District Court (Cal.) Orders TCPA Class Action to Arbitration; Finds No Waiver of Arb. Clause By Litigation of Individual Rosenthal Act Claim in State Court

In McNamara v. Royal Bank of Scotland Group, PLC, 2012 WL 5392181 (S.D.Cal. 2012), Judge Lorenz called out a now-frequently employed tactic by Plaintiff’s counsel, who litigate individual collection torts in state court to be able argue waiver of the arbitration clause in a later-filed class action in federal court.  Judge Lorenz ordered a TCPA class action to arbitration, finding the arbitration procedurally and substantively not-unconscionable.

“The right to arbitration, like any other contract right, can be waived.”   United States v. Park Place Assocs., Ltd., 563 F.3d 907, 921 (9th Cir.2009). “[W]aiver of the right to arbitration is disfavored because it is a contractual right, and thus any party arguing waiver of arbitration bears a heavy burden of proof.” Id . (internal quotation marks omitted). “Generally, the determination of waiver is a question of fact.” Saint Agnes Med. Ctr. v. PacificCare of Cal., 31 Cal.4th 1187, 1196 (2003).  ¶ . .  .In April 2011, Plaintiff filed a complaint against Defendants in the San Diego Superior Court. (Ankcorn Decl. ¶ 9.) He alleged claims for violations of the Rosenthal Fair Debt Collection Practices Act and the TCPA, and for invasion of privacy by intrusion upon seclusion. (Ankcorn Decl. Ex. B.) Citizens and Kroger filed an answer, and Citizens independently filed a cross-complaint against Plaintiff seeking, among other things, the sum of the debt Plaintiff owed. (Ankcorn Decl. Exs. D, E.) Though the parties engaged in discovery, Defendants note that “no depositions occurred and no dispositive briefs were filed … [and] Plaintiff produced fewer than 60 pages of documents.” (Ankcorn Decl. ¶¶ 22–47; Sullivan Decl. ¶ 8.) The parties eventually settled the state action, but not before Plaintiff voluntarily dismissed his TCPA claim, which is now the basis of the action currently before this Court. (Ankcorn Decl. ¶ 58; Sullivan Decl. ¶ 2–7.) Plaintiff argues that Defendants waived their right to arbitration based on their actions in the state action with each of the Saint Agnes factors weighing in his favor.  ¶  “Waiver does not occur by mere participation in litigation; there must be ‘judicial litigation of the merits of arbitrable issues,’ although ‘waiver could occur prior to a judgment on the merits if prejudice could be demonstrated.’ “ Keating v. Super. Ct., 31 Cal.3d 584, 607 (1982) (quoting Doers, 23 Cal.3d at 188) (internal citations omitted). “Prejudice in the context of wavier of the right to compel arbitration normally means some impairment of the other party’s ability to participate in arbitration.”   Groom v. Health Net, 82 Cal.App. 4th 1189, 1197 (2000). Indeed, the mere expense of responding to motions or other preliminary pleadings filed in court is not the type of prejudice that bars a belated petition to compel arbitration. See id. Thus, insofar as Defendants’ participation in defending themselves in the state action initiated by Plaintiff that has since been settled and dismissed, Plaintiff fails to overcome the heavy burden of proof needed to show waiver of arbitration. ¶ . . . Finally, the record before the Court does not show that Defendants requested arbitration close to the trial date or delayed for a long period of time before seeking a stay. And though Defendants did file a cross-complaint, it was not substantively related to the TCPA claims that they now seek to arbitrate. (See Ankcorn Decl. Ex. E (alleging causes of action related to the collection of Plaintiff’s outstanding balance for his credit card). ¶  In sum, though there is some basis for Plaintiff’s contentions that the Saint Agnes factors may weigh in his favor, they do not weigh heavily enough to over-come the heavy burden of proof needed to establish that Defendants waived their right to arbitration. See Saint Agnes, 31 Cal.4th at 1196; see also Park Place, 563 F.3d at 921.

The District Court found the TCPA claims within the scope of the arbitration clause.

The arbitration agreement at issue here is not as broad as the one in Jiffy Lube. Arbitration here is limited to “any claim, dispute or controversy of any nature … under or related to any Account [Plaintiff has] with the Bank.” (Klos Decl. Ex. A (emphasis added).) The agreement even explicitly covers claims related to “any servicing and collection activity.” (Id.) More broadly, Section 29 of the Agreement also discusses consent regarding telephone calls. Without a doubt, the phone calls to Plaintiff were related to “collection activity,” an issue explicitly contemplated by the Agreement. Plaintiff himself concedes that the phone calls he received were related to the credit card. (McNamara Decl. ¶ 16 (“I received 22 calls on my cell phone relating to the Ralphs Rewards card.”).) Therefore, Plaintiff’s TCPA claims relate to his Agreement with Defendants, and are consequently subject to arbitration. See Concepcion, 131 S.Ct. at 1748–49; see also Moses H. Cone Mem’l Hosp., 460 U.S. at 24–25 (“any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration”); Knutson v. Sirius XM Radio Inc., No. 12cv418, 2012 WL 1965337, at *8 (S.D.Cal. May 31, 2012) (Battaglia, J.) (compelling arbitration for TCPA claims).

The District Court also rejected procedural and substantive unconscionability arguments:

Here, Plaintiff argues that the arbitration agreement is procedurally unconscionable for three reasons: (1) the terms of the agreement were only sent to Plaintiff after the credit card had been extended and a balance transfer was completed; (2) the arbitration section is “on the back of a long sheet of paper, in a two-column maze of legal jargon printed at less than 7 point type,” where Defendants made no special effort to call Plaintiff’s attention to the arbitration section; and (3) the agreement was offered on a “take it or leave it” basis, with no option to negotiate terms or opt out of the arbitration provision. (Pl.’s Opp’n 21:19–22:7.) ¶ It is unclear what the significance of Plaintiff’s first reason is in the context of procedural unconscionability. Plaintiff fails to explain how or why the first reason supports a finding of procedural unconscionability. With respect to the remaining reasons, Connecticut law is clear that those grounds are not sufficient to find procedural unconscionability. See D’Antuono, 789 F.Supp.2d at 329; Smith, 247 Conn. at 352. On a final note, Plaintiff fails to provide any law to support his contention that any of these reasons serve as a sufficient basis to show that the arbitration agreement is procedurally unconscionable. (See Pl.’s Opp’n 21:19–22:7.)  ¶ . . . Looking to the merits of Plaintiff’s argument, Plaintiff fails to show that he entered into an agreement “which no man in his senses, not under delusion, would make … and which no fair and honest man would accept.” See Smith, 247 Conn. at 349. There is also nothing before the Court that shows the arbitration agreement is so outrageous as to warrant this Court’s refusal to enforce it based on substantive unconscionability alone. See D’Antuono, 789 F.Supp.2d at 327. In light of Connecticut’s policy favoring arbitration, the Court cannot conclude that the arbitration agreement is substantively unconscionable under Connecticut law. See Waterbury Teachers Ass’n v. City of Waterbury, 164 Conn. 426, 434 (1973).