Business lines are always looking to expand their pool of leads through cross-marketing efforts, especially following a corporate merger. But as a new decision out of the Northern District of California proves, it is sometimes best to not rush in with telemarketing campaigns, even if consumer contract terms with new corporate affiliates appear secure.
In Revtich v. DirecTV, LLC, Case No. 18-cv-01127, 2018 WL 4030550 (N.D. Cal. Aug. 23, 2018) the Court denied DirecTV’s bid to compel arbitration of a putative TCPA class action leveraging an arbitration provision within a class representative’s mobile services agreement with corporate sibling AT&T Mobility (“AT&T”). The class representative sued DirecTV for marketing calls it apparently made to AT&T customers following a corporate merger in a bid to leverage those new leads. Plaintiff sued in a class action contending that he did not consent to those calls. Although the Court agreed that corporate siblings can enforce arbitration provisions, it ultimately denied the motion finding that the consumer could not have anticipated arbitrating claims against corporate entities that would become affiliated with AT&T in the future. The result means that business lines seeking to leverage new markets following corporate mergers cannot count on courts to faithfully enforce arbitration provisions to defeat class actions in TCPA cases arising out of such calls.
Here’s the background: The Plaintiff in Revtich entered into a contract with AT&T for cell phone service back in 2006. The wireless agreement covered all claims and disputes that might arise with AT&T, and any corporate sibling. It was not limited to disputes arising out of the wireless relationship. And it required arbitration of all claims including claims against “affiliates” of AT&T.
The wireless agreement also afforded AT&T the right send information regarding “other matters we believe may be of interest to you.” You see where this is headed.
As mentioned, the wireless agreement is from 2006. Apparently in 2011 DirecTV and AT&T both ended up owned by the same parent company–AT&T, Inc. This–DirecTV argues–means that AT&T and DirecTV are now “affiliates” under the arbitration agreement in the AT&T wireless services agreement. And since the arbitration agreement between Plaintiff and AT&T is not limited to claims arising out of the wireless agreement surely DirecTV can leverage the arbitration agreement in its favor.
But not so fast. True, reasoned the court, that the agreement might reasonably be read to encompass claims arising in the future, unrelated to the wireless agreement, and against a corporate sibling, but it cannot be reasonably read to afford cover to an entity that “fortuitously” became affiliated with AT&T years after the agreement was signed. On that basis the Court denied DirecTV’s motion and required it to stand in fight the class action in federal court.
Notably Chief Magistrate Judge Spero is known as a thoughtful and independent voice on a court that does tend to lean a bit liberal, so this is not just the Northern District of California behaving badly. Rather, Revtich demonstrates that corproate entities should not be bullish about expanding existing contractual arbitration terms–and perhaps other contractual terms–to include and protect corporate siblings added in the future. Further, although Revtich does not (yet) address a contractual consent clause, you can rest assured that the Plaintiff will try to expand the reasoning the court applied in denying arbitration when it comes time to test the contours of consent granted by the class in the AT&T wireless agreement. While denial of the arbitration motion will result in costly litigation for DirecTV, a substantive finding that consent was invalid across the class might work “destruction” on a Proverbial scale.
Beware that haughty spirit friends.