United States: Arbitration Provisions Shut Down Three Different Putative TCPA Class Action Lawsuits In The Seventh And Sixth Circuits

The Seventh Circuit recently derailed a putative Telephone Consumer Protection Act ("TCPA") class action by ordering a district court to enforce an arbitration agreement contained in a cellular service contract. Andermann v. Sprint Spectrum L.P., No. 14-3478 (7th Cir. May 11, 2015). Andermann confirms that agreements for services, even if assigned and renewed, can still contain enforceable arbitration provisions applicable to TCPA and other claims. The case joins two other recent decisions from district courts within the Sixth and Seventh Circuits respectively that likewise compelled arbitration in the face of TCPA class action lawsuits.

The Andermann Decision

In Andermann, the plaintiffs were longtime customers of US Cellular who renewed their service agreement with US Cellular several times between 2002 and 2012. The 2012 renewal agreement included a clause that called for arbitration of any "controversy or claim arising out of or relating to this agreement." The 2012 agreement further stated that (i) the arbitration clause survived termination of the agreement and (ii) the cellular service provider could assign the agreement without notice to the customer. In 2013, following the assignment of their agreement to Sprint, the Andermanns switched suppliers (apparently because their phones were incompatible with the Sprint network). Sprint thereafter allegedly made six phone calls to the Andermanns to inform them about options to continue service with Sprint.

The Andermanns promptly responded by instituting a putative class action against Sprint based upon its alleged failure to comply with the TCPA.

Sprint moved to enforce the arbitration provision based on the assigned agreement. The district court denied the motion, reasoning that the arbitration agreement could not apply because the Andermanns had terminated their cellular service agreement with Sprint before the phone calls were made. The district court concluded that the calls thus did not "arise out of" the then-terminated agreement for cellular service.

Judge Posner reversed the district court's decision and remanded the case with an instruction to the district court to order arbitration. The Seventh Circuit held that the calls—all about the continuation of service with Sprint despite the incompatibility of the Andermanns' phones—plainly arose out of or related to Sprint's agreement to provide them with service.

The court further acknowledged the potentially fatal significance of its ruling on the Andermanns' TCPA claims. "It may seem odd that [Sprint] wants arbitration ... since it appears to have a very strong substantive defense to the suit—a defense at least as likely to persuade a judge as an arbitrator. But doubtless it wants arbitration because the arbitration clause disallows class action arbitration. If the Andermanns' claims have to be arbitrated all by themselves, they probably won't be brought at all, because the Andermanns if they prevail will be entitled only to modest statutory damages." (Emphasis added.)

The Conway and Rankin District Court Decisions

Shortly before Andermann was handed down, two district courts—one from the Seventh Circuit and the other from the Sixth Circuit—similarly issued opinions enforcing agreements to arbitrate against plaintiffs asserting TCPA class action claims. See Conway ex rel. Conway v. Done Rite Recovery Servs., No. 14-cv-5182, 2015 BL 126873 (N.D. Ill. Apr. 30, 2015) and Rankin v. Ashro, Inc., No. 2:15-cv-453, 2015 BL 117257 (S.D. Ohio Apr. 23, 2015).

In each case, the consumer plaintiff had accepted a set of standard terms and conditions used by the defendant that mandated arbitration. Each case analyzed the circumstances surrounding the formation of the agreements, their applicability to TCPA claims (neither agreement mentioned such claims specifically), and the propriety of limiting the plaintiff's recourse to the courts. Each clause was drafted broadly and covered all controversies either "surrounding" or "arising out of or in any way related to" the agreements.

Both courts held that the agreements to arbitrate were enforceable and governed the asserted TCPA class actions. In Conway, the arbitration clause further mandated that it would be the duty of the arbitrator to determine what matters were, and were not, within the scope of the arbitration agreement. This alone, the Conway court suggested, would warrant a stay of the court proceedings in favor of arbitration. Both courts stayed the matters pending completion of the respective arbitral proceedings.

Conclusion

Read collectively, Andermann, Conway, and Rankin not only offer solid support for the enforceability of arbitration clauses in the face of asserted TCPA claims in general, but they also provide some valuable reminders about the importance of the basics in drafting such clauses.

Companies may successfully limit the prospects of litigating TCPA (and other) class claims in court by including broad language (all disputes "arising out of or related to" the agreement) to define the scope of arbitration. Companies may also benefit from coupling a broad arbitration clause with an additional provision requiring that an arbitrator determine the scope and applicability of the arbitration clause in the event of any disputes. This "belt-and-suspenders" approach may further increase the likelihood of addressing a single TCPA claim in arbitration, rather than a class action in court. As Andermann makes plain, a clause endorsing assignment may provide protection to successor entities. And, of course, there can be enormous benefits in an agreement that expressly precludes the pursuit of class actions.

With the upsurge in TCPA class actions, and the risk of statutory damages, companies may wish to consider the utility of reviewing, revising, or implementing arbitration clauses. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Gregory R. Hanthorn
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