United States District Court, D. Alaska
ORDER RE MOTION TO COMPEL ARBITRATION
SHARON
L. GLEASON UNITED STATES DISTRICT JUDGE
This is
a dispute between a telephone and internet service provider,
Defendant GCI, Inc.[1] and a customer, Plaintiff George Kris
Cassity. Before the Court at Docket 15 is Defendant's
Motion to Compel Arbitration and to Stay Complaint. The
motion is fully briefed.[2] Oral argument was not requested and was
not necessary to the Court's decision.
The
Federal Arbitration Act (“FAA”) allows a party
“aggrieved by the alleged . . . refusal of another to
arbitrate under a written agreement for arbitration [to]
petition any United States district court . . . for an order
directing that such arbitration proceed in the manner
provided for in such agreement.”[3] The FAA
“leaves no place for the exercise of discretion by a
district court, but instead mandates that district courts
shall direct the parties to proceed to arbitration on issues
as to which an arbitration agreement has been
signed.”[4] “The court's role under the Act
is therefore limited to determining (1) whether a valid
agreement to arbitrate exists and, if it does, (2) whether
the agreement encompasses the dispute at
issue.”[5]
Mr.
Cassity challenges GCI's motion on both prongs of this
inquiry, contending both that the agreement is unenforceable
and that it does not govern this dispute.
The
Court has jurisdiction to determine this motion pursuant to
28 U.S.C. § 1331, federal question jurisdiction.
A.
Existence of a Valid Agreement to Arbitrate
“[A]rbitration
is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed so
to submit.”[6] Whether the parties agreed to arbitrate is
a matter of basic contract interpretation.[7] The FAA provides
that “[a] written provision in . . . a contract
evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such
contract . . . shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract.”[8]
Mr.
Cassity and GCI entered an agreement or series of agreements
sometime before January 10, 2014 pursuant to which GCI
provided internet and other services.[9] There appears to have been
no arbitration provision in the contract at that time.
However, in June of 2015 Mr. Cassity received a monthly
billing notice containing the following advisement:
The Terms and Conditions for GCI TV and Internet Service have
changed. One change is an agreement to arbitrate. By
continuing to use the service(s) for 30 days after this
notice, you are consenting to these changes.[10]
Mr.
Cassity acknowledges both receipt of this notice and that he
continued his internet service (but not his TV service) for
more than 30 days, but he denies actually reading the notice
or amendment.[11] The changed language provided that Mr.
Cassity and GCI would “settle all disputes between
[them] by binding arbitration.”[12]
Mr.
Cassity challenges the validity of the agreement on several
grounds. First, he claims that he never assented to this
term.[13] Second, Mr. Cassity contends the
provision is voidable on grounds of fraud, [14] duress,
[15]
and unconscionability.[16] Third, he contends that GCI has
waived its right to pursue arbitration.[17] The Court
addresses each challenge in turn.[18]
As Mr.
Cassity recognizes, the Residential Internet Terms and
Conditions (Internet Terms) governed Mr. Cassity's
contractual relationship with GCI with regard to the
provision of internet services.[19] Those terms explicitly
provide for their subsequent modification:
GCI will give you at least 30 days' advance notice of any
changes to this agreement or our service, if such change
materially adversely affects your rights or obligations under
the agreement. . . . If you do not agree to the amended
agreement, you may terminate the Service . . . . If you use
the Service for more than 30 days after we notify you of a
change, you agree to the amended Agreement.[20]
In
Bingham v. City of Dillingham, the Alaska Supreme
Court noted that if a contract offeror declares that he will
“interpret silence as acceptance, ” then the
offeror bears “the burden to prove ‘unequivocal
acceptance by the [offeree] and an intent to be
bound.”[21]Mr. Cassity contends that GCI has not met
its burden of “unequivocal proof” to establish
acceptance of the modification in the face of Mr.
Cassity's silence.[22] But here, the acceptance was not
conditioned on silence; acceptance of the modification was
effective upon continued use of GCI's (the offeror's)
services for 30 days. Mr. Cassity did use the service for
more than 30 days-indeed, he is still using it.[23] By his
continued use of the service after receiving notice, Mr.
Cassity accepted the terms of the modification and evinced an
intent to be bound by it.
Burgess
v. Qwest Corp. is not to the contrary.[24] There, the
contract provided that acceptance of the contract became
valid when the user activated the service or “fail[ed]
to return the equipment and cancel service within 30 days
after ordering services.”[25] The Court held that there
was no intent to be bound by the terms because, although the
customer failed to return the equipment, she had
“cancelled her internet service before it was activated
. . . and immediately sought to return the
modem.”[26] Here, by contrast, Mr. Cassity not only
failed to return the equipment, but continued to pay for
services pursuant to the agreement. Most important, and
unlike the parties in either Burgess or Knutson
v. Sirius XM Radio, Inc.[27] (another case cited by Mr.
Cassity), Mr. Cassity and GCI had a preexisting contractual
relationship that established the terms of consent to
modification. And similarly important-and again distinct from
either Burgess or Knutson-Mr. Cassity
received several notices of the changes to the
agreement.[28] The Court finds that Mr. Cassity
accepted the arbitration provision.
Mr.
Cassity raises three grounds for voiding the arbitration
provision. He first asserts that the contract and the
arbitration clause constitute a “constructive
fraud” and that the arbitration provision is therefore
voidable.[29] Relying on Graham Oil Co. v. ARCO
Products Co., Mr. Cassity contends that the contract as
a whole is deceptive.[30] But the provision that Mr. Cassity
claims renders the arbitration clause deceptive appears in
the “GCI Residential TV Terms and Conditions” (TV
Terms), not in the Internet Terms that contains the
arbitration provision.[31] Even if that provision in the TV
Terms was relevant, it clearly states-in all capital
letters-that the contractual dispute resolution procedures
still apply.[32] Mr. Cassity cannot claim to have been
deceived when it turned out that, as the contract affirms,
those procedures still apply. Mr. Cassity has identified no
fraud in the contract that would preclude enforcement of the
arbitration provision.
Mr.
Cassity next contends that his assent to the arbitration
provision was procured under duress because GCI might have
deleted the information he sought if he didn't continue
his contract.[33] But, as Mr. Cassity recognizes, duress
is an effective defense to a contract only if three elements
are met: “(1) one party involuntarily accepted the
terms of another, (2) circumstances permitted no other
alternative, and (3) the circumstances were the result of
coercive acts by the other party.”[34] But Mr.
Cassity hasn't identified any “coercive acts”
by GCI. He suggests that the “withholding of personal
information” by GCI-that is, its inability or
unwillingness to provide the information he had requested-was
“both tortious and potentially criminal, ” but
claims he accepted the contract because of the risk that
terminating the contract would “embolden GCI to destroy
additional records.”[35] But the record contains no
evidence that GCI ever threatened to destroy any records or
conditioned the release of information on Mr. Cassity's
agreement to the arbitration clause.[36] The mere fact that GCI
retained a contractual right to delete information upon
termination of service does not amount to a “coercive
act, ” especially when federal law prohibits
destruction of information when there is a “pending
request[] . . . for access to such
information.”[37] Because there is no “coercive
act” sufficient to establish duress, the arbitration
clause is not voidable on that basis.
Mr.
Cassity's third argument in favor of voiding the
arbitration provision is unconscionability. He specifically
contends that the costs of arbitration that he might face
would preclude him from vindicating statutory
rights.[38] The arbitration clause provides that GCI
will “reimburse those fees [related to filing,
administration, and payment of the arbitrator] for claims
totaling less than $10, 000 unless the arbitrator determines
the claims are frivolous.”[39] Contract
unconscionability is determined in Alaska based on an
assessment of various factors such as “weakness in the
contracting process, ” “gross disparity in values
exchanged, ” and “gross inequality in bargaining
power.”[40] But the Court need not decide whether
this provision, pursuant to which GCI would pay arbitration
fees for a party such as Mr. Cassity unless the claim exceeds
$10, 000, is unconscionable. This is because GCI has
stipulated to “reimburse Mr. Cassity's filing fee,
and [to] pay all administration and arbitrator fees in
arbitration, regardless of the amount of Mr. Cassity's
claim.[41] Even assuming the provision requiring
Mr. Cassity to pay certain arbitration fees if his claim
exceeds $10, 000 is unconscionable, the proper
remedy would be to sever that provision and hold that GCI
“will be responsible for all of the arbitration
costs” rather than “ruling that this case may not
be arbitrated.”[42] Because GCI has agreed to that
precise remedy, unconscionability is not a valid basis for
voiding the arbitration clause.
Finally,
Mr. Cassity contends that GCI has waived its right to compel
arbitration. Federal law, not state law, governs the defense
of waiver.[43] In the Ninth Circuit, waiver of an
agreement to arbitrate a dispute requires showing (1) that
GCI knew of its right to compel arbitration, (2) that GCI
acted inconsistently with that right, and (3) that Mr.
Cassity suffered prejudice from GCI's delay in moving to
compel arbitration.[44] Mr. Cassity identifies no prejudice, but
argues he is excused from showing prejudice if “it is
clear that a party has forgone its right to
arbitrate.”[45] But that rule-although adopted by the
Alaska Supreme Court applying federal law-is derived from the
Seventh Circuit, and it is inconsistent with the Ninth
Circuit's approach that this Court is bound to
apply.[46] Under the Ninth Circuit's approach,
Mr. Cassity has a “heavy burden” as to each of
the three elements.[47] Mr. Cassity has made no showing that he
is prejudiced, and accordingly the Court finds that GCI has
not waived its right to compel arbitration.[48]
B.
Scope of that Agreement
Because
the arbitration clause is valid and enforceable, the next
question is whether it “encompasses the dispute at
issue.”[49] Mr. Cassity raises two arguments in this
regard. First, he claims that his dispute arises not under
the Internet Terms (which contains the arbitration clause the
Court finds valid and enforceable), but instead under the TV
Terms (which contains no arbitration clause). Second, he
contends that the arbitration clause does not extend to
claims brought under the two provisions of federal law that
he asserts here.
Mr.
Cassity's Complaint explains that in 2014, at the
FBI's suggestion, Mr. Cassity sought “the
networking records for his Internet access account from
Defendants.”[50] Mr. Cassity's claims largely arise
from GCI's responses (or lack thereof) to those requests.
Mr. Cassity's first cause of action alleges GCI violated
its statutory duties through its “repeated failures to
respond to Plaintiff's requests for disclosure
information and to repair communications
services.”[51] His second cause of action alleges GCI
failed to respond to a March 29, 2015 letter requesting
“all customer information” described in two
sections of the U.S. Code.[52] His third cause of action
alleges GCI's failure to respond to “requests for
broadband Internet access information” violated
regulatory requirements governing disclosure of
“network management practices.”[53] The fourth
cause of action alleges that GCI's failure to respond
violated GCI's duty to disclose “customer
proprietary network information.”[54] Mr.
Cassity's fifth cause of action alleges “grossly
negligent and unreasonable conduct” by GCI in breach of
federal common law in failing to respond to Mr. Cassity's
letters.[55] Mr. Cassity's sixth cause of action
alleges breach of contract- specifically, the Internet Terms,
which incorporate the GCI Privacy Policy.[56] Mr.
Cassity's second sixth (Mr. Cassity identifies two claims
as his “sixth” claim) cause of action alleges
breach of the duty of good faith and fair dealing in failing
to respond to Mr. Cassity's letters.[57] The seventh
cause of action alleges negligent infliction of emotional
distress for “repeatedly failing to respond in any
fashion to Plaintiff's
communications.”[58] Mr. Cassity's eighth and final
cause of action alleges intentional infliction of emotional
distress, again for “repeatedly failing to respond in
any fashion to Plaintiff's
communications.”[59]
As is
apparent, each of Mr. Cassity's claims relate to his
requests to GCI to provide networking information. After Mr.
Cassity discovered interference with his digital records and
various online accounts, he sought the help of the
FBI.[60] The FBI encouraged Mr. Cassity to
“obtain copies of whatever networking records were
available to him from his Internet services provider, GCI, to
facilitate the inquiry.”[61] In response to this
suggestion, Mr. Cassity reached out to GCI by phone,
hand-delivered letter, certified mail, and
email.[62] In these communications, Mr. Cassity
sought information about his IP addresses and other
networking information related to his internet
services.[63]
In his
surreply, Mr. Cassity points out that his March 29, 2015
letter “requested information for [certain] dates by
reference to the terms of the Cable Act.”[64] But mere
reference to certain statutory provisions does not transform
the nature of his requests in that letter; rather, Mr.
Cassity's refers to the FCA in the letter to support his
request for “all GCI networking information, ”
“personal IP addresses, ” and “Internet use
logs” to support the investigation into
“fraudulent, abusive and unlawful acts in the invasion
of my computer and my internet services.”[65] Mr. Cassity
makes no mention of his “cable services” in that
letter. His requests for information did not relate to his
cable television services.
In his
surreply, Mr. Cassity also suggests that his Complaint
alleges breach of contract arising from GCI's failure to
repair his telephone services.[66] And indeed it
does.[67]Because Mr. Cassity raised this argument
for the first time in his surreply, the Court invited
supplemental briefing on whether these claims are subject to
arbitration.[68] In its supplemental briefing, GCI
acknowledged that claims related to Mr. Cassity's
landline telephone services are not subject to mandatory
arbitration and has withdrawn its motion to compel
arbitration as to these claims.[69]
Apart
from the telephone repair claims, this dispute relates to the
internet services GCI provided to Mr. Cassity pursuant to the
Internet Terms. The arbitration clause in those terms is
therefore operative in this dispute. Mr. Cassity suggests
that GCI has not produced “contract language governing
the arbitrability of disclosure request
disputes.”[70]But the arbitration clause provides for
arbitration of “all disputes” between the
parties. This broad scope clearly encompasses disputes about
disclosure requests related to Mr. Cassity's internet
services.
Yet,
Mr. Cassity argues, the contract does not in fact waive his
statutory right to litigate his claim in federal
court.[71] Mr. Cassity's argument proceeds in
two steps: First, he contends that federal law give him a
statutory right to sue in district court.[72] Second, he
claims that either a contract cannot waive his right
to sue in district court[73] or else this particular contract
does not contain the “clear and unmistakable
waiver” he contends is required to do so.[74] But, as
explained below, even assuming that Mr. Cassity is correct
with regard to his first claim-that the statute gives him a
right to pursue his claims in this case in district court-Mr.
Cassity is mistaken in his view that the contract cannot
waive that right and that it does not contain a “clear
and unmistakable” waiver of that right.
All
claims are potentially subject to arbitration, including
claims invoking federal statutory rights.[75] Indeed, the
FAA “establishes a ‘federal policy favoring
arbitration'” and standing alone “mandates
enforcement of agreements to arbitrate statutory
claims.”[76] But “[t]here are some statutes
where Congress has evinced an intent to preclude arbitration
of claims.”[77] The burden to establish that
congressional intent lies with the party opposing
arbitration, and such intent must be “‘deducible
from [the statute's] text or legislative history, '
or from an inherent conflict between arbitration and the
statute's underlying purposes.”[78]
Mr.
Cassity attempts to meet his burden by arguing that 47 U.S.C.
§ 551(f), which provides for a civil action as a remedy
for violations of cable subscriber privacy protections,
[79]
was intended to establish “a uniform national policy
for the cable industry enforced by a private attorney general
mechanism.”[80] Allowing arbitration, Mr. Cassity
contends, would be at odds with this intent. Mr. Cassity
similarly asserts that 47 U.S.C. § 207, which provides
for enforcement of 47 U.S.C. § 222 (among other
provisions) in either a district court or before the FCC,
would be undermined by permitting arbitration of such
claims.[81]
Assuming
that these statutes apply to Mr. Cassity's claims,
[82]
the asserted conflicts are insufficient to overcome the
presumption in favor of arbitrability. Permitting a cable
subscriber to agree to arbitrate his claims does not require
him to “forgo the substantive rights afforded by the
statute; it only submits to their resolution in an arbitral,
rather than a judicial, forum.”[83] The Ninth
Circuit has squarely rejected the argument that 47 U.S.C.
§ 207 precludes arbitration of claims brought under the
FCA because the “important public policy
considerations” protected by the act are outweighed by
the “strong public policy favoring
arbitration.”[84] That reasoning applies with at least
equal force to 47 U.S.C. § 551(f). The Court does
“not perceive any inherent inconsistency between those
policies [advanced by 47 U.S.C. §§ 207 & 551] .
. . and enforcing agreements to arbitrate” such
claims.[85] This is so even when arbitration
“focuses on specific disputes between the parties
involved” because arbitration is not distinct from
judicial adjudication in this way and because individualized
dispute resolution, even in arbitration, can still work to
advance the policies underlying substantive
rights.[86] Arbitration similarly does not undermine
the FCC's potential role in enforcing 47 U.S.C. §
222 because the FCC's role in enforcing that statute
“is not dependent on the filing of a charge” as
the FCC “may receive information concerning alleged
violations of the [statute] ‘from any
source.'”[87] In short, Mr. Cassity has not met his
burden to show a congressional intent to preclude arbitration
of his claims. The statutory right thus is susceptible to
waiver in favor of arbitration.
But Mr.
Cassity contends that even if the right may be waived, a
“clear and unmistakable” waiver of that right is
both required and missing. In Bernard v. Alaska Airlines,
Inc., the case on which Mr. Cassity relies, an employee
sued his former employee for wrongful
termination.[88] The trial court dismissed the case
because the plaintiff-employee had failed to exhaust his
contractual remedies, which included as the final step an
appeal “to the System Board of Adjustment, a
three-member arbitration panel.”[89] In Alaska,
under the so-called Hammond rule, an employee has
waived the right to sue in state court “by agreeing to
arbitrate such claims instead” if the contract contains
either (1) “an arbitration clause including a provision
whereby employees specifically agree to submit all federal
causes of action arising out of their employment to
arbitration, ” or (2) “an explicit incorporation
of the statutory anti-discrimination requirements in addition
to a broad and general arbitration
clause.”[90] The Alaska Supreme Court reversed the
trial court because, in its view, the provision at issue
neither extended to “all federal causes of
action” nor “contain[ed] an explicit
incorporation of the statutory anti-discrimination
requirements.” The Alaska Supreme Court held that the
arbitration clause was reasonably read to provide the right
to pursue arbitration only to the union and the employer, and
not to the employee.[91] Without deciding the actual scope of the
clause-that is, without concluding definitively that the
employee did not have right to pursue arbitration-the Alaska
Supreme Court concluded that “[t]he contract's
apparent foreclosure of a grievant's right to arbitrate
if the union declines to do so on the grievant's behalf
is inconsistent with the first prong of the Hammond
test, which requires the employee's specific agreement to
submit all claims to arbitration.”[92] The
arbitration clause was also inconsistent with the second
prong of the test because it was not “a broad and
general arbitration clause.”[93]
But
even if the Hammond rule applies to commercial
contracts such as the one at issue here, this contract
satisfies its requirements. Unlike the provision at issue in
Bernard, which permitted the union to pursue
arbitration but did not clearly permit the employee to do so,
the provision here clearly applies to Mr. Cassity-there is no
third party involved.[94] The provision applies to “ALL
DISPUTES.” The arbitration clause therefore satisfies
the first prong of the Hammond test, as it reflects
an intent to submit all claims-including federal statutory
claims-to arbitration.[95]
Because
the provision satisfies the first Hammond
requirement, the Court need not consider whether it meets the
second-the provision is a “clear and
unmistakable” waiver if it satisfies either
prong.[96] Thus, Mr. Cassity's argument that
the provision does not meet the second prong because GCI
retains a unilateral right to modify the terms,
[97]even if correct, does not permit him to
avoid his agreement to arbitrate. The Alaska Supreme
Court's discussion of that issue in Bernard was
limited to the second prong of the Hammond
test.[98]
C.
Summary
The
arbitration clause in the Internet Terms applies to this
dispute, as it centers on Mr. Cassity's requests for
information about his internet services. That arbitration
clause is sufficiently broad, on its face, to apply to Mr.
Cassity's claims, with the exception of the telephone
services repair claims. If federal law provides Mr. Cassity a
statutory right to sue in district court, that right is
waivable by contract in favor of arbitration, and this
contract waives it. The contract, including the arbitration
clause, is valid and enforceable.
Therefore,
IT IS ORDERED that GCI's Motion to Compel Arbitration at
Docket 15 is GRANTED.[99] With the exception of the telephone
services repair claims, adjudication of this case is STAYED
pending completion of the arbitration proceedings. The
parties shall file a status report no later than October 31,
2017 concerning the status of the arbitration proceedings.
GCI
indicated in its supplemental reply that it intended to file
a motion to dismiss as to the remaining telephone repair
services claims. Accordingly, IT IS FURTHER ORDERED that GCI
shall file any motion to dismiss such claims within 30 days
of the date of this order.
---------
Notes:
[1] There are multiple defendants, but for
clarity, the Court refers to all Defendants collectively as
“GCI” or “Defendant.”
[2]
See Docket 22 (Opp.); Docket
24 (Reply); Docket 29-1 (Surreply). At the Court's
invitation, GCI filed supplemental briefing on one issue.
See Docket 33 (Order); Docket 34 (Def.'s ...