CHICAGO (CN) – An Illinois man must arbitrate claims that his wireless-service provider deceived him into entering a new two-year contract, the 7th Circuit ruled.
Christopher Gore entered into a long-term wireless contract with Southern Illinois Cellular Corporation, known as First Cellular, in 2005. Alltel Communications acquired the company in May 2006, about a year and a half before Gore’s contract was set to expire. The transition from First Cellular to Alltel periodically rendered the network use on Gore’s phones unavailable.
In November 2006, Alltel sent Gore an invoice showing a $100 balance. Alltel considered Gore’s payment of that invoice, which was automatically billed to his credit card, as consent to its service agreement.
But Gore said he continued having service interruptions after paying the bill. Six months before his First Cellular Agreement would have ended, Gore learned that he would need to purchase an Alltel-compatible phone and new wireless plan or pay a $250 termination fee. Gore complied, raising his monthly bill from about $40 per month to $109 per month.
Fed up with the service, Gore filed a class action against both First Cellular and Alltel, alleging that both companies had breached their service agreement by rendering his phones useless and seeking to enforce the early-termination provision. Gore also alleged deceptive trade practices, civil conspiracy between First Cellular and Alltel, and unjust enrichment.
The case was removed to the Southern District of Illinois under the Class Action Fairness Act, where U.S. District Judge David Herndon refused to compel arbitration.
The 7th Circuit reversed last week, ruling that the broad scope of the arbitration clause, found on page nine of the November 2006 invoice Gore received, applied to his claims.
Cited the Supreme Court’s recent decision in AT&T Mobility v Concepcion, the three-judge panel said its interpretation “embodies both a ‘liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract.'”
In cases where parties enter into multiple agreements, though only one contains an arbitration clause, the parties can be compelled to arbitrate the case only if “the clause is broad enough to encompass their dispute” or “the agreement containing the clause incorporates the other by reference.”
Though the Alltel agreement did not incorporate the First Cellular agreement, the court found that it was broad enough to cover Gore’s claims.
The clause stated in small capital letters, “Any dispute arising out of this agreement or relating to the services and equipment must be settled by arbitration. … All claims must be arbitrated individually, and there will be no consolidation or class action treatment of any claims.”
Writing for the three-judge panel, Judge Ann Claire Williams said, “The language is unambiguous: any dispute ‘arising out of’ the Alltel Agreement or ‘relating to the services and equipment’ that Gore asked for under that agreement must be arbitrated.”
“We have previously said that ‘arising out of’ reaches all disputes having their origin or genesis in the contract, whether or not they implicate interpretation of performance of the contract per se,” she added.
The arbitrator should determine whether application of the arbitration clause to this dispute is procedurally unconscionable because Gore is attacking the entire Alltel agreement, not just the arbitration clause, as such, the decision states.