Last week, the United States Court of Appeals for the Second Circuit affirmed the Eastern District of New York’s decision dismissing an action brought against T-Mobile under the Telephone Consumer Protection Act (“TCPA”) due to a binding arbitration clause contained in the parties’ contract.
To Arbitrate or Not? That is the Question.
The plaintiff, Teddy Moore (“Moore”), was a former T-Mobile customer. He sued T-Mobile for allegedly placing close to three hundred pre-recorded – and unauthorized – calls to his mobile phone to collect allegedly “bogus” service charges. Moore argued that T-Mobile’s conduct constituted fraud and was a violation of the TCPA. T-Mobile responded by pointing out that the case was improperly filed in court because the parties’ agreement contained a binding arbitration clause which required that any and all claims be resolved through arbitration.
Moore maintained that he never actually signed the contract containing the arbitration provision – and T-Mobile’s inability to locate that document was proof of that fact. He also argued that even if he had signed such a contract, the arbitration provision was “unconscionable,” or unfair and, therefore, he should not be bound by it. Finally, Moore claimed that T-Mobile waived its right to compel arbitration because it appeared in the action by filing an answer and did not raise arbitration as an affirmative defense.
T-Mobile responded by noting that all of its customers are required to sign its contract before their mobile service is activated and, therefore, T-Mobile’s inability to locate Moore’s actual signature page was irrelevant. Further, T-Mobile demonstrated that the box containing Moore’s mobile phone was sealed with a sticker advising him that the box contained T-Mobile’s Terms and Conditions and that by using the T-Mobile service, he was agreeing to be bound by such Terms and Conditions including, expressly, the mandatory arbitration provision.
T-Mobile offered numerous arguments to counter Moore’s claim that the arbitration provision was unconscionable, including the fact that Moore had the option of using the services of any of T-Mobile’s competitors, such as Virgin Mobile, and that Virgin’s contracts do not include an arbitration requirement. In addition, T-Mobile noted that its arbitration clause was not buried in fine print – to the contrary, it was prominently and conspicuously displayed.
T-Mobile also argued that it did not waive its right to proceed with arbitration because it quickly amended its answer to raise the arbitration defense. Finally, T-Mobile also reminded the court of the strong judicial presumption in favor of arbitration.
The Eastern District agreed with T-Mobile and dismissed the case, confirming, like other courts, that TCPA cases are arbitrable.
Et Tu, Court of Appeals?
Moore appealed the decision. The Court of Appeals for the Second Circuit determined that it was not disputed that T-Mobile did, in fact, provide Moore with wireless service – and that it did so pursuant to its agreement with him. Therefore, even if the contract was not signed, there was objective evidence establishing that the parties were bound by it. Further, nothing in the T-Mobile contract limited the broad language of the arbitration clause and, as such, the Court of Appeals held that the dispute had to proceed to arbitration.
The bottom line: contracts which contain conspicuous agreements to arbitrate will usually be upheld by the courts and such agreements, if broad enough to encompass statutory claims (such as claims arising under the TCPA), will require that a TCPA dispute be decided through arbitration.
If you are interested in learning more about this topic or would like to review your terms and conditions or other consumer agreements, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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