Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Mich. App.: Arbitration required in dealer’s dispute with AT&T subsidiary, (Apr 1, 2016)

An arbitration provision in a dealer’s 2009 exclusive dealer agreement with an affiliate of an AT&T subsidiary applied to the dealer’s circuit court complaint regarding a 2011 dealer agreement with the subsidiary, according to the Michigan Court of Appeals. However, the 2011 contract’s choice of law provision applied to the arbitration of the disputes (Coastal Communications of Michigan, LLC v. AT&T Services, Inc., March 29, 2016, Per Curiam).

In 2009, an “AT&T Exclusive Dealer Agreement” was executed on behalf of Coastal Communications of Michigan, LLC and AT&T Mobility. The contract contained a provision for the arbitration of disputes, a merger clause, and a Georgia choice of law provision.

In 2011, Coastal entered into a contract with AT&T Services, an affiliate of AT&T Mobility, to sell U-verse and certain other legacy products door-to-door. The contract, which did not provide for the arbitration of disputes but did contain a merger clause and a Texas choice of law provision, was terminated by letter in 2013.

In June 2014, Coastal, its president, and its corporate representative filed a demand for arbitration, with regard to the 2009 contract against AT&T Mobility, alleging counts of breach of contract, fraudulent misrepresentation, tortious interference, promissory estoppel, and negligent misrepresentation.

In July 2014, the plaintiffs filed a complaint against AT&T Services and three employees of AT&T Mobility with regard to the 2011 contract. The complaint alleged several of the same counts as in their demand for arbitration.

The defendants filed a motion to dismiss the complaint on the basis that every aspect of the dispute was subject to the arbitration clause in 2009 contract. The court agreed and determined that: (1) the parties to the 2009 contact and the 2011 contract were the same; and (2) the termination of the 2011 contract was a termination of additional services allowed under the 2009 contract (which explained how the 2011 contract terminated and the 2009 contract with AT&T Mobility survived). Consequently, the 2011 contract expanded the scope of the original 2009 contract and, rather than revoking the arbitration clause contained in the 2009 contract, became subject to it.

On appeal, the plaintiffs’ argument against arbitration was that the 2009 and 2011 contracts were completely independent from each other. The appellate court disagreed and found that the 2009 contract: (1) established Coastal’s business relationship with AT&T and its affiliates; (2) included language regarding future agreements between contract signatories and affiliates of the 2009 contract; and (3) required arbitration of disputes arising from the contract. Further, the 2011 contract was an opportunity for Coastal to distribute services from an AT&T affiliate.

Additionally, the appellate court held that the 2011 contract’s Texas choice of law provision would apply for arbitration, rather than the 2009 contract’s Georgia choice of law provision, because the 2011 contract contained an integration clause that superseded inconsistent terms of prior agreements. Moreover, the allegations of the plaintiffs’ complaint were factually intertwined with the 2009 contract which contained the arbitration clause. Consequently, the plaintiffs’ circuit court claims were subject to arbitration.

The case is No. 324241.

Attorneys: Briar Shawn Siljander (Cooper & Riesterer PLC) for Coastal Communications of Michigan LLC. Kathryn S. Wood (Dickinson Wright Law Firm) for AT&T Services Inc.

Companies: Coastal Communications of Michigan LLC; AT&T Services Inc.

Cases: FranchisingDistribution MichiganNews