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In re Sprint Premium Data Plan Marketing and Sales Practices Litigation

United States District Court, Third Circuit

January 15, 2014

IN RE: SPRINT PREMIUM DATA PLAN MARKETING AND SALES PRACTICES LITIGATION

OPINION

SUSAN D. WIGENTON, District Judge.

Before this Court is Defendant Sprint Spectrum L.P.'s motion to compel bilateral arbitration and dismiss or stay all actions pursuant the Federal Arbitration Act, Federal Rule of Civil Procedure 12(b)(1), and 12(b)(6). This Court, having considered the parties' supplemental submissions, decides this matter without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons stated below, this Court GRANTS Defendants' motion to compel arbitration.

I. FACTUAL and PROCEDURAL BACKGROUND

Given the extensive procedural history of this case, only a brief recitation of the facts and procedural posture is provided. This case involves Plaintiffs Cameron Comstock, Arlene Baisa Lockhart, Shalimar Guerra, Gene Lockhart, Matt Tillman, Scott Tallal, and Craig Morris, (collectively "Plaintiffs") and their grievances against Defendant Sprint Spectrum L.P. ("Sprint"). On July 15, 2011, Sprint moved to compel arbitration with Plaintiffs. ( See Dkt. No. 37.) On March 12, 2012, this Court entered an opinion and order finding that Plaintiffs' claims were subject to arbitration and that the arbitration agreement ("Arbitration Agreement") was valid in almost every respect save for the issue of unconscionability. ( See Dkt. No. 47-48.) The parties were ordered to engage in limited discovery to permit this Court to determine whether the Arbitration Agreement, was substantively unconscionable due to prohibitive costs. ( See id. )

Having completed their limited discovery in compliance with this Court's March 12, 2012 order, the parties now return for this Court's determination of the validity of the Arbitration Agreement.

II. LEGAL STANDARD

"The final phrase of ยง 2 [of the Federal Arbitration Act ("FAA")]... permits arbitration agreements to be declared unenforceable upon such grounds as exist at law or in equity for the revocation of any contract.'" AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1746 (2011) ( "Concepcion") . "This saving clause permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability.'" Id. For an agreement to be unconscionable, it must be found to be both procedurally and substantively unconscionable. See Antkowiak Tax Musters, 455 Fed.App'x. 156, 159 (3d Cir. 2011). "ln addressing a claim that an arbitration clause is unconscionable, we apply the ordinary state law principles... of the involved state or territory."[1] Nino v. Jewelry Exchange, Inc., 609 F.3d 191, 200 (3d Cir. 2010).

This Court previously found that it was not clear under California law whether the Arbitration Agreement was procedurally unconscionable. Consequently, this Court turned to the issue of substantive unconscionability to determine the validity of the Arbitration Agreement. Despite the rule enunciated in Nino, the issue of substantive unconscionability in this case is governed by federal law given the language in the Arbitration Agreement.[2] See Parada v. Superior Court, 176 Cal.App.4th 1554, 1577 (Cal.Ct.App. 2009) (stating that, in that case, determination of substantive unconscionability was governed by California pursuant to the language of the arbitration agreement).

i. Substantive Unconscionability

Concerning substantive unconscionability, there are two cases that provide controlling law. The first case that is instructive on substantive unconscionability is Green Tree Fin. Corp. v. Randolph, 531 U.S. 79 (2000). In Green Tree the Court held that an arbitration agreement that did not have a specific provision regarding costs would be unenforceable under the FAA if it made arbitration "prohibitively expensive." Green Tree Fin. Corp., 531 U.S. at 92. The Court further stated that the party opposing arbitration was responsible for showing the likelihood of costs being "prohibitive." Id.

Unlike the agreement in Green Tree, here the Arbitration Agreement is not silent as to arbitration costs. Instead, the Arbitration Agreement contains a clear fee-splitting provision. (Miller Decl. Ex. A, p. 12.) The Arbitration Agreement states that the parties are jointly responsible for arbitration costs; however, Sprint agrees to cover arbitration administrative and filing fees in excess of $25 if the customer is seeking to recover less than $1000, or the cost of court filing fees in the applicable jurisdiction if the claim is for more than $1000. ( See id. )

The second instructive case on the issue of substantive unconscionability is Blair v. Scott, 283 F.3d 595 (3d Cir. 2002). In Blair, the Third Circuit addressed fee-splitting provisions in light of Green Tree. The Blair court stated that the presence of fee-splitting alone is not enough to make an arbitration agreement unconscionable. See Blair v. Scott Specialty Gases, 283 F.3d 595, 610 (3d Cir. 2002). The Third Circuit further stated that for it to hold the mere existence of a fee-splitting provision to be per se unconscionable "would run counter to the strong federal preference for arbitration and the liberal policy regarding arbitration." Id.

Blair established a test to determine whether a fee-splitting provision is prohibitive under Green Tree. The test consisted of two separate parts. First, a court must look at the projected costs that would apply according to the arbitration rules set forth in the agreement. See Blair, 283 F.3d at 607-08. Second, a court must look at the individual plaintiff's ability to pay the projected costs. See id. ; Antkowiak, 455 Fed.App'x at 160 (applying the same test). It is Plaintiffs' responsibility to make a showing as to both factors. See Parilla v. IAP Worldwide Servs., VI, Inc., ...


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