Spam phone calls have become an unfortunate part of everyday life, even if you have put yourself on a “no call” list. But would you expect that your cell service contract can prevent you from taking the spam callers to court? Well, depending on who your carrier is, who is calling, and what part of the country you are living in, that may very well be the case.
In a somewhat unique turn of events, two federal courts of appeal, considering virtually the same fact pattern, came to completely opposite conclusions about the reach of an arbitration provision in a cell service contract, about a month apart from each other. The arbitration provision is found in an AT&T wireless agreement and requires customers to arbitrate “all disputes and claims” between the customer and any of AT&T’s “subsidiaries, affiliates, agents, employees, predecessors in interest, successors, and assigns.” The dispute at issue, however, involved purported spam phone calls from DirectTV, a subsidiary of AT&T, and claims under the Telephone Consumer Protection Act. Are such claims arbitrable? Apparently, this now rests on which circuit you happen to be filing suit in.
The Fourth Circuit’s View-Mey v. DirectTV LLC
In an August 2020 decision, the Fourth Circuit Court of Appeals held that these claims were in fact subject to arbitration. Noting the broad rule that federal courts are directed, under the Federal Arbitration Act, to construe arbitration clauses in a way that favors arbitration, the court held in its decision in Mey v. DirectTV LLC, that DirectTV clearly was a subsidiary of AT&T, that the parties had clearly agreed to a very broad arbitration provision that would include “all disputes and claims,” and that therefore the claims had to be arbitrated. The fact that the average consumer would not have contemplated that a cell service contract would be applied to a television provider or would know the byzantine corporate history that made DirectTV a subsidiary of AT&T was of no consequence. Indeed, as the court noted, the arbitration provision also applied to successors and assigns, two groups that could not possibly be known at the time of contracting. The parties agreed to a broad arbitration provision, one that could include disputes wholly unrelated to the contract containing the arbitration provision, and therefore the arbitration clause should be read to encompass the TCPA suit.
The Ninth Circuit’s View-Revitch v. DirectTV LLC
However, confronted with the exact same fact pattern, the Ninth Circuit Court of Appeals took a completely different tack. In Revitch v. DirectTV LLC, the Ninth Circuit court held that the TCPA suit was not encompassed by the arbitration provision. The Ninth Circuit court held that because DirectTV was not affiliated with AT&T at the time the cell service contract was entered into, the customer could not reasonably have anticipated that he would be agreeing to arbitrate disputes with DirectTV. Per the Ninth Circuit, it would be an absurd interpretation of the word affiliate to include companies not affiliated, or anticipated to be affiliated, with AT&T at the time the contract was entered into. My own view is that the Fourth Circuit likely has the better of this particular argument. As the Fourth Circuit court correctly pointed out, successors and assigns are per se unknown at the time a contract is consummated, but it is not absurd to say they fall within the ambit of an arbitration provision.
The better argument may be the one adopted in a concurrence written by Judge O’Scannlain in concurrence with the majority opinion (also written by Judge O’Scannlain). In his concurring opinion, Judge O’Scannlain writes that the DirectTV suit is simply outside the scope of the arbitration provision because it does not “aris[e] out of” the cell service contract, as required by the Federal Arbitration Act. The lawsuit regarding DirectTV’s purported spam phone calls has no relation to a contract for cell service. This seems to me to be a much better way of squaring the broad arbitration provision agreed to and the intuitive sense most people have that a cell service contract should not create an agreement to arbitrate disputes with what was, at the time of formation, an unrelated company.
These cases highlight the importance of careful drafting when putting together and negotiating a contract, particularly with regard to dispute resolution clauses. Whenever you or your business find yourself negotiating a contract of importance, it is key to hire experienced counsel who can recognize the subtleties that can lead to unintended consequences down the road. Dressel/Malikschmitt LLP is a sophisticated firm with the skills necessary to both avoid unfortunate surprises in your agreements, as well as to negotiate the most favorable terms possible for you and your business. Whether you are seeking counsel for a “one off” contract or to engage an outside general counsel on a regular basis, please contact us through our online form, or by calling us at (848) 202-9323.