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Freedom of Contract Appears Alive and Well in Third Circuit

Two federal courts in the Third Circuit recently compelled individual arbitration in TCPA actions. See Raynor v. Verizon Wireless, No. 15-5914, 2016 U.S. Dist. LEXIS 54678 (D.N.J. Apr. 25, 2016); Herndon v. Green Tree Serv. LLC, No. 15-1202, 2016 U.S. Dist. LEXIS 53937 (M.D. Pa. Apr. 22, 2016). Issued just a few days apart in cases against a telecommunications provider and a mortgage broker, these decisions serve as a helpful reminder to businesses to consider including arbitration clauses in their consumer contracts—and to explore their applicability when facing TCPA litigation.

In Raynor, a Verizon wireless subscriber alleged violations of the TCPA stemming from calls to her mobile phone “regarding delinquent cell phone payments.” Id. at *6. Verizon moved to compel arbitration, citing three agreements—two “Customer Agreements” and the “VZW Agreement”—that each contained identical arbitration clauses. Id. at *2–3. The two Customer Agreements were generated contemporaneously with the activation of each phone number on plaintiff’s account. Id. Although only one Customer Agreement was signed, both incorporated the VZW Agreement by reference. Id. The court found that the plaintiff had accepted the terms of the unsigned Customer Agreement through activation of her mobile service, thus “signif[ying] her acceptance . . . through her conduct. Id. at *13. The court further found that the broad scope of the arbitration clause encompassed plaintiff’s TCPA claims, as the provision covered any “dispute that in any way relates to or arises out of this agreement or from any . . . services [she] receive[s] from [VZW].” Id. at *17.

In Herndon, a mobile home buyer brought a putative class action alleging violations of the TCPA for calls made to collect overdue payments. Initially, the court rejected plaintiff’s claim that defendant’s failure to attach the arbitration agreement to its motion was dispositive—and admonished plaintiff for this bad faith argument. Id. at *10. The court then granted defendant’s motion to compel, concluding that plaintiff “agreed to arbitrate ‘any controversy or claim . . . arising out of or relating to’ the purchase of her manufactured home,” and that “any reasonable purchaser would have understood the scope of such an agreement to extend to debt collection upon default of the purchase agreement’s terms.” Id. at *16.

Coincidentally, these two rulings were handed down just days before U.S. Senator Richard Blumenthal, D-Conn., introduced a bill attempting to amend the Federal Arbitration Act to invalidate so-called “predispute” arbitration agreements in contracts for mobile phone services, cable and satellite television services, and other “telecommunications” and “information” services or services offered by “common carriers” (as those terms are defined in 47 U.S.C. § 153). See S. 2897, 114th Cong. (2016) (bill text available here). Such arbitration agreements are common in the telecommunications space, and, with Raynor as but one example, are routinely enforced by the courts. We will continue to report on pertinent developments in the coming months. In the meantime, these two decisions reaffirm the importance of considering the use of arbitration clauses—both before and after litigation arises—and of ensuring that such clauses are drafted so as to encompass TCPA claims.

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About this Author

Michael Daly, Drinker Biddle Law Firm, Philadelphia, Litigation and Retail Attorney

Michael P. Daly defends class actions and other complex litigation matters, handles appeals in state and federal courts across the country, and counsels clients on maximizing the defensibility of their marketing and enforceability of their contracts. A recognized authority on class action and consumer protection litigation, he often speaks, comments, and writes on recent decisions and developments in the class action arena. He is also a founder of the firm’s TCPA Team; the senior editor of the TCPA Blog, which provides important information and insight...

Matthew J. Adler, attorney, Drinker Bilddle, San Francisco, healthcare, telecommunications

Matthew J. Adler represents clients across a broad range of industries, including health care, retail and telecommunications. He focuses his practice on complex commercial disputes, multi-state consumer class actions and product liability litigation. Matt has litigated cases in state and federal court, at both the trial and appellate level, and he is particularly skilled in pre-trial motion practice.

Matthew is a regular on the firm's Associates Committee and a regular contributor to Drinker Biddle’s Telephone Consumer Protection Act (“TCPA”) Blog, which regularly provides news and insights concerning TCPA. Prior to joining the firm, Matt worked as a staff attorney for the Supreme Court of California. He also served as a judicial extern while in Law School for Honorable Kathryn M. Werdegar, Associate Justice of the Supreme Court of California.