Mey v. DIRECTV, LLC, No. 5:17-CV-179-JPB-JPM (N.D. W. Va. Feb. 12, 2021) [click for opinion]
In 2012, Plaintiff Diana Mey, an ordinary wireless consumer, entered into a cell phone service contract with AT&T Mobility which included an agreement to arbitrate “all disputes and claims” with AT&T Mobility and its “affiliates.” In 2015, the parent company of AT&T Mobility—AT&T Inc.—acquired DIRECTV. DIRECTV does not provide cell phone service.
Some years later, Mey sued DIRECTV for making unwanted automated telemarketing calls. DIRECTV moved to compel arbitration, asserting that the dispute was covered by the arbitration agreement governing Mey’s cell phone plan with AT&T Mobility. The district court denied the motion, concluding that the dispute did not fall within the scope of the agreement, and that any other construction of the agreement would be unconscionably overbroad. DIRECTV appealed. The Fourth Circuit vacated the district court’s order, finding that the dispute was within the scope of the agreement, but remanded the issue for further consideration of Mey’s unconscionability challenge.
On remand, DIRECTV first argued that Mey had waived any unconscionability argument by failing to raise it on the initial appeal. This argument was swiftly rejected by the court, which noted that while an appellant may be required to raise all issues on appeal or risk waiver, this principle does not extend to appellees. Holding otherwise would motivate appellees “to raise every possibly alternative ground and to file every conceivable protective cross-appeal, thereby needlessly increasing the scope and complexity of initial appeals.”
The court then analysed the scope of the arbitration agreement. The court recognized that arbitration clauses may validly apply to claims with a significant relationship to the contract. This principle, however, does not mean agreements can extend to any disagreement, and the court cautioned against “metastasized” arbitration clauses and “infinite arbitration agreements,” which fail to limit either the kind of dispute or the parties to whom arbitration extends.
Applying these principles, the court found that the arbitration provision at issue was both procedurally and substantively unconscionable. The agreement was procedurally unconscionable because it was clearly a contract of adhesion. There was a large imbalance in the degree of sophistication between the parties, the arbitration provision was a non-negotiable term in the agreement between the parties, and the agreement containing the arbitration provision was provided on a small electronic pinpad device, which displayed only a few lines of the agreement at a time.
The agreement was also substantively unconscionable, as customers would rationally expect that the agreement to arbitrate would relate to issues with that contract, and not with future unrelated disputes with an unknown affiliate. The court reasoned that no reasonable person would understand that they were consenting to arbitrate any claims with any future affiliate. Accordingly, the court found the arbitration agreement unenforceable and denied DIRECTV’s motion to compel arbitration.