Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court asked to consider Cox cable customer arbitration waiver decision, (Oct 15, 2015)

By Jody Coultas, J.D.

Cox Communications, which is owned by Cox Enterprises, Inc. and Cox DNS, Inc., has filed a petition for writ of certiorari asking the U.S. Supreme Court to review an appellate court decision upholding a ruling that Cox waived its right to arbitrate a class action antitrust suit filed by its customers (Cox Communications, Inc. v. Healy, Dkt. 15-466, filed October 13, 2015).

Cox consumers alleged that the company illegally tied its premium cable service to rental of a Cox set-top box. During the pendency of its motion to dismiss, Cox began inserting mandatory arbitration clauses into the contracts of some of its customers, including putative class action members. There was no record evidence that Cox notified the district court about the insertion of these clauses.

After an Oklahoma district court granted class certification, Cox moved for reconsideration on several grounds but the impact of the arbitrations clauses was not among them. Cox eventually moved to compel arbitration and, on that same day, also moved for summary judgment. The district court determined that Cox’s prior conduct constituted waiver and it denied the motion to compel arbitration. Cox then appealed the denial of its motion.

The U.S. Court of Appeals for the Tenth Circuit in Denver held that Cox waived the right to compel arbitration against at least 140,000 customers, and it was unnecessary to resolve a claim that the arbitration contracts were illusory or otherwise unenforceable. Cox’s failure to inform the court about the presence of the arbitration agreements until after the certification was inconsistent with an intent to arbitrate, according to the court. The district court expended a significant amount of judicial resources, at great expense to the public, which could have been conserved if Cox had timely mentioned the arbitration clauses and its intent to arbitrate. This failure to mention the arbitration clauses prejudiced the consumers and the court.

In its petition, Cox asserts that the Tenth Circuit’s decision undermines the national policy favoring arbitration outlined in the Federal Arbitration Act (FAA), and complicates litigation procedures in cases involving arbitrability issues. The decision allegedly created a judge-made exception to the FAA that is not supported by general contract waiver principles or ordinary procedural waiver rules. Cox also notes that the decision at issue would deepen a split between the D.C. and Fifth circuits concerning whether a party waives its right to compel arbitration by filing a motion for summary judgment simultaneously with a motion to compel arbitration. Finally, Cox notes a split in circuit court decisions regarding whether a showing of prejudice is necessary to establish a waiver of arbitration rights. The decision allegedly “embraces a conception of prejudice that should not be cognizable, and applies the prejudice requirement in a way that essentially nullifies it in the class action context.”

Cox asked the court to consider:

1. Whether, in a putative class action, a defendant waives its right to compel arbitration of the claims of absent class members by not filing its motion to compel arbitration until after the court certified the class;

2. Whether a defendant waives its right to compel arbitration by filing a motion for summary judgment simultaneously with a motion to compel arbitration, or a defendant may file alternative motions to compel arbitration or for judgment on the merits; and

3. Whether a reduction in the size of a class constitutes prejudice to plaintiffs sufficient to support a waiver of the defendant’s arbitration rights with respect to absent class members.

Attorneys: J. Scott Ballenger and Jonathan Y. Ellis (Latham & Watkins LLP) for Cox Communications, Inc.

Companies: Cox Communications, Inc.

News: Antitrust