CALIFORNIA COURTS HIT THE BRAKES ON PUTATIVE TCPA CLASS ACTIONS WITH THEIR ENFORCEMENT OF ARBITRATION PROVISIONS

Two federal district courts in California recently granted defendants’ motions to compel arbitration, sending two putative TCPA class actions to arbitration.  In Mendoza v. Ad Astra Recovery Services, Inc., No. 2:13-cv-06922 (Jan. 6, 2014 C.D. Cal.), plaintiff brought a TCPA class action against an agent of a payday lending firm who had left pre-recorded voicemail messages on his cell phone regarding a debt he had failed to repay.  Plaintiff, however, had signed a contract with the payday lending firm at the time he received the loan, by which he waived the right to pursue a class action and agreed to arbitrate any potential claims.  The arbitration clause covered “any claim, dispute or controversy between you and us (or related parties) that arises from or relates in any way to this Agreement . . . ; any of our marketing, advertising, solicitations and conduct relating to your request for Services; our collection of any amounts you owe; or our disclosure of or failure to protect any information about you.”

Plaintiff raised three arguments against enforcement of the arbitration provision.  First, he argued that defendant lacked standing to enforce the agreement.  The court rejected this argument, finding that defendant had standing as an agent of the payday lending firm.  Plaintiff next argued that his claim was not covered by the arbitration clause.  The court disagreed, noting that the clause was extremely broad.  Under the clause, “‘[c]laim’ [was] to be given the broadest possible meaning and include[d] . . . claims based on any . . . statute[.]”  Importantly, the clause also expressly included claims arising out of debt-collection activities.  Lastly, plaintiff argued that the arbitration provision was unconscionable.  The court found that the clause was not procedurally unconscionable because it “gave plaintiff the unilateral right to reject arbitration at any time within 30 days of signing the contract.”  The court also found that the clause was not substantively unconscionable because the clause was set out conspicuously on a separate page of the contract and the contract contained the following warning:

VERY IMPORTANT. READ THIS ARBITRATION PROVISION CAREFULLY. IT SETS FORTH WHEN AND HOW CLAIMS . . . WILL BE ARBITRATED INSTEAD OF LITIGATED IN COURT. IF YOU DON’T REJECT THIS ARBITRATION PROVISION IN ACCORDANCE WITH SECTION 1 BELOW, UNLESS PROHIBITED BY APPLICABLE LAW, IT WILL HAVE A SUBSTANTIAL IMPACT ON THE WAY IN WHICH YOU OR WE RESOLVE ANY CLAIM.

In Sherman v. RMH, LLC, et al., No. 13-cv-1986 (Jan. 2, 2014 S.D. Cal.), plaintiff brought a TCPA class action against a dealership who had left a pre-recorded voicemail message on his cell phone reminding him that it was the anniversary of his auto purchase and that it was time for “another status review of [his] ownership experience.”  When plaintiff purchased his car, however, he signed a Retail Installment Sales contract which included an arbitration clause.  Like the clause in Mendoza, the arbitration clause contained in the Retail Installment Sales contract was broad enough to encompass plaintiff’s claim: “Any claim or dispute, whether in contract, tort, statute or otherwise . . ., between you and us or our employees, agents, successors or assigns, which arise out of or relate to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship . . . shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.”  The court like its counterpart in the Central District, rejected the plaintiff’s arguments that the clause did not cover the claim at issue and that the clause was unconscionable. 

By signing contracts containing arbitration clauses, the plaintiffs in the aforementioned cases relinquished any right to pursue TCPA claims through a class action. These recent decisions stress the importance of ensuring that arbitration clauses contain class action waivers and are broad enough to encompass potential TCPA claims.  For more information on this topic or assistance in reviewing or drafting arbitration clauses, please contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com.