Summary
denying overbroad discovery requests, noting that plaintiff "failed to request any discovery that would actually aid the Court in making an unconscionability determination."
Summary of this case from Martin v. Wells Fargo Bank NAOpinion
No. C 12-02827 JSW
11-07-2012
ROBERT HODSDON and LESLIE GOLBA, on behalf of themselves and all others similarly situated, Plaintiffs, v. DIRECTV, LLC, Defendant.
ORDER REGARDING MOTIONS
Now before the Court is the motion to compel arbitration and to stay proceedings pending arbitration filed by Defendant DirecTV, LLC ("DirecTV"). Also before the Court is the motion for leave to conduct arbitration-related discovery filed by Plaintiffs Robert Hodsdon and Leslie Golba (collectively, "Plaintiffs"). The Court finds these matters suitable for disposition without oral argument and VACATES the hearing set for December 14, 2012. See N.D. Cal. Civ. L. R. 7-1(b). Having carefully reviewed the parties' papers and considered their arguments and the relevant authority, the Court GRANTS DirecTV's motion and DENIES Plaintiffs' motion.
BACKGROUND
Plaintiffs sued DirecTV on June 1, 2012, claiming that DirecTV had violated both the Satellite Home Viewer Extension and Reauthorization Act ("SHVERA") and certain California state laws. (See Plaintiffs' Class Action Complaint ("Compl.") at ¶¶ 1-4.) The suit is based upon Plaintiffs' allegations, on behalf of themselves and their putative class of former DirecTV customers, that DirecTV had improperly maintained their personally identifiable information after Plaintiffs had terminated their service with DirecTV. (Id.)
DirecTV has moved to compel arbitration and to stay proceedings pending arbitration. Plaintiffs oppose DirecTV's motion, alleging that arbitration is improper in this case and also that the arbitration provision in their contract with DirecTV is unconscionable and thus not enforceable. To support their unconscionability argument, Plaintiffs move for arbitration-related discovery. The Court shall address additional facts as necessary to its analysis in the remainder of this Order.
ANALYSIS
A. Legal Standards Applicable to Motions to Compel Arbitration.
Pursuant to the Federal Arbitration Act ("FAA"), arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Once the Court has determined that an arbitration agreement involves a transaction involving interstate commerce, thereby falling under the FAA, the Court's only role is to determine whether a valid arbitration agreement exists and whether the scope of the parties' dispute falls within that agreement. 9 U.S.C. § 4; Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000); United Computer Systems v. AT&T Corp., 298 F.3d 756, 766 (9th Cir. 2002) ("Under § 4 of the FAA, a district court must issue an order compelling arbitration if the following two-pronged test is satisfied: (1) a valid agreement to arbitrate exists; and (2) that agreement encompasses the dispute at issue.").
The FAA represents the "liberal federal policy favoring arbitration agreements" and "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Under the FAA, "once [the Court] is satisfied that an agreement for arbitration has been made and has not been honored," and the dispute falls within the scope of that agreement, the Court must order arbitration. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 400 (1967). The "central purpose of the [FAA is] to ensure that private agreements to arbitrate are enforced according to their terms." Mastrobuono v. Shearson Lehman Hutton. Inc., 514 U.S. 52, 53-54 (1995). The "preeminent concern of Congress in passing the [FAA] was to enforce private agreements into which parties had entered, a concern which requires that [courts] rigorously enforce agreements to arbitrate." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625-26 (1985) (quotations omitted).
Finally, notwithstanding the liberal policy favoring arbitration, by entering into an arbitration agreement, two parties are entering into a contract. Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 479 (1989) (noting that arbitration "is a matter of consent, not coercion."). Thus, as with any contract an arbitration agreement is "subject to all defenses to enforcement that apply to contracts generally." Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003). Although the Court can initially determine whether a valid agreement exists, disputes over the meaning of specific terms are matters for the arbitrator to decide. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002); Prima Paint, 388 U.S. at 403-04 (holding that "a federal court may consider only issues relating to the making and performance of the agreement to arbitrate").
B. The Arbitration Agreement Applies to Plaintiffs' Suit.
Plaintiffs argue that no valid arbitration agreement exists because Plaintiffs' customer agreements had expired by the time Plaintiffs' claims arose. (Plaintiffs' Opposition to DirecTV's Motion ("Opp.") at 3.) Alternatively, Plaintiffs argue that their claims are outside the scope of the arbitration agreement. (Id. at 8.) For the following reasons, the Court finds both of these arguments unpersuasive.
1. The arbitration agreement did not expire before Plaintiffs' claim arose.
Plaintiffs contend that the arbitration provision in their Customer Agreements ("CAs") with DirecTV does not bind them here because the provision, as a part of Plaintiffs' CAs with DirecTV, "terminated by [its] own terms years ago," upon Plaintiffs' cancellation of their DirecTV service. (Opp. at 3-4.) Plaintiffs argue that when they cancelled their DirecTV service, the contract governing that service expired, and with it, terminated the arbitration provision therein. (Id.) However, Plaintiffs are mistaken that the CAs terminated "by its own terms" upon cancellation of service. In fact, section 5(a) of the CAs, labeled "Term" explicitly states just the opposite: "The term of this Agreement is indefinite and Service will continue until canceled as provided herein." (Declaration of Valerie McCarthy ("McCarthy Decl."), Ex. A at § 5(a).)
Furthermore, it is well settled that courts must hold "arbitration agreements to a life and validity separate and apart from the agreement in which they are imbedded." Berkery v. Cross Country Bank, 256 F. Supp. 2d 359, 368 (E.D. Pa. 2003). This is because "the duty to arbitrate does not necessarily end when the contract is terminated." Aspero v. Shearson Am. Express, Inc., 768 F.2d 106, 108 (6th Cir. 1985). The United States Supreme Court has rejected the argument proposed by Plaintiffs here, "that the duty to arbitrate, being strictly a creature of contract, must necessarily expire with the ... contract that brought it into existence." Nolde Bros., Inc. v. Local No. 358, Bakery & Confectionary Workers Union, 430 U.S. 243, 250 (1977). The Nolde Bros. Court held that where a "dispute is over a provision of [an] expired agreement, the presumptions favoring arbitrability must be negated expressly or by clear implication." Id. at 255.
Plaintiffs urge this Court to apply Litton Financial Printing Division v. NLRB, in which the United States Supreme Court clarified that a grievance arising after a contract expires is only presumptively arbitrable if it arises from the contract. 501 U.S. 190, 205-06 (1991). The Supreme Court held that a dispute only arises from a contract if "it involves facts and occurrences that arose before expiration, where an action taken after expiration infringes a right that accrued or vested under the agreement, or where ... the disputed contractual right survives expiration of the remainder of the agreement." Id. However, Litton does not support Plaintiffs' argument that the arbitration clause here has expired.
First, as already noted, the contract here had no expiration date but, rather, expressly indicated that its term was "indefinite." (McCarthy Decl., Ex. A at § 5(a).) In contrast, the Litton contract had an express termination date, and the dispute unquestionably arose afterwards. 501 U.S. at 205. Even if, as Plaintiffs assert, the CAs terminated upon cessation of services, Litton still fails to support their argument. Plaintiffs claim that the dispute here could only have arisen after the CAs were terminated because the dispute concerns DirecTV's retention of data after Plaintiffs had cancelled their DirecTV service. (Opp. at 5.) Putting aside the fact that the CAs did not in fact expire upon cessation of service, Plaintiffs defeat their own argument later in their brief by claiming that DirecTV's information retention "deprived [Plaintiffs] of paid-for privacy protections." (Id. at 16.) Plaintiffs claim that, by retaining their information after Plaintiffs had terminated service, DirecTV failed to honor its obligations under the CAs. As such, Plaintiffs' own allegations demonstrate that their suit involves "an action taken after expiration [that] infringes a right that accrued or vested under the agreement." See Litton, 501 U.S. at 205-06. Thus, even under the Litton analysis, the CA's arbitration clause applies to Plaintiffs' dispute.
2. Plaintiffs' dispute falls under the scope of the arbitration provision.
Plaintiffs argue that, aside from having expired, the CAs' arbitration provision does not apply to their dispute because "the Privacy Policy—not the CA—speaks to DirecTV's data retention and disclosure policies." (Opp. at 8.) Plaintiffs are referring to CA section 6, labeled "Personal Data," which states: "We collect personally identifiable information about our customers .... The use and disclosure of this Personal Data is governed by our Privacy Policy and ... by this Agreement." (McCarthy Decl., Ex. A at § 6.) Plaintiffs argue that their dispute arises under the Privacy Policy, and that the Privacy Policy is not properly incorporated into the CAs. (Opp. at 8.) Thus, Plaintiffs claim, their dispute is not governed by the CA's arbitration provision. (Id.) The Court finds this argument unpersuasive.
"The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone, 460 U.S. at 24-25. Here, the CAs' arbitration provision is worded very broadly. It requires that any claim "relating to [the CAs], any addendum, or your Service" be resolved by arbitration, failing informal resolution. (McCarthy Decl., Ex. A at § 9.) Even assuming Plaintiffs are correct, and the Privacy Policy is not properly incorporated into the CAs, Plaintiffs' argument here fails for the same reason that their expiration argument fails: because Plaintiffs allege that DirecTV's treatment of their personal information constitutes DirecTV's failure to perform its obligations under the CAs. (See Opp. at 16-17.) Because this dispute is, by Plaintiffs' own admission, related to the CAs, the dispute falls under the scope of the CAs' arbitration provision.
C. The Arbitration Agreement is Not Unconscionable.
Plaintiffs argue that the arbitration agreement is unenforceable because it is unconscionable under both California and Florida law. As a preliminary matter, Plaintiffs have provided no support for their argument that the arbitration provision is unconscionable under Florida law. However, like California law, Florida law requires both procedural and substantive unconscionability, and for the reasons below, the Court finds a fatal lack of substantive unconscionability. See Gainesville Healthcare Center, Inc. v. Weston, 857 So.2d 278, 284 (2003). Thus, while the Court's analysis will be conducted pursuant to California law, its finding would be the same under Florida law.
Plaintiffs correctly note that "unconscionability remains a basic contract defense that may be used to invalidate arbitration provisions." (Opp. at 9) (citing AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1746 (2011).) Plaintiffs also acknowledge that "[l]ike other contracts, an arbitration provision is invalid if it is both procedurally and substantively unconscionable." (Id.) (citing Armendariz v. Foundation Health Psychare Serv., Inc., 24 Cal. 4th 83, 114-15 (2000).) Courts apply a sliding scale when analyzing these two factors, but "both must be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability." Grabowski v. Robinson, 817 F. Supp. 2d 1159, 1171 (S.D. Cal. 2011) (quotation omitted). "The party opposing arbitration has the burden of proving the arbitration provision is unconscionable." Id. (quotation omitted). Here, while the arbitration provision in question may be minimally procedurally unconscionable, it is not substantively unconscionable.
1. The arbitration provision is minimally procedurally unconscionable.
Procedural unconscionability "analysis concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. The element focuses on oppression or surprise." Gatton v. T-Mobile, USA, Inc., 152 Cal. App. 4th 571, 581 (2007) (quotations omitted). "Oppression arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice." Id. (quotations omitted). "Surprise is defined as the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed term." Id. (quotations omitted).
The arbitration provision at issue here is minimally procedurally unconscionable because it is undisputedly a contract of adhesion. As DirecTV correctly notes, "California courts recognize that adhesion only 'establishes a minimal degree of procedural unconscionability.'" (Reply in Support of DirecTV's Motion to Compel Arbitration ("Reply") at 12 (citing Gatton, 152 Cal. App. 4th at 585).) Plaintiffs argue that the arbitration provision here is further procedurally unconscionable because consumers wishing to opt out of the provision would have to cancel their DirecTV service and pay a $15 fee. (Opp. at 10 (citing McCarthy Decl., Ex. A at § 2(c)(9).) Plaintiffs speculate as to further cancellation costs but make no showing that such costs could be or have been incurred by Plaintiffs or any other DirecTV customer. (Id.) Any procedural unconscionability posed by the $15 fee is so minimal that it is subsumed in that which arises from the adhesive nature of the contract.
Plaintiffs argue that "DirecTV's provision is also procedurally unconscionable because it incorporates the rules of a specific type of arbitration (JAMS) but fails to provide the JAMS arbitration rules to the customer." (Opp. at 11.) Plaintiffs provide support for the proposition that the failure to provide arbitration rules can be deemed procedurally unconscionable. (Id. (citing Trivedi v. Curexco Technology Corp., 189 Cal. App. 4th 387, 393 n.4 (2010); Harper v. Ultimo, 113 Cal. App. 4th 1402, 1406-07 (2003).) However, more recent cases have held that procedural unconscionability can be avoided if the arbitration rules are incorporated into the contract by reference, such incorporation is clear, and the rules are readily available. Ulbrich v. Overstock.Com , Inc., 2012 WL 3631498, at *6 (N.D. Cal. Aug. 15, 2012); see also Medlin Ins. Agency v. QBE Ins. Corp., 2012 WL 2499952, at *5 (E.D. Cal. June 27, 2012) (holding that failure to provide arbitration rules is not, itself, enough to establish procedural unconscionability).
Here, the arbitration provision incorporates the JAMS rules clearly and explicitly, stating that any arbitration "will be conducted under the rules of JAMS." (McCarthy Decl., Ex. B at § 9(b).) Contrary to Plaintiffs' assertion that "DirecTV's provision fails to specify which version of the rules ... supposedly applies," the provision in fact states that the applicable rules are those "in effect at the time the arbitration is initiated." (Opp. at 11; id.) Nor have Plaintiffs satisfied their burden to demonstrate that the JAMS rules are now, or were ever, not readily available. In fact, Plaintiffs have not even alleged as much.
Finally, Plaintiffs argue that DirectTV's arbitration clause is "deceptive" because it "merely states: 'Arbitration means you waive your right to a jury trial.'" (Opp. at 12.) Plaintiffs argue that this statement is "misleading." (Id.) However, that statement is factually true and bears none of the many obfuscations present in the arbitration provision found to be procedurally unconscionable in Plaintiffs' sole citation, NAACP of Camden Cnty. E. v. Foulke Mgmt. Corp.. 24 A.3d 777 (N.J. Sup. Ct. App. Div. 2011); see also, Armendariz, 24 Cal. 4th at 118 (noting that a party waives the right to a jury upon agreeing to arbitrate). In the NAACP case, there were multiple arbitration provisions, scattered across multiple documents, many of which contradicted each other. 24 A.3d at 794. That is simply not the case here.
In all, the Court finds that DirecTV's arbitration provision is minimally procedurally unconscionable due to the adhesive nature of the contract and thus, in the balance, turns to the question of substantive unconscionability.
2. The arbitration provision is not substantively unconscionable.
Plaintiffs argue that DirecTV's arbitration provision is substantively unconscionable because it lacks both mutuality and the "customer-friendly" provisions that Plaintiffs argue the Supreme Court's decision in Concepcion turned on. (Opp. at 12-13.) For the following reasons, the Court finds neither argument convincing and finds that the DirecTV arbitration provision bears no indicia of substantive unconscionability.
Unlike procedural unconscionability, which focuses on the manner in which agreement to a disputed term was sought or obtained, substantive unconscionability relates to the actual terms of the arbitration agreement and whether those terms are "overly harsh" or "generate one- sided results." Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1281 (9th Cir. 2006) (quotations omitted). "The paramount consideration in assessing conscionability is mutuality." Id. (quotations omitted).
Indeed, Plaintiffs first argue that the provision is substantively unconscionable because it lacks mutuality. Plaintiffs are correct in their assertion that an arbitration provision is substantively unconscionable if it binds only one party and not the other. (Opp. at 12; see Monzon v. Southern Wine & Spirits of California, 834 F. Supp. 2d 934, 942 (2011).) However, the California standard provides that only a "modicum of bilaterality" is required to save an agreement from substantive unconscionability. Bischoff v. DirecTV, 180 F. Supp. 2d 1097, 1112 (C.D. Cal. 2002). Plaintiffs here have failed to show the lack of such a modicum of bilaterality in the DirecTV provision.
Plaintiffs claim that the provision here "would compel arbitration of all claims brought by customers, while providing DirecTV the freedom to file suits at its whim," because "DirecTV's arbitration clause specifically exempts claims ... that only DirecTV would ever be in a position to bring." (Opp. at 13.) The provision states that "any Claim [either party] asserts will be resolved only by binding arbitration." (McCarthy Decl., Ex. C at § 9(b).) However, it excludes certain claims, such as those brought under certain federal statutes and laws "governing theft of service," which may be litigated in court by either party. (Id. at § 9(d).) Plaintiffs have provided no support for their statement that such exceptions to the arbitration provision create non-mutuality by exempting from arbitration suits "that only DirecTV would ever be in a position to bring." (Opp. at 13.)
Other courts analyzing DirecTV's arbitration provision have rejected Plaintiffs' argument. The Central District of California, for example, held that the exact exemptions now disputed by Plaintiffs do not limit the right to litigate the excepted claims to DirecTV only, "and it is conceivable that a [customer] might have a claim against" DirecTV for such claims. In re DirecTV Early Cancellation Fee Mktg. and Sales Practices Litig., 810 F. Supp. 2d 1060, 1069 (C.D. Cal. 2011).
In the In re DirecTV case, the plaintiff made the identical argument to Plaintiffs' contention here: that "the Customer Agreement 'requires one contracting party, but not the other, to arbitrate all claims.'" Id. The court dismissed this argument, finding that "even a quick reading of the Arbitration Clause reveals that this is untrue." Id. Another Central District of California court similarly found that even if DirecTV's "arbitration clause ... in fact contain[s] certain unilateral effects, it is not unconscionably unilateral." Bischoff, 180 F. Supp. 2d at 1112. This Court agrees and finds that there is sufficient bilaterality in the arbitration provision here.
Finally, Plaintiffs argue that DirecTV's arbitration clause is "replete with unconscionable provisions" because it "contains none of the supposedly 'customer-friendly' attributes present in the provision upheld in Concepcion." (Opp. at 13.) Plaintiffs refer to only one such aspect of the Concepcion provision: that "AT&T had agreed to pay a $10,000 bonus to any consumers whose arbitration awards exceeded AT&T's last settlement offer." (Id.)
The primary defect in Plaintiffs' argument is that it is logically erroneous: the arbitration provision does not gain unconscionability by lacking consumer-friendly provisions, as Plaintiffs suggest. Plaintiffs' argument is based on a second faulty premise: that the Concepcion ruling was dependent on the consumer-friendly aspects of the provision at issue in that case. In fact, and as DirecTV has demonstrated, courts have generally rejected this very claim. See e.g., Adams v. AT&T Mobility LLC, 816 F. Supp. 2d 1077, 1088 (W.D. Wash. 2011) ("The court ... observes that the decision in Concepcion did not depend on the relatively consumer-friendly terms of" the arbitration agreement at issue there). Because the Concepcion Court did not depend on the consumer-friendly aspects of the provision there in order to uphold it, Plaintiffs' argument fails. This Court will not strike down an arbitration provision as unconscionable on the grounds that it lacks consumer-friendly attributes that were not decisive in the Concepcion case.
Furthermore, DirecTV's provision does indeed contain consumer-friendly provisions. For example, DirecTV has taken on the responsibility of paying all arbitration costs beyond the filing fee, which itself is not to exceed $125. (McCarthy Decl., Ex. C at § 9(b).) Also, the arbitration hearings take place in the customers' hometowns, and under the laws of their home states. (Id.) The Court thus finds no substantive unconscionability on this or on any other grounds presented by Plaintiffs. As noted above, both procedural and substantive unconscionability are required if an arbitration provision is to be deemed unenforceable on unconscionability grounds. See Concepcion, 131 S.Ct. at 1746. Because the Court finds DirecTV's arbitration provision lacks any indicia of substantive unconscionability, it is enforceable.
D. No Arbitration-Related Discovery is Necessary.
Plaintiffs move for leave to conduct arbitration-related discovery in order to bolster their contention that DirecTV's arbitration provision is unconscionable. Plaintiffs' argument is premised upon California Civil Code section 1670.5(b) which provides for arbitration-related discovery upon a claim or appearance of unconscionability. (Motion for Leave to Conduct Arbitration-Related Discovery at 4 (citing Cal. Civ. Code § 1670.5(b).) That section allows the parties "a reasonable opportunity to present evidence as to [the provision's] commercial setting, purpose, and effect to aid the court in making the [unconscionability] determination." Cal. Civ. Code § 1670.5(b). Some courts have interpreted this "reasonable opportunity" language to allow for discovery on the question of unconscionability. See, e.g., Hamby v. Power Toyota Irvine, 798 F. Supp. 2d 1163, 1164 (2011).
Here, Plaintiffs' requested discovery would provide no new information that is necessary for the Court to determine the issue of unconscionability. Plaintiffs have failed to request any discovery that would actually aid the Court in making an unconscionability determination. Plaintiffs make several requests, most of which relate to the merits of their suit, rather than to unconscionability of the arbitration provision. (See e.g., Plaintiffs' First Set of Arbitration-Related Interrogatories at ¶ 12 ("State the number of Subscribers in the United States who signed up for satellite service with DirecTV, and whose personally identifiable information was retained by DirecTV after the termination of services").) Further, Plaintiffs focus on DirecTV's customers in general, rather than on the only relevant customers, which are Plaintiffs themselves. (See id. at ¶ 4 ("[S]tate on an annual basis the number of disputes involving Consumers' Accounts where the amount in controversy was less than $15,000 that were instituted and resolved in state and federal court").)
The court in Meyer v. T-Mobile U.S.A. Inc. dealt with a very similar situation. 836 F. Supp. 2d 994, 1007 (2011). There, the plaintiff was a consumer suing on behalf of herself and a putative class, and she requested arbitration-related discovery on the issue of unconscionability. Id. at 997; 1006-07. However, like Plaintiffs' here, most of the Meyer plaintiff's discovery requests did "not relate to the validity of Plaintiff's arbitration agreement with [the DirecTV]. Instead, they concern[ed] all agreements, disputes, arbitrations and lawsuits relating to T-Mobile customers ... other than Plaintiff." Id. at 1007. The court there found that because the only relevant document—the agreement between the plaintiff and T-Mobile—was readily available to the court, no further discovery was necessary. Id.
Similarly here, the only relevant document is the actual arbitration agreement that Plaintiffs allege is unconscionable. Plaintiffs' further requests for information would not aid the Court and would only serve to delay arbitration in contravention of the FAA and its stated purpose.
The Court notes that the Plaintiffs and DirecTV refer in their briefs to a few different iterations of the CAs. However, further discovery on this issue is obviated by the McCarthy Declaration, which includes all the versions of the CAs that were sent to, and are thus applicable to, the Plaintiffs.
CONCLUSION
For the foregoing reasons, the Court GRANTS DirecTV's motion to compel arbitration and to stay proceedings pending arbitration. The Court finds that the arbitration clause at issue here is not unconscionable and DENIES Plaintiffs' motion for leave to conduct arbitration-related discovery.
IT IS SO ORDERED.
____________
JEFFREY S. WHITE
UNITED STATES DISTRICT JUDGE