Morgan v. AT&T Wireless Services, Inc.
Filed 9/13/13 Morgan v. AT&T Wireless Services, Inc.
CA2/4
NOT TO BE PUBLISHED IN THE
OFFICIAL REPORTS
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
JOSHUA MORGAN et
al.,
Plaintiffs and Appellants,
v.
AT&T WIRELESS
SERVICES, INC.,
Defendant and Respondent.
B241242
(Los Angeles County
Super. Ct. No. BC318474)
APPEAL
from an order of the Superior Court of
County, Jane Johnson, Judge. Reversed
and remanded.
Kirtland
& Packard, Behram V. Parekh, and Joshua A. Fields for Plaintiffs and
Appellants.
John
C. O’Malley; Mayer Brown, Donald M. Falk, and John Nadolenco for Defendant and
Respondent.
introduction
Plaintiffs
Joshua Morgan and George Shannon appeal from the trial court’s denial of their
motion to certify a class consisting of customers who purchased cellular
telephones from defendant AT&T Wireless Services, Inc. (the predecessor to
AT&T Mobility, hereafter referred to as ATTM) in 2003. Plaintiffs’ filed a class action lawsuit
alleging ATTM made changes to their wireless network which rendered plaintiffs’
phones unusable. ATTM initially sought
to compel individual arbitration based on an arbitration clause that contained
a clear action waiver, but changes in the law resulted first in its abandonment
of that request, and later in its renewal of its request to compel individual
arbitration. The trial court concluded
that ATTM waited too long to renew its request to compel arbitration and waived
that right as to the named plaintiffs.
However, the court also held that ATTM could not have sought to compel
arbitration as to the putative class members before the named plaintiffs filed
a motion seeking class certification.
When plaintiffs did so, the court denied the motion for class
certification on the basis that plaintiffs were not compelled to arbitrate due
to ATTM’s waiver, but the putative class members were still subject to
arbitration. As a result, the named
plaintiffs were not representative of the class, and the trial court therefore
denied the motion for class certification.
Plaintiffs
contend on appeal that a finding of waiver of the right to compel arbitration
by a class action defendant applies not only to claims of the class
representatives, but also to putative class members, prior to class
certification. Because we agree, we
reverse the trial court’s order denying class certification.
factual and
procedural background
I. Initiation of the Lawsuit
A
now-dismissed plaintiff filed the original complaint in this action in July
2004. Morgan and Shannon joined as named
plaintiffs in December 2004. The
essential factual underpinning of the complaint was that in 2003 plaintiffs
purchased Sony Ericsson T68i phones for use on ATTM’s wireless network and
subsequently ATTM made changes to the network that rendered those phones
essentially unusable. ATTM provided free
replacement phones but they were inadequate.
Plaintiffs pleaded violations of various consumer protection laws. The operative third amended complaint was
filed in May 2007.
II. ATTM’s 2005 Motion to Compel Arbitration
The
ATTM wireless service contracts signed by the plaintiffs included a provision
requiring that any disputes between the parties were to be resolved by binding
arbitration. A further provision stated
that “[y]ou and we both agree that any arbitration will be conducted on an
individual basis and not on a consolidated, classwide or representative basis.â€
ATTM
invoked the arbitration provision in mid-2005 and sought to compel arbitration.
The trial court (Chaney, J.) denied the
motion in October 2005. The trial court
had before it both ATTM’s motion to compel arbitration and plaintiffs’
cross-motion to compel classwide arbitration.
The court initially indicated its tentative ruling was to grant ATTM’s
motion to compel, but indicated that the provision in the agreement waiving
classwide arbitration was unenforceable, relying on the recently-decided case
of Discover Bank v. Superior Court
(2005) 36 Cal.4th 148 (Discover Bank),
which held that class action waivers in consumer contracts of adhesion were
unconscionable under some circumstances.
ATTM responded that if its class waiver provision might be unenforceable
it would prefer not to proceed to arbitration. The trial court therefore found that neither
party wished to pursue arbitration (as plaintiffs’ filing of a lawsuit was
inconsistent with arbitration), and denied the motions to compel arbitration.
ATTM
filed a notice of appeal from the denial of its motion to compel arbitration
but dismissed the appeal in June 2006 after other cases following
would be futile.
the Third Amended Complaint, the Successful Demurrer, and the Appeal
Eventually,
ATTM filed a demurrer to the third amended complaint which the trial court
sustained without leave to amend, dismissing the action. Plaintiffs appealed and the ruling was
affirmed in part and reversed in part by this court in Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235
(Morgan I). We found plaintiffs had stated claims for
violation of the Unfair Competition Law (Bus. & Prof. Code, § 17200),
violation of the California Consumers Legal Remedies Act (Civ. Code, § 1750),
and for fraud and deceit. We held
plaintiffs lacked standing on their claim under the False Advertising Law (Bus.
& Prof. Code, § 17500), and had abandoned their declaratory relief
claim. (Morgan I, at pp. 1259, 1262-1263.)
Motion to Compel Arbitration and the Motion to Certify the Class
ATTM
filed an answer to the third amended complaint on April 1, 2011. Later that month, on April 27, 2011, the
United States Supreme Court decided AT&T
Mobility LLC v. Concepcion (2011) 563 U.S. ___ [131 S.Ct. 1740] (
held that California’s Discover Bank rule—classifying
most collective-arbitration waivers in consumer contracts as unconscionable—is preempted
by the Federal Arbitration Act because it interferes with fundamental
attributes of arbitration. (
In
September 2011, plaintiffs moved for class certification. The parties undertook significant class
certification-related discovery. ATTM
took depositions, participated in status conferences, and sought approval to
set the depositions of numerous absent class members.
On
November 8, 2011, about six and one-half months after Concepcion was decided, ATTM filed a renewed motion to compel
arbitration (based on the assumption, in light of Concepcion, that arbitration would occur on an individual basis).
The
trial court issued a tentative ruling indicating it was likely to deny ATTM’s
renewed motion to compel arbitration on the ground ATTM waited too long after
meantime had undertaken discovery, thus waiving its right to compel
arbitration. However, the trial court
permitted ATTM to file preliminary opposition to the motion for class
certification. The only issue it was
permitted to address was whether the putative class members’ arbitration
agreements precluded certification of a class.
ATTM filed its preliminary opposition in February 2012.
On
March 15, 2012, the trial court denied the motion for class certification,
concluding that although ATTM had waived its right to compel arbitration of the
named plaintiffs’ claims, that waiver did not extend to the claims of the
absent members of the putative class. Relying
on Sky Sports, Inc. v. Superior Court
(2011) 201 Cal.App.4th 1363 (Sky Sports),
the trial court ruled that ATTM could not have moved to compel arbitration of
the putative class members’ claims “before the issue of class certification was
before the court.†The court
stated: “While [plaintiffs] seek[] to
distinguish Sky Sports on the basis that [ATTM] could have moved to
compel arbitration as to the entire class because the ‘named plaintiffs and the
putative class members here are all subject to the same arbitration agreement’
(unlike the named plaintiff in Sky Sports who did not sign the
arbitration agreement), this is a distinction without a difference. Sky Sports stands for the proposition
that it is premature to bring a motion to compel arbitration as to the putative
class members unless and until a class certification motion is filed, and the
failure to bring one before then cannot constitute a waiver, including any
claim based on the statute of limitations.
Delay as to the putative class can only happen after
certification.â€
The
court continued: “It is true that [defendant]
could have timely brought a motion to compel arbitration as to the class
representative following Concepcion.
However, that fact has little bearing on the timing of a motion with
respect to putative class members. Until
the filing of the motion for class certification in this case, the issues as to
the enforcement of putative class members’ arbitration agreements and resulting
individualized issues affecting commonality, as well as lack of typicality as
to the class representatives, were not ripe for decision.â€
The
court noted that ATTM had not pleaded arbitration as an affirmative defense in
its answer to the third amended complaint.
In the court’s view, however, no other factors supported a finding that
ATTM had waived its right to require “the remaining putative class members†to
abide by their arbitration agreements.
The
court also found that both named plaintiffs, as the would-be class
representatives, had not met their burden to establish they are typical of a
class consisting almost entirely of people who had agreed to arbitrate. The court stated that “class certification is
improper in light of the existence of arbitration agreements applicable to each
putative class member who was a customer of [ATTM], as opposed to class
representatives no longer subject to arbitration due to waiver by delay in
bringing a motion to compel arbitration.
Because the lack of typicality of class representatives and the individualized
issues as to enforceability and terms of a variety of potential arbitration
agreements as to putative class members, the Court concludes a class cannot be
certified and denies plaintiffs’ motion for class certification.â€
This
timely appeal followed.
discussion
Plaintiffs
contend that none of the absent members of the putative class are required to
arbitrate this matter because ATTM waived its right to compel arbitration as to
plaintiffs as well as to all members of the putative class; ATTM did not have
to await filing of a motion for class certification to move to compel
arbitration as to putative class members.
Thus, the trial court erred in denying plaintiffs’ motion for class
certification on the basis that the named plaintiffs are not typical of the
class they sought to represent. We
agree.
I. The Finding of Waiver Is Now
Irrefutable
The
trial court concluded that ATTM waived its right to compel arbitration as to
the named plaintiffs because it delayed for over six months after
class-related discovery, before filing a renewed motion to compel
arbitration. Although the trial court
apparently did not enter a formal order denying ATTM’s motion to compel
arbitration, its order denying class certification necessarily constituted a
ruling denying the motion to compel based on a finding of waiver. ATTM did not file a protective cross-appeal
as to the finding of waiver—although it ineffectually purports to reserve the right
to appeal the ruling—and does not argue that the finding was incorrect. Under these circumstances, ATTM has forfeited
the opportunity to challenge that finding.
We presume that the ruling was correct and need not discuss its
merits.
Court Erred in Concluding the Waiver Did Not Apply to Putative Class Members
Given
that ATTM waived its right to arbitrate against the named plaintiffs, we next
consider whether the trial court was correct in concluding that such waiver did
not apply to the putative class members.
ATTM cites various reasons why the trial court was correct. ATTM contends the trial court correctly
concluded that a motion to compel arbitration as to putative class members
would be premature until a motion for class certification was filed. ATTM also asserts that prior to class
certification, putative class members cannot be bound by precertification
rulings on substantive issues. In
addition, ATTM argues that it would violate the due process rights of putative
class members to bind them to a precertification ruling. As we now discuss, we find none of these
arguments persuasive.
A. ATTM’s Motion to Compel Arbitration Was Not Premature as to
the Putative Class Members Unless and Until a Motion for Class Certification
Was Filed
ATTM
asserts that the trial court correctly ruled, relying on Sky Sports, supra, 201 Cal.App.4th
1363, that ATTM’s waiver of the right to compel arbitration did not apply to
putative class members because any motion to compel arbitration as to those
“nonparties†would be premature until a motion for class certification was
filed. We conclude that
trial court’s ruling was legally incorrect.
As this is a legal issue, our review is de novo. (Id.
at p. 1367, citing Lee v. Southern
California University for Professional Studies (2007) 148 Cal.App.4th 782,
785 (Lee).)
In
company filed a class action lawsuit seeking remedies for alleged rest break
violations. In order to defeat class
certification, about eight months after the motion to certify the class was
filed the company argued that the majority of its employees had signed
arbitration agreements as part of their employment contracts.
Hector Hogan, had not signed such an agreement.
The company therefore asserted that he was not an adequate class
representative. The company demonstrated
that a high percentage of the putative class members had signed arbitration
agreements. Nonetheless, the trial court
granted the class certification motion, finding that the company had waived its
right to arbitration due to its unreasonable delay in bringing its petition to
compel. (Sky Sports, supra, 201
Cal.App.4th at pp. 1366-1367.)
The
Court of Appeal stated that it was called upon to determine if the trial court
had erred in ruling that the company had waived its right to enforce the
arbitration agreements by not moving to compel arbitration before certification
of a class that included parties to the agreement. (Sky
Sports, supra, 201 Cal.App.4th at
p. 1367.) The appellate court concluded
that the statutory pleading requirements to compel arbitration under Code of
Civil Procedure section 1281.2 were not satisfied until the class was certified,
and therefore any purported delay in bringing the motion to compel arbitration
did not constitute a waiver. (
it was whether “a ‘motion to compel the named plaintiff Hector Hogan to arbitrate
before a ruling on the class certification motion would have been premature
arbitration agreement.’†(
its right to compel arbitration because it did not bring the motion before
certification of a class that included
parties to the arbitration agreement.â€
(Ibid., italics added.)
The
court reasoned as follows. “Section
1281.2 sets forth the procedure to compel arbitration of parties to an arbitration
agreement. ‘On petition of a party to an
arbitration agreement alleging the existence of a written agreement to
arbitrate a controversy and that a party thereto refuses to arbitrate such
controversy, the court shall order the petitioner and the respondent to
arbitrate the controversy . . . unless . . . [¶]
(a) The right to compel arbitration has been waived by the petitioner[.]’ (§ 1281.2.)
“. .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
“Arbitration
is a matter of contract, and ordinarily someone not a party to an arbitration
agreement cannot be compelled to arbitrate. (§ 1281.) The company contends none of the limited
exceptions to compel a nonsignatory to arbitration apply here, and until the
class was certified to include a
signatory to the arbitration agreement, it would have been premature to
bring a motion to compel. Section 1281.2
supports the company’s position.
“To
compel arbitration under section 1281.2, there must be a ‘written agreement to
arbitrate a controversy,’ and a ‘party thereto refuses to arbitrate such
controversy.’ As construed in
Cal.App.4th 633, ‘[t]he Legislature plainly intended section 1281.2 to provide
a procedural device for enforcing the parties’ written arbitration agreement if
one or more of the parties would not agree to such arbitration.’ (Id.
at p. 641.) Thus, to bring a motion to
compel arbitration, a party must plead and prove: ‘(1) the parties’ written agreement to
arbitrate a controversy . . . ; (2) a request or demand by one
party to the other party or parties for arbitration of such controversy
written arbitration agreement; and (3) the refusal of the other party or
parties to arbitrate such controversy pursuant
to and under the terms of their written arbitration agreement.’ (Ibid.,
citation omitted.)
“The
company could not bring a motion to compel Hogan to arbitrate because he was
not a party to the company’s arbitration agreement. (§ 1281.2.) The company also could not compel Hogan to
arbitrate merely because the complaint defined the class to include employees
who had signed arbitration agreements. (
148 Cal.App.4th at pp. 786-787).†(
certification motion, he could have narrowed the class to include only those
employees who did not sign arbitration agreements. When he moved to represent a class, some of
whom had signed arbitration agreements, the company opposed class certification
by raising the arbitration issue to show Hogan’s claims were not typical of the
class he sought to represent.†(
motion to compel arbitration before class certification, the trial court would
have denied the motion because Hogan was
not a party to the arbitration agreement. Thus, any delay in bringing the motion to
compel arbitration until the class was certified to include parties to the arbitration agreement cannot constitute a
waiver by the company. Until the class
was certified, the pleading requirements to move to compel arbitration under
section 1281.2 were not satisfied. (
Sports, supra, at p. 1369,
italics added.)
Here,
citing Sky Sports, the trial court
ruled that ATTM could not have moved to compel arbitration of the putative
class members’ claims “before the issue of class certification was before the
court.†The court stated: “While [plaintiffs] seek[] to distinguish Sky
Sports on the basis that [ATTM] could have moved to compel arbitration as
to the entire class because the ‘named plaintiffs and the putative class
members here are all subject to the same arbitration agreement’ (unlike the
named plaintiff in Sky Sports who did not sign the arbitration
agreement), this is a distinction without a difference. Sky Sports stands for the proposition
that it is premature to bring a motion to compel arbitration as to the putative
class members unless and until a class certification motion is filed, and the
failure to bring one before then cannot constitute a waiver, including any
claim based on the statute of limitations.
Delay as to the putative class can only happen after certification.â€
In
fact, the distinction that ATTM could have moved to compel arbitration as to
the entire class because the named plaintiffs and the putative class members
are all subject to arbitration agreements is a critical difference. Sky
Sports does not “stand[] for the proposition that it is premature to bring
a motion to compel arbitration as to the putative class members unless and
until a class certification motion is filed.â€
Instead, the appellate court held in essence that the
trial court could not compel anybody
to arbitrate until it had somebody
before it who had signed the arbitration agreement, in that case by having the
class defined, not simply alleged in the complaint, as including employees who
had signed the arbitration agreement.
The court did not hold that putative class members had to join in the
action before the pleading requirements would be met to file a motion to
compel; rather the class had to be defined as including signatories to the
arbitration agreement because until then the class could possibly be defined to
include only those employees who had not signed the arbitration agreement, so
arbitration never would have become an issue.
In contrast here, from the outset all plaintiffs—named and potential—were
signatories to the arbitration agreement, and the class was always contemplated
as including those who were subject to the arbitration agreement. Waiver of the right to arbitrate was based on
ATTM’s delay in renewing its motion to compel after Concepcion, and such conduct constituting waiver applied equally to
all named plaintiffs and putative class members.
a waiver until someone subject to arbitration was involved; here there was
always someone subject to arbitration involved until ATTM waived its right to
compel arbitration. As declared in
compel arbitration, a party must plead and prove: ‘(1) the parties’ written agreement to
arbitrate a controversy . . . ; (2) a request or demand by one
party to the other party or parties for arbitration of such controversy
written arbitration agreement; and (3) the refusal of the other party or
parties to arbitrate such controversy pursuant
to and under the terms of their written arbitration agreement.’†(Sky
Sports, supra, 201 Cal.App.4th at
p. 1368, citing Mansouri v. Superior
Court, supra, 181 Cal.App.4th at
p. 641.) In this case, each of those requirements was
met when the named plaintiffs refused to agree to individual arbitration
pursuant to the terms of the written arbitration agreement that was contained
in the consumer contract of adhesion received with each customer’s Sony
Ericsson T68i phones for use on ATTM’s wireless network. Under these circumstances, the time was ripe
for ATTM to move to compel arbitration as to the named plaintiffs and the
putative class members when Concepcion
was decided.
We
stress that our conclusion—that ATTM waived its right to compel arbitration as
to the named plaintiffs and all putative class members—is appropriate under the
circumstances here because the putative class members are readily definable
(purchasers of T68i phones), limited in time and not prospective (because as of
2004 the phones were no longer being sold), and all were at least potentially
subject to arbitration agreements (aside from individual claims of lack of
enforceability). ATTM is not being held
to have waived a right to compel arbitration in perpetuity against unknown
putative class members who do not yet exist.
ATTM’s waiver of its right to compel arbitration due to its delay
eliminated any issues regarding enforcement of putative class members’ arbitration
agreements or regarding which arbitration language applies to each putative
class member. Those issues were in fact
ripe for decision up until the time ATTM was found to have waived its right to
compel arbitration.
In
its briefing on appeal, ATTM adopts the erroneous interpretation of
court but goes much further, mischaracterizing both the holding in
reasoning. It repeatedly states that
putative class members are “nonparties†who have not yet asserted claims against
ATTM, and that “[a]s a matter of law, putative class members are not yet
parties to the litigation . . . .†It asserts as to the putative class members
that “[t]hose nonparties are not before the court and have not raised any
controversies with ATTM, so ATTM could not request arbitration of their
nonexistent claims, nor could they refuse to arbitrate,†and that “[w]hat
mattered [in Sky Sports] was that
most of the putative class members were bound by arbitration agreements, and
that before a class was certified they were not parties.â€
once in Sky Sports did the court hold
or even suggest that putative class members are “nonparties†or “not before the
court.†Its holding was premised on the
fact that at the time at issue it remained uncertain if anyone, whether a putative class member or not, who was a party to
an arbitration agreement with defendant was definitively involved in the
case. Similarly here, our focus is not
on determining whether putative class members are parties or “nonparties.†Our focus is on whether the statutory
requirements for bringing a motion to compel were met (they were), whether ATTM
should be held to have waived its right to compel arbitration as to both named
plaintiffs and putative class members (they should), and whether our decision
serves the purposes and goals of class action litigation, as well as those of
arbitration (as we explain, it does).
“Often,
courts and commentators will determine the rights and duties of absent class
members by analyzing whether they should be considered ‘parties’ for purposes
of the requirement, procedure, or rule involved. This focus of party status of absent class
members is only of limited value because it begs the underlying issue concerning
whether the procedure or rule applies to persons who are not physically before
the court, who are not named and identified parties to the suit, and who are
interested or involved solely because they share a common issue in controversy
with a named party, and the court has determined that the named party will
adequately represent their interests. As
Justice Powell suggested in his dissenting opinion in Deposit Guaranty National Bank v. Roper [(1980) 445 U.S. 326], the
courts risk confusion and uncertainty when they try to determine the implications
of rights of the representative or of class members by focusing on whether
absent members are parties or are present as parties for some purposes and not
for others. The position that absent
class members occupy in class action litigation is sui generis, and attempts to analogize to conventional ‘party’
status are likely to fail. It is more
logical for a court faced with a question concerning the rights and duties of
absent class members to analyze the issue presented with reference to the goals
of representative litigation, not by strained analogies to
(5th ed. 2011) § 1:5, pp. 15-16, fns. omitted.)
We
therefore examine the issue presented—the consequences of ATTM’s delay in
seeking to compel arbitration after Concepcion
made classwide arbitration waivers permissible once again—with reference to the
goals of class action litigation, and also with reference to the intended
purposes of arbitration. More
specifically, the critical focus here is on the defendant’s conduct: ATTM’s conduct in undertaking class-related
discovery before moving to compel arbitration was manifestly incompatible with
a desire to engage in arbitration as to the named plaintiffs
B. Whether Putative Class Members Can Be Bound by
Precertification Rulings on Substantive Matters Is Not the Proper Focus of Our
Inquiry
ATTM
contends that “[i]t is well established that a favorable ruling for a defendant
before class certification—when ‘no other members of the class need be bound by
the outcome, for they were not parties to the lawsuit and received no
notification about it’—does not buy the defendant any peace because it does not
preclude subsequent lawsuits by other plaintiffs if a class is not
certified. (Citing Home Sav. & Loan Assn. v. Superior Court (1974) 42 Cal.App.3d 1006,
1011.)
Similarly,
ATTM also cites the Supreme Court’s decision in Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1074 (
federal procedure is that trial courts in class action proceedings should
decide whether a class is proper and, if so, order class notice before ruling
on the substantive merits of the action. (See Green
v. Obledo (1981) 29 Cal.3d 126, 146 . . . ; Fed. Rules
Civ.Proc., rule 23(c)(1)(A), 28 U.S.C.; Hickey
v. Duffy (7th Cir. 1987) 827 F.2d 234, 237.) The virtue of this sequence is that it
promotes judicial efficiency, by postponing merits rulings until such time as
all parties may be bound, and fairness, by ensuring that parties bear equally
the benefits and burdens of favorable and unfavorable merits rulings. The rule stands as a barrier against the
problem of ‘one-way intervention,’ whereby not-yet-bound absent plaintiffs may
elect to stay in a class after favorable merits rulings but opt out after
unfavorable ones.â€
name="_ftnref4" title="">[4] (Fireside
Bank, supra, at p. 1074.)
These
authorities have no relevance here. The
ruling denying class certification now before us is neither a ruling in favor
of defendant by which other members of the class need not be bound, nor is it a
ruling on the substantive merits. The
trial court’s ruling would necessarily mean that no class action is available
and all would-be class members would have to seek recourse on an individual
basis. Denial of class certification and
the finding of waiver by ATTM are procedural rulings only, not substantive
ones, because they simply determine the forum in which this dispute is going to
be heard.
The
circumstances of this case are unique.
Our Supreme Court decided Discover
Bank just before the trial court was to rule on ATTM’s 2005 motion to
compel individual arbitration, and held that class arbitration waivers were
unconscionable and therefore unenforceable.
Then, immediately after ATTM filed its answer to the operative third
amended complaint, the United States Supreme Court ruled in
desire to proceed by way of individual arbitration early in the litigation, its
ability to do so was thwarted by Discover
Bank. Yet when Concepcion revived its ability to compel individual arbitration,
ATTM waited over six months to renew its motion.
discovery. Such conduct is plainly
inconsistent with a desire to arbitrate.
The trial court recognized that fact in finding that ATTM had waived its
right to compel arbitration. The court
abused its discretion, however, in finding that “other than [ATTM’s] failure to
plead the affirmative defense of arbitration, there are no other factors
showing that [ATTM] intended to waive its right to compel arbitration
move to compel arbitration against putative class members until a motion for
class certification was filed.) Engaging
in class-related discovery is clearly inconsistent with an intent to
arbitrate. ATTM perhaps did so in hopes
of defeating class certification, but
nonetheless it participated in the litigation, and did so on the plaintiffs’
terms, i.e., a putative class action.
Its waiver of the right to compel arbitration was applicable to the
putative class as a whole, as well as the named plaintiffs. ATTM’s
conduct is the correct focus here, not whether putative class members are
parties to the action, and not whether putative class members are bound by or
may benefit from precertification rulings.
Affirming
the trial court’s denial of class certification would eliminate the class
members’ opportunity to pursue these claims as a class action. Further, ATTM’s delay in asserting its right
to arbitrate has resulted in the expenditure of considerable costs by plaintiffs
and would-be class counsel in litigating this case and conducting discovery. Forcing the named plaintiffs to litigate alone
now, and forcing the class to arbitrate individually, would result in those
costs being wasted. In short, there is
no question that plaintiffs have relied to their detriment on ATTM’s failure to
assert its right to arbitration in a timely manner. If the trial court’s ruling were upheld, ATTM
would benefit from its delay in
invoking arbitration by making it impractical for the plaintiffs to proceed
with the litigation and, ironically, by forcing
the erstwhile putative class members to pursue arbitration if they wish to
have their dispute heard. The putative
class members have up until this point been permitted to rely on the named
plaintiffs to press their claims (see Crown
v. Parker (1983) 462 U.S. 345, 350), so the named plaintiffs’ reliance on
ATTM’s conduct in failing to assert its right to arbitration in a timely manner
would result in prejudice to the entire class if the trial court’s ruling were
permitted to stand. The purpose of
arbitration is to provide a quick, efficient, less expensive form of dispute
resolution. Upholding the trial court’s
ruling would instead reward ATTM for its delay and allow arbitration to occur
after plaintiffs have already expended significant monetary and other
resources. It would also defeat the goal
of class action litigation to provide an opportunity for numerous individual
claims involving small amounts of damages to be tried together in an efficient
manner.
ATTM
contends that it would violate the due
process rights of putative class members if they were to be bound by the
actions of the named plaintiffs and their attorneys, and the court’s rulings,
without first giving them notice and an opportunity to opt out. ATTM’s claim is without merit. Under our ruling finding that ATTM waived its
right to compel arbitration as to everybody, and assuming the class were to be
certified, the putative class members would still have the ability to opt out
of the class litigation and choose to individually arbitrate instead. Their opportunity to do so is not
foreclosed. Again, the focus of our
inquiry and concern is on whether ATTM is fundamentally bound by its conduct
constituting waiver and acquiescence to participate in litigation, not on
whether putative class members are bound by rulings made before a class is
certified. We conclude that ATTM is
indeed bound by its waiver as to all members of the putative class.
disposition
The
order denying class certification is reversed and the matter is remanded to the
trial court for further consideration in keeping with the views expressed in
this opinion. Plaintiffs are awarded costs
on appeal.
NOT TO BE PUBLISHED IN THE
OFFICIAL REPORTS
SUZUKAWA,
J.
We concur:
WILLHITE, Acting
P. J.
MANELLA, J.
title="">[1] ATTM states in its brief on appeal
that it has periodically revised its arbitration provision and permits
customers and former customers to apply the revised provisions rather than the
terms in their original agreements; ATTM characterizes the revised provisions
as more consumer-friendly. Plaintiffs
assert, on the other hand, that the applicable agreement is the one packaged
with the T68i phone, the terms of which are stated here.
name="_ftn2" title="">[2] In
its answer to the complaint the company raised the existence of the arbitration
agreements as an affirmative defense.
