Stearn v. Cingular Wireless Corp.

453 F.Supp.2d 1138

Heather STERN, on behalf of herself and all others similarly situated v. CINGULAR WIRELESS CORP., et al.

No. CV 05-8842 CASCTX.

United States District Court, C.D. California.

July 28, 2006.

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J Paul Gignac, Robert Curtis, Present for Plaintiffs.

Steven K. Hwang, Donald M. Falk, Present for Defendants.

SNYDER, District Judge.

Proceedings: DEFENDANTS' MOTION TO COMPEL ARBITRATION (filed June 8, 2006)

I. INTRODUCTION AND BACKGROUND

The question presented on this motion is the enforceability of an arbitration clause contained in a wireless telephone service contract between plaintiff Heather Stern and defendant AT & T Wireless Services, Inc. ("AT & T Wireless"). On November 1, 2004, plaintiff signed a written agreement ("Service Agreement") with AT & T Wireless. Declaration of Cynthia Hennessy in Support of Defendants' Motion to Compel Arbitration ("Hennessy Decl.") Ex. C.¹ At that time, plaintiff received a box containing a new telephone and a 3inch-by-5-inch, 27-page booklet ("Booklet") entitled "Important Information and Service Agreement," referred to by defendants as a "Welcome Guide." Declaration of Heather Stern in Opposition to Defendants' Motion ("Stern Decl.") ¶ 3; Opp'n at 3. The Booklet sets forth the terms and condition of the wireless service, and includes an "arbitration clause"² on pages 22 through 24.³ Stern Decl. Ex. A at 25-27. The arbitration clause states in relevant part:

The arbitration process established by this section is governed by the Federal Arbitration Act.... This provision is intended to be interpreted broadly to encompass all disputes or claims ... arising out of any aspect of our relationship.... All such disputes or claims whether based in contract, tort, statute, fraud, misrepresentation or any other legal theory, will be resolved by binding arbitration except that (1) you may take claims to small claims court if they qualify for hearing by such a court, or (2) you or we may choose to pursue claims in court if the claims relate solely to the collection of any debts you owe to us.

Id. at 25. The arbitration clause also contains a class action waiver, which states in pertinent part:

By this Agreement, both you and we are waiving certain rights to litigate disputes in court. You and we both agree that any arbitration will be conducted on an individual basis and not on a consolidated, class wide or representative basis. If for any reason this arbitration clause is deemed inapplicable or invalid, or to the extent this arbitration clause allows for litigation of disputes in court, you and we both waive, to the fullest extent allowed by the law, any rights to trial by jury and to pursue any claims on a consolidated, class wide or representative basis.

Id. at 26-27. The arbitration clause further provides that:

An arbitrator may award any relief or damages (including injunctive or declaratory relief) that a court could award, except an arbitrator may not award relief in excess of or contrary to what this Agreement provides and may not order relief on a consolidated, class wide or representative basis.... Except for restriction's on class or representative relief, if any portion of this arbitration clause is determined by a court to be inapplicable or invalid, then the remainder shall still be given full force and effect.

Id. at 26. Defendants assert, and plaintiff does not appear to dispute, that the Service Agreement contained a statement by which plaintiff acknowledged that she had received and reviewed the terms and conditions of the contract (presumably those contained in the Booklet) and agreed to be bound by them. Reply at 2. Plaintiff asserts, however, that she received the Booklet only after entering into the Service Agreement. Opp'n at I.

Subsequent to plaintiff's agreement with AT & T Wireless, Cingular Wireless LLC⁴ ("Cingular Wireless") acquired AT & T Wireless. Mot. at 1 n.1. Cingular Wireless' service agreement with its customers also includes an arbitration clause and class action waiver, although that clause, unlike the AT & T Wireless clause, states that Cingular Wireless will pay the costs of arbitration unless the suit is found to be frivolous, and that Cingular Wireless will pay the customer's attorneys' fees if the customer is awarded the amount of his or her demand or more. Declaration of David T. Biderman in Support of Defendants' Motion to Compel Arbitration ("Biderman Decl.") Ex. G.

On December 20, 2005, plaintiff filed a complaint, initiating a class action suit against Cingular Wireless, AT & T Wireless, and several Doe defendants (collectively, "defendants"). Plaintiff filed a First Amended Complaint ("FAC") on March 14, 2006, alleging the following claims for relief: (1) violation of the Federal Communications Act, 47 U.S.C. § 201; (2) declaratory relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, et seq.; (3) breach of contract; (4) violation of the Consumers Legal Remedies Act, Cal. Civ. Code § 1750, et seq.; and (5) violation of California's Unfair Competition Law, Cal. Bus. & Prof.Code § 17200, et seq. In her FAC, plaintiff alleges that defendants have perpetrated a scheme to overcharge plaintiff and the class⁵ by imposing service charges on customers' bills for services not authorized by those customers. FAC ¶ 1.

On June 8, 2006, defendants Cingular Wireless and AT & T Wireless moved to compel arbitration and stay the present litigation. On July 10, 2006, plaintiff filed an opposition to defendants' motion and, on July 17, 2006, defendants filed their reply. Defendants' motion is presently before the Court.

II. LEGAL STANDARD

"An agreement to arbitrate is a matter of contract: `it is a way to resolve those disputes—but only those disputes— that the parties have agreed to submit to arbitration." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). As with any other contract dispute, the Court must first look to the express terms of the contract. Id.

The Federal Arbitration Act ("FAA") provides that "a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. It is a matter to be determined by the court whether the FAA applies to a certain agreement; "[a]s a threshold matter, the FAA applies if, among other things, the contract requires dispute resolution `by arbitration.'" Judge William W. Schwarzer, California Practice Guide: Federal Civil Procedure Before Trial, § 16:63.1 (The Rutter Group 2002) (citing Portland Gen. Elec. Co. v. United States Bank Trust Nat'l Ass'n as Tr. for Trust No. 1, 218 F.3d 1085, 1089 (9th Cir.2000)).

Any party to an arbitration agreement covered by the FAA who is "aggrieved by the alleged ... refusal of another to arbitrate" may petition a federal district court⁶ "for an order directing that such arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4.

Under the FAA, the court, not the arbitrator, must decide whether a particular dispute is arbitrable., 9 U.S.C. § 4; AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (holding that the arbitrator is without power to determine arbitrability absent "clear[] and unmistakabl[e]" language in the arbitration agreement conferring such power). The court must determine (1) whether there exists a valid agreement to arbitrate; and (2) if there is a valid agreement, whether the dispute falls within its terms. Chiron Corp., 207 F.3d at 1130. "If the response is affirmative on both counts, then the [FAA] requires the court to enforce the arbitration agreement in accordance with its terms." Id. The FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985); Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 720 (9th Cir.1999) (noting that where an arbitration agreement has been signed by the parties with respect to the issues in dispute, "[s]uch agreements are to be rigorously enforced").

The FAA further provides:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action 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. In addition, "[a] trial court has authority to stay proceedings in the interest of saving time and effort for itself and litigants." ATSA of California, Inc. v. Cont'l Ins. Co., 702 F.2d 172, 176 (9th Cir.1983).

III. DISCUSSION

As a threshold matter, the parties dispute which arbitration provision is relevant for purposes of this motion. The parties agree that after plaintiff filed suit, Cingular Wireless sent her counsel a letter, dated May 30, 2006, which indicates that, as a former customer of AT & T Wireless, plaintiff was entitled to arbitrate under the terms of Cingular Wireless' arbitration provision. Mot. at 2; Biderman Decl. Ex. G; Opp'n at 1 n.1. Defendants argue that "Cingular's policy of making its arbitration procedures available to all [AT & T Wireless] customers moots challenges to features of the [AT &...