Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D. N.Y.: Arbitration award allowing consumer’s unfair trade practices class action claims against wireless carrier confirmed, (Feb 12, 2014)

By Linda O’Brien, J.D., LL.M.

The federal district court in New York City has confirmed a partial arbitration award terminating arbitration proceedings and authorizing the pursuit of a putative class action in a consumer action against a wireless communications services provider for violations of the Kansas Unfair Trade and Consumer Protection Act (KCPA) involving the service provider’s practice of charging customers a monthly fee to satisfy a state excise tax. Accordingly, the consumer was granted leave to file a class action complaint (Emilio v. Sprint Spectrum L.P., February 11, 2014, Oetken, J.).

Vincent Emilio was a customer of Sprint Spectrum L.P.,’s wireless telephone services. The customer agreement between Emilio and Sprint contained an arbitration provision requiring mandatory arbitration of disputes and stating that no claim between the parties could be resolved on a class-wide basis. The provision also stated that the arbitration would be conducted under the applicable rules of the Judicial Arbitration and Mediation Services (JAMS) or National Arbitration Forum (NAF). In 2005, Emilio filed a demand for class arbitration. The arbitrator held that the class action waiver was unenforceable in light of the KCPA’s anti-waiver provision. In 2010, the U.S. Supreme Court issued a decision in Stolt-Nielsen SA v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) which held that, under the Federal Arbitration Act (FAA), a party could not be compelled to submit to class arbitration absent a contractual basis for its agreement to do so. Subsequently, the arbitrator issued a decision holding that, although Sprint could not be compelled to proceed with class arbitration, Emilio could not be compelled to proceed with bilateral arbitration and must be given the opportunity to pursue class actions in a court action. Emilio moved to confirm the arbitration award terminating the arbitration and allowing his claims proceed as a putative class action.

Manifest disregard of the law. The court determined that the enforceability of the class action waiver in the arbitration provision was a question for the arbitrator. In rejecting Sprint’s argument that the arbitrator manifestly disregarded the law, the court noted that the argument relies on changes in the law after the issuance of the award. In finding that the FAA did not preempt the anti-waiver provision of the KCPA, the arbitrator did not ignore or refuse to apply the governing legal principles applicable at that time and an intervening change in the law, standing alone, was not grounds for vacating an otherwise proper arbitral award.

Scope of arbitrator’s powers. The court also found that the arbitrator did not exceed her authority under the arbitration provision or under the applicable JAMS rules. The JAMS rule on class action procedures requires the arbitrator to determine whether or not to permit class arbitration but does not require an order of bilateral arbitration in the event that the class action waiver is unenforceable. Sprint also failed to show that the arbitrator was not “arguable construing” the contract or that she committed more the “grave error.” Moreover, the award providing that Emilio be given the opportunity to pursue his claims on a class basis in court did not constitute an order to the court to allow him to file a class action complaint since Emilio was free to file his complaint regardless of the award.

The case is No. 11 Civ. 3041.

Attorneys: William Robert Weinstein for Vincent Emilio. Joseph Andrew Boyle (Kelley Drye & Warren, LLP) for Sprint Spectrum L.P.

Companies: Sprint Spectrum L.P.

Cases: StateUnfairTradePractices NewYorkNews