Thompson v. AT&T Serv., Inc., No. 17 C 3607 (N.D. III. Sept. 24, 2018) [click for opinion]

Plaintiff brought suit against several Defendants, including AT&T Services, Inc. (“AT&T”), Illinois Bell, and Sutherland Global Services, Inc. (“Sutherland”), for allegedly making unsolicited calls to Plaintiff in violation of the Telephone Consumer Protection Act (“TCPA”). AT&T allegedly contracted with Sutherland to call AT&T customers. Plaintiff alleges that he received multiple unsolicited calls from Sutherland’s using an automatic telephone dialing system, which had the capacity to store or produce telephone numbers that could be randomly dialed. AT&T, Illinois Bell, and Sutherland moved to compel arbitration based on an arbitration clause contained in the Terms of Service provided to Plaintiff as a condition of his obtaining AT&T’s U-verse Internet service. Plaintiff ultimately dismissed AT&T and Illinois Bell from the case, leaving Sutherland as the lone Defendant.

Rather than presenting substantial argument of its own, Sutherland joined, relied on, and incorporated AT&T’s and Illinois Bell’s motions and further argued that, because Plaintiff alleges that it made calls on behalf of AT&T, the claims against Sutherland also fell within the scope of the arbitration clause. Critically, although it was disputed whether Plaintiff had actually accepted or opted out of the arbitration agreement with AT&T, it was undisputed that Sutherland was not a signatory itself to that agreement. Plaintiff argued that the arbitration agreement did not extend to his claims against Sutherland because Sutherland was not a party to any such agreement. Plaintiff further argued that, if an agreement to arbitrate with Sutherland did exist, such an agreement would be unconscionable and unenforceable. In its reply brief, Sutherland argued that the arbitration agreement in the AT&T U-verse Internet Terms of Service should apply to Plaintiff’s claims against it because Sutherland was acting as AT&T’s agent.

The court denied Sutherland’s motion to compel, reasoning that Sutherland had failed to meet its burden of establishing that it was AT&T’s agent. When deciding whether parties have agreed to arbitrate a certain matter, courts will generally apply state contract law principles. The general principle is that non-signatories are not bound by an arbitration agreement. But a corollary principle is that an arbitration agreement may be enforced by or against a non-signatory where the party can prove assumption, agency, alter ego, waiver, estoppel, third party beneficiary, or incorporation by reference. The court declined to consider evidence of agency submitted by Sutherland for the first time in its reply brief and further reasoned that Plaintiff’s allegation that Sutherland was AT&T’s “vendor” was not a deliberate, clear, and unequivocal statement capable of binding Plaintiff to the judicial admission that Sutherland was AT&T’s agent. The court concluded that, without any evidence of agency, Sutherland had failed to satisfy its burden to compel arbitration. The court, therefore, denied the motion to compel and granted expedited discovery to resolve whether Sutherland could be considered AT&T’s agent and thereby invoke the arbitration clause in the Terms of Service.

Although the court ultimately denied the motion to compel arbitration, it did hold that the arbitration agreement in the AT&T Terms of Service (which required Plaintiff to click a box on a webpage in order to proceed with obtaining service) was enforceable. The court expressly rejected that such a method of accepting an arbitration agreement was unconscionable, citing a growing body of case law in the Northern District where similar arbitration agreements were held to provide adequate notice to consumers of mandatory arbitration.

A version of this post originally appeared in the November 2018 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.