Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—CalCtApp: Sprint Not Permitted to Seek Arbitration of Already-Tried Class Claims Centered on Early Termination Fees., (Oct 31, 2012)

By E. Darius Sturmer, J.D.

A wireless communications service provider—Sprint Spectrum, L.P.—was not entitled to arbitration of consumer class action claims that its flat early termination fees violated California’s Consumers Legal Remedies Act and Unfair Competition Law and constituted unauthorized penalties prohibited under Civil Code Sec. 1671, the California Court of Appeal in San Francisco has ruled (Ayyad v. Sprint Spectrum, L.P., October 29, 2012, Needham, H.).

The consumers initially brought the action in 2003, and prevailed at trial in December 2008 on all claims—a decision later affirmed on appeal, in a ruling that additionally granted the consumers a partial new trial to resolve several damages issues. The remand was specifically intended to address whether actual damages were due the consumers, whose initial award of restitution in the amount of $73,775,975 had been completely offset by Sprint’s damages on breach of contract cross–claims it had asserted against the consumers for early termination.

Only upon that remand did Sprint seek to compel arbitration of the very same claims that had just been tried and even resolved at the appellate level. The company claimed that it had not sought arbitration earlier because “any such attempt would have been futile” until the U.S. Supreme Court’s April 2011 decision in AT&T Mobility LLC v. Concepcion (131 S.Ct. 1740) that the Federal Arbitration Act preempted an existing rule requiring the availability of classwide arbitration, thereby ensuring Sprint’s right to enforce the arbitration provisions of its subscriber agreements. The trial court subsequently refused to entertain Sprint’s motion, ruling that its jurisdiction on remand was restricted to the issues specified in the appellate court’s remanding opinion. The court explained that even if it were jurisdictionally permissible for it to compel arbitration of Sprint’s cross-claims while leaving the judgment on the class claims intact, Sprint had not sought that relief.

The trial court correctly concluded that hearing the motion to compel arbitration would have exceeded its jurisdiction on remand, the appellate court stated. The court properly interpreted the appellate court’s opinion upholding the trial court’s judgment and its order granting a partial new trial on the issue of actual damages and the setoff calculation. After Sprint had exhausted all avenues of further appellate review—unsuccessfully petitioning both the California and U.S. Supreme Court—the California appellate court’s ruling because final, and the issues adjudicated by the judgment were conclusively determined. The directions on remand restricted the issues to be retried to those identified in the trial court’s order granting the partial new trial, the appellate court said. The court did no more than comply scrupulously with the remand directions.

Moreover, remand for retrial on damages did not expand the scope of the trial court’s jurisdiction, the appellate court reiterated. The court rejected an argument by Sprint that because the prior appellate opinion had not addressed arbitration, the trial court had “wide jurisdiction to deal with pretrial matters including a motion to compel arbitration.” The court explained that its decision not to expressly comment on the issue of arbitration did not render inapplicable the fundamental rule that a lower court had jurisdiction to consider only those issues specified in the higher court’s disposition. “It is unnecessary and inappropriate for an appellate court to attempt to envision and to set forth in detail the entire universe of matters prohibited by its directions on remand,” the court remarked.

Alan R. Plutzik (Bramson, Plutzik, Mahler & Birkhaeuser) for Ramsay Ayyad. A. Brooks Gresham (McGuireWoods) for Spirnt Spectrum, L.P.

Cases: StateUnfairTradePractices ConsumerProtection CaliforniaNews