Nathan Vanderhorst | Fed Up with Autodials: Litigation or Arbitration?
BACKGROUND
Congress passed the Telephone Consumer Protection Act (TCPA) in 1991 to restrict the emerging practice of telemarketing. Telemarketing is the often-unsolicited practice of autodialing individuals to market various products or services in the form of a pre-recorded, automated voice message, and is the subject of frequent consumer complaints. The TCPA imposes limits on telemarketing, including restrictions on times call may be made and maintaining an active do-not-call list; these limits may only be avoided by written consent from the consumer.
ISSUE
Under a wireless services contract that binds consumers to arbitrate any disputes with the providing company and its affiliates, may a satellite television company that became an affiliate of a wireless services provider several years after the signing of such contract compel arbitration when a consumer brings a suit under the Telephone Consumer Protection Act?
THE SPLIT
In 2020, the Seventh and Fourth Circuit Courts of Appeals both heard cases on the arbitrability of “infinite arbitration clauses” of contracts, a term created by legal scholar David Horton to describe arbitration agreements that use “infinite” language to bind parties to arbitration. Such language attempts to widen the scope of arbitrable disputes as much as possible to those arising anytime and anywhere, regardless of whether such disputes arose from any relationship between the contracting parties. As a result, judges have had to decide how literally to interpret such provisions.
The Ninth Circuit
In 2018, Jeremy Revitch filed a lawsuit against DirecTV for alleged violations of the TCPA after the company repeatedly called him with automated messages advertising cable services. Revitch had never been in contact with DirecTV, had never given consent for such phone calls, and after enduring considerable frustration with the autodialing, attempted to bring a class-action lawsuit against the company on behalf of all similarly-situated consumers.
DirecTV filed a motion to compel arbitration. The company had discovered that in his 2011 contract with wireless services provider AT&T, Revitch had agreed to mandatory arbitration for any disputes arising out of his relationship with AT&T, and with any of AT&T’s “affiliates”. DirecTV had been acquired by AT&T, Inc. in 2015, becoming, along with AT&T Mobility, a subsidiary of that company, making DirecTV and AT&T Mobility, in DirecTV’s affiliates.
Revitch initiated his class-action claim against DirecTV in the United States District Court for the Northern District of California; the district court denied DirecTV’s motion to compel arbitration, holding that the contract between Revitch and AT&T “did not reflect an intent to arbitrate the claim that Revitch asserts against DIRECTV”. DirecTV appealed the ruling to the Ninth Circuit.
Under the Federal Arbitration Act, federal courts do not have the discretion to determine the arbitrability of claims. Federal judges are “limited to determining (1) whether a valid agreement to arbitrate exists, and if it does, (2) whether the agreement encompasses the dispute at issue”, writes Circuit Judge Diarmuid O’Scannlain in Revitch v. DIRECTV, LLC (2020), quoting an earlier case. A judge may only hold that an arbitration clause is not enforceable if the answer to either of these questions is no.
To answer the first question, Judge O’Scannlain turned to California state contract law, relying on a presumption against absurd results to answer in the negative. The California Civil Code stipulates, in §§1636 and 1638 respectively, that contracts are to be interpreted “so as to give effect to the mutual intentions of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful”, and that “the language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity”. The court said that Revitch could not reasonably have expected that, when he was signing a cell phone services contract with AT&T, that he was entering into an agreement to arbitrate any disputes he may have with any company that affiliates with AT&T years into the future, and as a result, DirecTV is not a party to the contract between Revitch and AT&T.
The Court expressly acknowledged that their decision in Revitch creates a circuit split with the Fourth Circuit:
“[W]e are aware that with our decision today, we are opening a circuit split on this difficult issue: Can anything less than the most explicit “infinite language” in a consumer services agreement bind the consumer to arbitrate any and all disputes with (yet-unknown) corporate entities that might later become affiliated with the service provider—even when neither the entity nor the dispute bear any material relation to the services provided under the initial agreement?”
The dissent in Revitch argued that the canon against absurd results is not appropriate here, and that the plain language of the agreement between Revitch and AT&T dictates that Revitch must arbitrate his claim against DirecTV:
“Nothing in the arbitration clause or in the dictionary definition of the word ‘affiliate’ confers any type of temporal scope to the term so that ‘affiliates’ should be read to refer only to present affiliates. DirecTV is therefore an affiliate within the explicit language of the arbitration clause.”
The Fourth Circuit
The facts in the Fourth Circuit decision of Mey v. DIRECTV, LLC are similar to those in Revitch and, indeed, both cases share the same defendant. In Mey, Diana Mey sued DirecTV for violation of the TCPA when the company solicited Mey by repeatedly calling her cell phone, even though her phone number was listed on the National Do Not Call Registry. DirecTV moved to arbitrate the case because of an arbitration provision Mey signed when entering into a cellular services contract with AT&T.
The Fourth Circuit held that, since DirecTV is unambiguously an affiliate of AT&T, and that the arbitration clause gave no indication that the term “affiliate” had temporal limitations, Mey had signed a contract to arbitrate her disputes with DirecTV. The court pointed to the language of the contract to argue that there were no temporal limitations. For example, the contract used terms such as “successors” and “assigns” in addition to “affiliate”, and the arbitration clause provided for the arbitrability of “claims that may arise after the termination of this [cellular services] Agreement.” The arbitration clause also provided that “all disputes and claims between us” were to be arbitrated, implying that the contract was intended to cast as wide a net as possible.
In so holding, the Fourth Circuit, similarly to the dissent in Revitch, rejected the idea that the arbitration with DirecTV was an “absurd result” of the contract interpretation. Circuit Judge Rushing, author of the opinion, stated:
In light of the expansive text of the arbitration agreement, the categories of claims it specifically includes, and the parties’ instruction to interpret its provisions broadly, we must conclude that it is “‘susceptible of an interpretation'” that covers Mey’s TCPA claims… The text of the agreement arguably contemplates arbitration of Mey’s claims, and any ambiguity about whether those claims are included “must be resolved in favor of arbitration.” Indeed, “the presumption in favor of arbitrability is particularly applicable when the arbitration clause is broadly worded,” as it is here.
LOOKING FORWARD
Revitch voluntarily dismissed his complaints against DirecTV without prejudice. In the case of Mey v. DIRECTV, LLC, the Fourth Circuit remanded the case to the District Court for the Northern District of West Virginia. Because Mey’s attorneys had not argued that the pertinent arbitration clause was “unconscionably overbroad” before her case was appealed to the Fourth Circuit, that issue was left to be litigated again when the case was remanded. The District Court once again denied DirecTV’s arbitration claim. As it currently stands, Mey is able to challenge DirecTV in court rather than through arbitration.
Nonetheless, the issue of infinite arbitration clauses and their interpretability is likely to persist. The dissent in Revitch and the internal disagreements in the Fourth Circuit illustrate that there is not judicial consensus on whether entities like DirecTV may enforce arbitration provisions in which their connection to the underlying agreement is tenuous. Further, corporations are likely to continue the use of infinite arbitration clauses because they perceive that arbitration decisions are less likely to be friendly to consumer suits. As long as contracts continue to contain infinite arbitration clauses, there is likely to be litigation over the enforceability of those clauses.
For further reading, see: https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=9691&context=penn_law_review