James v. Global Tel*link Corp.

BOBBIE JAMES, et al., Plaintiffs, v. GLOBAL TEL*LINK CORPORATION, INMATE TELEPHONE SERVICE and DSI-ITI LLC, Defendants.

Civ. No. 13-4989 (WJM)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

February 11, 2016

OPINION

This matter comes before the Court on Defendants' motion to compel arbitration and stay this proceeding in the interim. The Plaintiffs bring this putative class action over fees charged by the Defendants for phone calls made by inmates from pay phones in New Jersey correctional institutions. The Court decides this motion without oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the Defendants' motion.

I. BACKGROUND

A. Factual Background

Global Tel*Link Corporation, Inmate Telephone Service, and DSI-ITI LLC (collectively, "the Defendants" or "GTL") manage telecommunications services at state and local correctional facilities in New Jersey and other states. (Complaint ¶ 12, ECF No. 1.) The Defendants are all Delaware corporations, and Plaintiffs allege that they operate as a single economic unit. (Id. ¶¶ 14-16.) The State of New Jersey gave GTL the exclusive right to provide telecommunications services for inmates so that they may communicate with family, friends, and other approved persons outside the prisons. (Id.) GTL's service can be accessed by users telephonically through an interactive voice response ("IVR") system—using standardized scripts and prompts—or via GTL's website. (Declaration of John W. Baker ("Baker Dec'l") ¶ 2, ECF No. 95-2.) Through either of these methods, users can sign up for an account and deposit funds. (Id.)

Those who create an account through GTL's website are shown a copy of GTL's Terms of Use ("TOU") within their browser, and the user must click a button labeled "Accept" in order to complete the account creation process. (Id.) In contrast, users of the IVR system receive the following notice over the phone:

Please note that your account, and any transactions you complete, with GTL, PCS, DSI-ITI, or VAC are governed by the terms of use and the privacy statement posted at www.offenderconnect.com. The terms of use and the privacy statement were most recently revised on July 3, 2013.

(Id.) GTL states that every user of the IVR service receives this notice before he or she can proceed to the remainder of the options. (Defendants' Brief in Support of Motion to Compel Arbitration ("Def. Brief") at 13.) However, unlike the website, users of the IVR system do not have to affirmatively register assent to the TOU. (See Baker Dec'l ¶ 2.)

The TOU contains an arbitration agreement and a corresponding class-action waiver. (Id. ¶ 4.) Users have thirty days in which to opt-out of both of these provisions. (Baker Dec'l, Ex. A ("TOU") § R(4), ECF No. 95-2.) The TOU also notes that use of the service (or clicking "Accept" when registering online) constitutes acceptance of the terms. (Id. §§ A-B.) Similar to the opt-out provisions, users have thirty-days in which to cancel their account if they do not agree to the TOU's terms. (Id.) Prior to July 2013, the TOU stated that GTL may amend the terms and that it would "post any material changes to [the TOU] on [its] Site with a notice advising of the changes." (Baker Dec'l, Ex. B § R, ECF No. 95-2.) Should a user not agree with the updated terms, they have fifteen days within which to cancel their account without being bound by the new TOU. (Id.) GTL alleges that a message was posted on its website's frontpage on or about July 2, 2013, informing users of the updated TOU. (Baker Dec'l ¶ 6.) The version of the TOU prior to July 2013 also stated that use of the service constituted acceptance of the terms. (Baker Dec'l, Ex. B § A.)

The plaintiffs in this action (Bobbie James, Crystal Gibson, Betty King, John Crow, and Barbara, Mark, and Milan Skladany, collectively, the "Plaintiffs") are inmates or friends or family of inmates, and used GTL's calling services in order to communicate with their loved ones. (Complaint ¶ 39.) GTL alleges that Crystal Gibson opened an account through GTL's website on July 29, 2014. (Baker Dec'l¶ 8.) Prior to this, Gibson also opened an account through the IVR system on June 13, 2014, but closed it the same day. (Id.) However, Gibson states that she became a customer of GTL in approximately April 2011, but does not provide records for such an account. (Declaration of Crystal Gibson ¶ 2, ECF No. 99-4.) Bobbie James and Barbara and Milan Skladany opened accounts prior to July 2, 2013, but continued using their accounts after this date. (Baker Dec'l ¶ 9.) Betty King opened her first account on October 18, 2006, and closed it on July 9, 2013. She then opened a second account on November 15, 2014, through the IVR system. (Id. ¶ 10.) Lastly, GTL has not provided details for accounts opened by Dr. John Crow or Mark Skladany. Though Mr. Skladany's declaration does not state when he began using the service, the Complaint notes that Dr. Crow opened an account with GTL in April 2013. (Complaint ¶ 59.)

B. Procedural Background

The Plaintiffs filed this putative class action in August 2013 alleging violations of the New Jersey Consumer Fraud Act ("NJCFA"), the Federal Communications Act ("FCA"), the Takings Clause of the Fifth Amendment, and various New Jersey public utilities statutes, as well as alleging unjust enrichment and seeking declaratory judgment. GTL moved to dismiss or stay this case, arguing that the Federal Communications Commission ("FCC") has primary jurisdiction. (Docket No. 20.) In an opinion dated September 8, 2014, the Court stayed this proceeding until either: (a) the FCC made a determination as to whether the challenged charges and practices violated the FCA, (b) the Plaintiffs voluntarily dismissed the FCA cause of action, (c) the Plaintiffs failed to file an administrative complaint with the FCC within 90 days from the filing of the D.C. Circuit's opinion, or (d) the parties made a showing of good cause to lift the stay. (Docket Nos. 35, 36.) Following the Court's opinion and order, Plaintiffs moved to withdraw the relevant counts from their complaint that had prompted this Court to stay the action. (Docket No. 38.) On November 26, 2014, GTL filed its answer and then filed an amended answer on March 9, 2015. (Docket Nos. 46, 67.) In the amended answer, GTL raised the possibility of arbitration, noting that some of the Plaintiffs (and the putative class members) may be subject to binding arbitration. (Defendants' Amended Answer at 16, ECF No. 67.) On May 6, 2015, GTL sought leave to file a motion to compel arbitration, which was granted on July 14, 2015. (Docket No. 75.) Subsequently, GTL filed the instant motion. In the interim, after GTL's first answer and prior to the filing of the instant motion, the parties engagedin discovery pursuant to a scheduling order entered on February 17, 2015. (Docket No. 61.)

II. LEGAL STANDARD

Federal law presumptively favors the enforcement of arbitration agreements. Harris v. Green Tree Fin. Corp., 183 F.3d 173, 178 (3d Cir. 1999). "The question of arbitrability—whether a[n] . . . agreement creates a duty for the parties to arbitrate the particular grievance—is undeniably an issue for judicial determination." AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986). In considering the propriety of arbitration, a court must make "a two-step inquiry into (1) whether a valid agreement to arbitrate exists and (2) whether the particular dispute falls within the scope of that agreement." Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir. 2005). "When determining both the existence and the scope of an arbitration agreement, there is a presumption in favor of arbitrability." Id.

The Third Circuit has held that when arbitrability is apparent on the face of the complaint (and/or documents relied upon in the complaint) a motion to compel arbitration should be analyzed under the Rule 12(b)(6) standard. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 773-74 (3d Cir. 2013). However, if either the complaint does not facially establish arbitrability or if the non-movant submits enough evidence to put the question of arbitrability in issue, then the motion to compel arbitration "should be judged under the Rule 56 standard." Id. Under the summary judgment standard, the moving party must demonstrate that no genuine issue of material fact exists "concerning the formation of the [arbitration agreement]." Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir. 1980). Moreover, the court must give the non-moving party the "benefit of all reasonable doubts and inferences." Id.

While the moving party has the burden of showing that the parties executed an agreement to arbitrate, see Schwartz v. Comcast Corp., 256 F. App'x 515, 519 (3d Cir. 2007), if the moving party fulfills this showing, the agreement to arbitrate is found presumptively valid and enforceable, 9 U.S.C. § 2. Then, it is the non-moving party that bears the burden of proving that the agreement is invalid. See AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011); Quilloin v. Tenet HealthSystem Philadelphia, Inc., 673 F.3d 221, 228-29 (3d Cir. 2012).

III. DISCUSSION

A. Agreement to Arbitrate

"Before a party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there should be an express, unequivocal agreement to that effect." Par-Knit Mills, 636 F.2d at 54. Plaintiffs contest this fundamental requirement for the instant motion, arguing that they never assented to the arbitration agreement contained within GTL's TOU.

"To determine whether the parties have agreed to arbitrate, [courts] apply 'ordinary state-law principles that govern the formation of contracts.'" Century Indem. Co. v. Certain Underwriters at Lloyd's, London, subscribing to Retrocessional Agreement Nos. 950548, 950549, 950646, 584 F.3d 513, 524 (3d Cir. 2009). The parties have not briefed the issue of...