Lonstein Law Office, P.C. v. Evanston Ins. Co.

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LONSTEIN LAW OFFICE, P.C., JULIE LONSTEIN, WAYNE D. LONSTEIN, Plaintiffs, v. EVANSTON INSURANCE COMPANY, MARKEL SERVICE INCORPORATED, AT&T SERVICES, INC., Defendants.

No. 20-cv-9712 (LJL)

United States District Court, S.D. New York

January 6, 2022

OPINION AND ORDER

LEWIS J. LIMAN, UNITED STATES DISTRICT JUDGE:

Defendant AT&T Services, Inc. (“AT&T”) moves to compel arbitration, pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. Dkt No. 51.

For the following reasons, the motion is granted, and the case against AT&T is stayed.

BACKGROUND

The court applies “a standard ‘similar to that applicable for a motion for summary judgment'” in deciding a motion to compel arbitration. Gilbert v Indeed, Inc., 513 F.Supp.3d 374, 390 (S.D.N.Y. Jan. 19 2021) (quoting Meyer v. Uber Techs., Inc., 868 F.3d 66, 74 (2d Cir. 2017)). The court may consider “all relevant, admissible evidence submitted by the parties and contained in pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits.” Meyer, 868 F.3d at 74.

Plaintiff Lonstein Law Office, P.C. (“LLO” and together with Julie and Wayne Lonstein (“Plaintiffs”)) is a law firm located in Ellenville, New York. Dkt. No. 27 (“Compl.”) ¶ 2. Julie C. Lonstein and Wayne D. Lonstein are the principals of LLO. Dkt. No. 55-2 at 1. AT&T is the successor-in-interest to DirecTV, Inc. Compl ¶ 11. The complaint defines AT&T, as successor- in-interest to DirectTV, Inc., as “DIRECTV, ” and the allegations of the complaint recited herein use the same definition unless otherwise noted. Id.

I. The Relationship Between LLO and DIRECTTV/AT&T

Beginning in 2006, LLO was retained by DIRECTV to identify, investigate, and bring claims and/or civil actions against businesses or individuals throughout the United States who illegally acquired DIRECTV services, either by acquiring it without payment or by misrepresenting that they were individuals when in fact the services were actually being received and exhibited in a commercial establishment. Id. ¶ 17. LLO's agreement to provide these services to DIRECTV was documented in a retainer agreement (the “Retainer Agreement”) between LLO and DIRECTV dated on or about October 2, 2009. Id. ¶ 18. Pursuant to the Retainer Agreement, DIRECTV retained LLO (defined as “ATTORNEYS” therein) to represent it “in the investigation and litigation of claims against individuals and entities for the commercial misuse and unauthorized exhibition of DIRECTV satellite programming services” in exchange for a contingency fee. Dkt. No. 55-1 at 1. The parties agreed that they would share equally the costs of auditing and investigation fees incurred in the documentation of fraud, misuse, and/or piracy through the efforts of an outside firm, Signal Auditing, Inc., and that LLO could pay DIRECTV's share from client funds it was permitted to hold in trust. Id. at 2.^[1] LLO was required to obtain DIRECTV's approval on a case-by-case basis prior to filing any lawsuit, id. at 1, and was further required to maintain professional liability coverage with minimum limits of $1 million “per occurrence, ” id. at 3. DIRECTV represented to LLO that it had “the rights upon which it is basing its claims of infringement, misuse or piracy.” Id. at 1.

In addition, the Retainer Agreement has a mutual indemnification provision. As relevant here, DIRECTV agrees to

indemnify, defend and hold [LLO], its officers, directors, employees, agents and affiliates harmless from any and all costs, expenses, liability, claims, judgments, lawsuits and demands related to the litigation of commercial misuse and fraud claims if [DIRECTV's] representations regarding programming rights form the bases of the claims of misuse and fraud are determined to be invalid.

Id. at 3; Compl. ¶ 19.

The Retainer Agreement is terminable by either party, with or without cause, on 14-days prior notice to the other party. Dkt. No. 55-1 at 2. It is signed by Julie C. Lonstein on behalf of LLO. Id. at 4.

On or about February 15, 2019, Plaintiffs entered into a wind-down agreement (the “Wind Down Agreement”) with AT&T, as successor to DIRECTV. Compl. ¶ 20; see also Dkt. No. 55-2.^[2] The Wind Down Agreement recognized that AT&T “has retained LLO over the past twelve years to assist with detecting commercial misuse of DIRECTV residential programming and converting commercially-misused residential accounts to proper commercial accounts” but states that such program is being discontinued. Dkt. No. 55-2 at 1. For a one-time non-refundable payment from AT&T, LLO agreed to continue to represent AT&T during a one-year period following the effective date of the Wind Down Agreement. Id. at 2-3. The Wind Down Agreement superseded all prior agreements between the parties. Id. § 12.01 (“The terms and conditions of this Agreement constitute the entire agreement between the Parties with respect to the subject matter hereof, and this Agreement supersedes all prior agreements, understandings, and representations by or between the Parties, whether written or oral, to the extent they relate to the subject matter hereof”). Section 5.01 of the Wind Down Agreement contains a mutual release by the parties of claims that they might have against one or another:

LLO and AT&T, each on behalf of itself and its Affiliates and their respective predecessors, successors, parents, subsidiaries, assigns, agents, attorneys, directors, officers, partners, employees and their heirs and executors do hereby fully, irrevocably and unconditionally release, acquit and forever discharge (i) the other Party, (ii) its Affiliates, and (iii) their respective predecessors, successors, parents, subsidiaries, assigns and their agents, attorneys, directors, officers, partners, employees, insurers, users, customers, distributors, retailers, suppliers and their heirs and executors from any and all actions, causes of action, claims or demands, liabilities, damages, attorneys' fees, court costs, or any other form of claim or compensation, at law, in equity, or otherwise, known or unknown, contingent or fixed, suspected or unsuspected, relating to, based upon, or arising out of (1) any prior agreement between the Parties or (2) the AT&T Commercial Misuse Program or (3) any other relationship, obligation, arrangement, facts, or circumstances, through and including the Effective Date of this Agreement. Notwithstanding the foregoing, any and all claims for indemnification arising from any prior agreement or obligation between the Parties are excluded from Article 5.

Id. § 5.01. The parties here agree that the indemnification obligation in the Retainer Agreement is encompassed by the last sentence of Section 5.01.

The Wind Down Agreement also contains a broad arbitration clause. Section 12.07, entitled Dispute Resolution, provides as follows:

Any and all controversies or claims of any nature arising out of or relating to this Agreement or the breach, termination or validity thereof, whether based on contract, tort, statute, fraud, misrepresentation or any other legal or equitable theory (the “Claim”) shall be resolved solely and exclusively by binding, individual arbitration administered by the American Arbitration Association (“AAA”) in accordance with the provisions of this paragraph and the AAA Commercial Arbitration Rules to the extent such rules do not conflict with this paragraph and Agreement. The arbitrator shall strictly limit discovery to the production of documents directly relevant to the parties' claims and defenses and, if depositions are required, each Party shall be limited to three (3) depositions. The arbitrator shall issue an order preventing the Parties, AAA and any other participants to the arbitration from disclosing to any third party any information obtained via the arbitration, including discovery documents, evidence, testimony and the award except as may be required by law. All requests for injunctive or declaratory relief shall be decided by the arbitrator; provided, however, that requests for temporary injunctive relief may be submitted to a court of competent jurisdiction if the arbitrator has not yet been appointed. Any injunctive or declaratory relief granted by the arbitrator shall be on behalf of a Party only; no form of representative, class, multi-party, public, or private attorney general injunctive relief may be advanced, considered, or awarded. If, after the exhaustion of all appeals, any of these prohibitions on non- individualized injunctive or declaratory relief are found to be unenforceable with respect to a particular claim or request for relief, then that claim or request for relief shall be severed and decided by a court, and all other claims and requests for relief shall be arbitrated. The arbitrator shall not limit, expand or otherwise modify the terms of this Agreement and shall not award punitive or other damages in excess of compensatory damages. Each Party shall bear its own expenses, but those related to the compensation of the arbitrator shall be borne equally.

Id. § 12.07.

The Wind Down Agreement was signed on February 15, 2019 by Wayne D. Lonstein and Julie C. Lonstein individually and on behalf of LLO, and it was signed on February 19, 2019 by AT&T. Id. at 12.

II. The Lawsuits Against DIRECTV and LLO

During the term of the Retainer Agreement, Plaintiffs were named, sometimes alongside DIRECTV, in four lawsuits relating to the actions by Plaintiffs and DIRECTV in asserting DIRECTV's programming rights (the “Actions”).^[3]

A. The Roberson Action

On or about July 10, 2013, Brandon Roberson, Julie Roberson, and ELR Dreams, LLC, among others (“the Roberson Plaintiffs”), commenced an action in Texas state court in the District Court of the 68^th Judicial District of Dallas County,...