Schatz v. Cellco Partnership
842 F. Supp. 2d 594
S.D.N.Y.
2012

Background

  • Schatz used Verizon’s Nationwide Unlimited Plan (NUP) under a two-year contract at $99.99/month.
  • Verizon reduced NUP price to $69.99 on Jan 18, 2010 but did not notify Schatz or retroactively refund overpayments.
  • Schatz learned of the price cut in April 2010 and Verizon agreed to charge the lower price going forward but refused to refund prior overpayments.
  • Schatz alleged breach of the Customer Agreement and violations of the New Jersey Consumer Fraud Act or New York General Business Law § 349.
  • Schatz filed a July 2010 putative class action on behalf of all Verizon NUP customers charged the higher rate as of Jan 18, 2010, seeking broad relief including non-individual relief and compliance with the customer agreement.
  • Verizon moved in Nov. 2010 to compel arbitration based on an arbitration clause; after Concepcion, the court addressed the availability of general injunctive relief and the validity of the remedial limitation in the arbitration clause.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether the remedial limitation in the arbitration clause renders statutory claims nonarbitrable. Schatz argues general injunctive relief is available to vindicate statutory rights. Verizon argues the remedial limit confines relief to individual claims only. Not a clear arbitrability issue; decision reserved for arbitrators.
Whether New York/New Jersey statutes permit general injunctive relief in private actions without class relief. Plaintiffs contend private actions may obtain general injunctive relief for absent parties. Defendant argues such relief requires class action or lacks authority for private injunctive relief. Ambiguity exists; arbitrator must decide the underlying issue.
Whether the dispute is a gateway arbitrability question for court or should be decided by arbitrators. The scope includes whether relief is permissible; the dispute falls within arbitration. Only the consumer-protection claim falls within scope; general injunctive relief to be decided by arbitrators. Not a clear question of arbitrability; arbitrators must resolve the relief issue first.
Whether the arbitration clause is enforceable or severable given Concepcion and PacifiCare. The clause may be unenforceable if it blocks statutory rights. Concepcion preempts state rules; the clause may be severable if remedial rights are ambiguous. PacifiCare governs; arbitrators decide the remedial issue first; no severance ruling at this stage.
Whether the absent customers’ interests are prejudiced if general injunctive relief is denied. Absent customers could be affected; relief would benefit them. Absentees' interests are not prejudiced; relief is not foreclosed to them otherwise. Even if available, non-arbitral forum adequacy is not established; arbitrators proceed.

Key Cases Cited

  • AT&T Mobility LLC v. Fisher, 11 Civ. 2245, 2011 WL 5169349 (D. Md. 2011) (AT&T/Mobile cases on class waivers and scope of arbitration in mergers)
  • AT&T Mobility LLC v. Bernardi, 11 Civ. 03992, 11 Civ. 04412, 2011 WL 5079549 (N.D. Cal. 2011) (AT&T/Mobile class-action/arbitration scope decisions)
  • AT&T Mobility LLC v. Gonnello, 11 Civ. 5636, 2011 WL 4716617 (S.D.N.Y. 2011) (AT&T/Mobile arbitration scope rulings)
  • AT&T Mobility LLC v. Smith, 11 Civ. 5157, 2011 WL 5924460 (E.D. Pa. 2011) (AT&T/Mobile relief remedies in arbitration context)
  • AT&T Mobility LLC v. Bushman, 11 Civ. 80922, 2011 WL 5924666 (S.D. Fla. 2011) (AT&T/Mobile arbitration relief discussion)
  • Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006) (Arbitrability and vindication of statutory rights; PacifiCare framework)
  • PacifiCare Health Systems, Inc. v. Book, 538 U.S. 401 (2003) (Remedial limitations and arbitral forum adequacy; compel arbitration)
  • Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (Arbitration of statutory claims preserved; scope and waiver considerations)
  • Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (Arbitrability questions are court questions absent clear agreement to arbitrate otherwise)
  • Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (2000) (Costs/fee concerns in arbitration; burden on cost-showing)
  • American Express Merchants’ Litig., In re, 554 F.3d 300 (2d Cir. 2009) (Vindication of statutory rights; class arbitration considerations)
  • American Express Merchants’ Litig., In re, 634 F.3d 187 (2d Cir. 2011) (Am. Express II/III on class/arbitration; authority post-Concepcion)
  • Randolph, Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (2000) (Arbitration costs and vindication of statutory rights)
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