how to construe 9 U.S.C. §§ 3 and 4 in the event of a party's willful nonpayment of an arbitrator's fees.

Id. at 1076.

Other courts support this observation.

[W]hen a party who has engaged in arbitration in good faith is unable to afford to continue in such a forum, that party may seek relief from the superior court. If sufficient evidence is presented on these issues, and the court concludes the party's financial status is not a result of the party's intentional attempt to avoid arbitration, the court may issue an order specifying: (1) the arbitration shall continue so long as the other party to the arbitration agrees to pay, or the arbitrator orders it to pay, all fees and costs of the arbitration; and (2) if neither of those occur, the arbitration shall be deemed "had" and the case may proceed in the superior court.

Weiler v. Marcus & Millichap Real Estate Inv. Servs., Inc., 22 Cal. App. 5th 970, 981, 232 Cal.Rptr.3d 155 (2018), review denied (Aug. 15, 2018), cert. denied, ––– U.S. ––––, 139 S. Ct. 2665, 204 L.Ed.2d 1085 (2019). See also Dobbins v. Hawk's Enters., 198 F.3d 715, 716 (8th Cir. 1999) ("[T]he district court held an evidentiary hearing to provide the Dobbinses the opportunity to present evidence on their financial condition and inability to pay the arbitration fees. Following the evidentiary hearing, the district court lifted the stay, reopened the case, and found that the arbitration fees precluded the Dobbinses from availing themselves of the arbitral forum."); Miller v. Aaacon Auto Transp., Inc., 545 F.2d 1019, 1020 (5th Cir. 1977) ("Had the failure of arbitration been caused by plaintiff's dilatory tactics, vacating the stay may have been improper, since plaintiff would be profiting from her own wrongdoing.").

The focus in the cases above on good faith compliance with the arbitration resonates with this Court.

The integrity and efficacy of the arbitration institution as well as court orders and contract laws are at stake here. Parties should be deterred from manipulating the justice system by forum shopping and noncompliance. Therefore, only upon a satisfactory showing that the non-paying party acted in good faith and under a genuine indigency -- inadvertently causing the...