Lorraine Adell v. Cellco Partnership ( 2022 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 22a0195n.06
No. 21-3570
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
LORRAINE ADELL, individually and on ) FILED
behalf of all others similarly situated, ) May 11, 2022
) DEBORAH S. HUNT, Clerk
Plaintiff-Appellant, )
)
ON APPEAL FROM THE UNITED STATES
v. )
DISTRICT COURT FOR THE NORTHERN
)
DISTRICT OF OHIO
CELLCO PARTNERSHIP, doing business )
as Verizon Wireless, )
OPINION
)
Defendant-Appellee. )
BEFORE: GILMAN, STRANCH, and NALBANDIAN, Circuit Judges.
JANE B. STRANCH, Circuit Judge. Lorraine Adell challenges the district court’s
decision compelling her to arbitrate her claims against Cellco Partnership based on an arbitration
clause in her Customer Agreement with Verizon Wireless. Adell asserts that the waiver of her
Article III right to bring her state-law claims through diversity jurisdiction in federal court was not
voluntary and that the Class Action Fairness Act of 2005 overrides the Federal Arbitration Act
with respect to the arbitration of class action claims. The district court rejected these arguments
in granting Verizon’s motion to compel arbitration, granting Verizon’s request to confirm the
arbitration award, and rejecting Adell’s motion to vacate the arbitration reward. For the reasons
that follow, we AFFIRM the district court’s judgments.
No. 21-3570, Adell v. Cellco Partnership
I. BACKGROUND
Adell became a Verizon Wireless customer in September 2015. When signing up for
Verizon service, Adell accepted Verizon’s Customer Agreement, which included a statement
agreeing that both parties would resolve disputes exclusively through arbitration or in small-claims
court. In March 2018, she sued Verizon in the U.S. District Court for the Northern District of
Ohio. (Adell alleged that, in October 2005, Verizon introduced a monthly administrative charge
on wireless customers for each line. This charge was, at some point, as much as $1.23 per line
monthly. In 2010, the charge was $0.92 per line and generated approximately $84 million in
revenue per month. According to Adell, Verizon first noted the administrative charge in its
November 2006 Customer Agreement, explaining that the company “may also include Federal
Universal Service, Regulatory and Administrative Charges, and may also include other charges
related to our governmental costs.” (R. 7-1, Verizon Customer Agreement, PageID 43) Adell
alleged that these charges must be put toward governmental costs. However, “Verizon has used
the Administrative Charge as a discretionary pass-through of Verizon’s general costs,” such as the
cost of building cell sites. (R. 1, Complaint, PageID 3) The complaint asserted that using the costs
in this way allows Verizon to increase the monthly rate for service without disclosure to its
customers, breaching Verizon’s contracts with Ohio and nationwide customers.
Adell sought to challenge the charge both individually and through a class action on behalf
of two classes. The first class would include “all Verizon wireless telephone customers.” Adell
brought a declaratory judgment on behalf of this class, seeking a declaration that the arbitration
clause in the Customer Agreement was, as applied to state-law claims against Verizon for breach
of contract under the Class Action Fairness Act of 2005 (CAFA), not voluntary or enforceable.
This class also sought a declaration that the agreements to arbitrate state-law claims that CAFA
allows plaintiffs to bring in federal courts through diversity jurisdiction “are not enforceable
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because of the ‘inherent conflict’ between arbitration under the FAA and CAFA’s express
purposes as stated by Congress.” The second class included “all Verizon wireless telephone
customers whose wireless phones have an Ohio area code.” Adell sought damages for breach of
contract based on Verizon’s imposition of the administrative charge.
In June 2018, Adell moved for partial summary judgment on her individual claims for
declaratory judgment, including her arguments that the waiver of her right to bring a case in an
Article III court against Verizon was not voluntary, conflicted with CAFA, and was therefore not
enforceable. Later in June, Verizon moved the district court to compel Adell’s state-law claims to
arbitration and to stay the case until the end of the arbitration process. In March 2019, the district
court granted Verizon’s motion to compel arbitration, denied Adell’s motion for partial summary
judgment, and stayed the case pending the completion of arbitration.
Adell and Verizon arbitrated their dispute through the American Arbitration Association.
They agreed to a summary disposition based on pre-hearing motions on Adell’s breach of contract
claim. On August 22, 2020, the arbitrator concluded, based on Ohio law, that “the Agreement in
its entirety does not appear to require that Administrative Charges be related to government costs
and cannot be said to be ambiguous as it relates to administrative charges.” Therefore, Adell’s
claim for breach based on Verizon’s imposition of administrative charges unrelated to government
costs failed. The arbitrator denied Adell’s claims for breach of contract, specific performance, and
partial summary disposition, and granted Verizon’s motion for summary adjudication. The
arbitrator ordered the parties to pay $1,900.00 in administrative fees and expenses to the American
Arbitration Association and $2,500.00 as compensation to the arbitrator.
After the district court confirmed the arbitration award and denied Adell’s motion to vacate
that award, Adell brought this appeal. She challenges both the district court’s March 2019 opinion
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No. 21-3570, Adell v. Cellco Partnership
and order compelling arbitration and the opinion and order denying her motion to vacate the
arbitration award.
II. ANALYSIS
The Arbitration Agreement Adell signed as part of her Customer Agreement with Verizon
states, in pertinent part:
YOU AND VERIZON WIRELESS BOTH AGREE TO RESOLVE
DISPUTES ONLY BY ARBITRATION OR IN SMALL CLAIMS COURT.
YOU UNDERSTAND THAT BY THIS AGREEMENT YOU ARE GIVING
UP THE RIGHT TO BRING A CLAIM IN COURT OR IN FRONT OF A
JURY. . . . WE ALSO BOTH AGREE THAT:
(1) THE FEDERAL ARBITRATION ACT APPLIES TO THIS AGREEMENT.
EXCEPT FOR SMALL CLAIMS COURT CASES THAT QUALIFY, ANY
DISPUTE THAT IN ANY WAY RELATES TO OR ARISES OUT OF THIS
AGREEMENT OR FROM ANY EQUIPMENT, PRODUCTS AND SERVICES
YOU RECEIVE FROM US (OR FROM ANY ADVERTISING FOR ANY SUCH
PRODUCTS OR SERVICES), INCLUDING ANY DISPUTES YOU HAVE
WITH OUR EMPLOYEES OR AGENTS, WILL BE RESOLVED BY ONE OR
MORE NEUTRAL ARBITRATORS BEFORE THE AMERICAN
ARBITRATION ASSOCIATION (“AAA”) OR BETTER BUSINESS BUREAU
(“BBB”). YOU CAN ALSO BRING ANY ISSUES YOU MAY HAVE TO THE
ATTENTION OF FEDERAL, STATE OR LOCAL GOVERNMENT
AGENCIES, AND IF THE LAW ALLOWS, THEY CAN SEEK RELIEF
AGAINST US FOR YOU. . . .
(3) THIS AGREEMENT DOESN’T ALLOW CLASS OR COLLECTIVE
ARBITRATIONS EVEN IF THE AAA OR BBB PROCEDURES OR RULES
WOULD. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, THE ARBITRATOR MAY AWARD MONEY OR
INJUNCTIVE RELIEF ONLY IN FAVOR OF THE INDIVIDUAL PARTY
SEEKING RELIEF AND ONLY TO THE EXTENT NECESSARY TO
PROVIDE RELIEF WARRANTED BY THAT PARTY'S INDIVIDUAL
CLAIM. NO CLASS OR REPRESENTATIVE OR PRIVATE ATTORNEY
GENERAL THEORIES OF LIABILITY OR PRAYERS FOR RELIEF MAY
BE MAINTAINED IN ANY ARBITRATION HELD UNDER THIS
AGREEMENT. ANY QUESTION REGARDING THE ENFORCEABILITY
OR INTERPRETATION OF THIS PARAGRAPH SHALL BE DECIDED
BY A COURT AND NOT THE ARBITRATOR. . . .
(R. 21-2, Sandoval Declaration, PageID 263–64) The parties do not dispute that Adell’s Customer
Agreement with Verizon from September 2015 includes an arbitration clause that covers Adell’s
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No. 21-3570, Adell v. Cellco Partnership
breach of contract claim. Adell also concedes that the clause requires the bilateral, rather than
class, arbitration of disputes and limits her to individual relief in that process. The disagreement
lies with whether this clause is enforceable under federal law.
Arbitration agreements fall under the ambit of the Federal Arbitration Act (FAA), which
provides than an arbitration clause in “a transaction involving commerce . . . shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation
of any contract.” 9 U.S.C. § 2. The FAA evinces “a liberal federal policy favoring arbitration
agreements.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). As
arbitration agreements are contracts, “courts must ‘rigorously enforce’ arbitration agreements
according to their terms.” Am. Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013) (quoting
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985)). If a court is “satisfied that the
making of the agreement for arbitration . . . is not in issue, the court shall make an order directing
the parties to proceed to arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4.
The district court entered such an order, and Adell asserts on appeal that two independent
reasons show the decision to be erroneous. First, Adell insists that she did not voluntarily waive
an Article III adjudication of her breach of contract claim against Verizon. Second, she argues
that the “inherent conflict” between CAFA and the FAA means that claims falling within a federal
court’s diversity jurisdiction through CAFA are no longer within the FAA’s bounds. We take each
argument in turn.
“When reviewing a district court’s decision to confirm or vacate an arbitration award, we
review factual findings for clear error and questions of law de novo.” Uhl v. Komatsu Forklift Co.,
Ltd., 512 F.3d 294, 303 (6th Cir. 2008) (quoting Green v. Ameritech Corp., 200 F.3d 967, 974 (6th
Cir. 2000)). We review both denials of motions for summary judgment and decisions to compel
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arbitration pursuant to the FAA de novo. Hergenreder v. Bickford Senior Living Grp., LLC, 656
F.3d 411, 415 (6th Cir. 2011); Wilson v. Safelite Grp., Inc., 930 F.3d 429, 433 (6th Cir. 2019).
A. Voluntariness Under the Federal Arbitration Act
Adell’s first challenge to the enforceability of the arbitration clause in the Customer
Agreement is that she did not consent to the arbitration of her claims. Consent is a prerequisite to
the enforcement of arbitration agreements under the FAA. See, e.g., Thomas v. Union Carbide
Agric. Prods. Co., 473 U.S. 568, 584 (1985). Courts cannot require a party to arbitrate a dispute
if that party has not agreed to do so. United Steelworkers of Am. v. Warrior & Gulf Co., 363 U.S.
574, 582 (1960). Once parties have agreed to arbitrate, though, courts must “rigorously enforce”
those agreements. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985).
Adell contends that, on the issue of consent, we have used a “‘knowing and voluntary’
standard in the context of FAA arbitration, but not in connection with Article III.” She relies on
the decision in Wellness International Network, Ltd. v. Sharif, 575 U.S. 665 (2015), which
concluded that the “knowing and voluntary” consent of parties to a bankruptcy court’s adjudication
of claims that are otherwise within the jurisdiction of an Article III court does not offend
constitutional principles. Adell argues that we should “extend” this standard to assessing whether
she consented to the waiver of her right to Article III adjudication. She then asserts that the
application of this standard shows “that Verizon’s adhesive denial of the right to refuse non-Article
III arbitration by Adell and still receive her equipment and services from Verizon is not ‘voluntary’
under the Constitution, and that the waiver of her Article III rights is unenforceable.”
Nothing in the record, however, supports Adell’s claim that her consent to the Customer
Agreement was not knowing and voluntary. Wellness International, moreover, did not disrupt the
firmly established rule that consent is a prerequisite to the enforcement of arbitration agreements.
See United Steelworkers of Am., 363 U.S. at 582. We “review the enforceability of an arbitration
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agreement according to the applicable state law of contract formation.” Seawright v. Am. Gen.
Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007). Here, the Customer Agreement states that it
is “governed by federal law and the laws of the state encompassing the area code of [the
customer’s] wireless phone number,” which requires us to apply Ohio law. See AT&T Mobility
LLC v. Concepcion, 563 U.S. 333, 346–47 (2011). Adell asserts that Verizon’s requirement that
she waive her personal right to bring claims in a federal court to receive Verizon’s equipment and
services left her without a choice but to waive her personal rights under Article III. This argument
is essentially a claim that the agreement is unconscionable. See Morrison v. Circuit City Stores,
Inc., 317 F.3d 646, 666 (6th Cir. 2003) (explaining that an unconscionability argument under Ohio
law raised the issue of “the disparity in bargaining power between the parties to the agreement”).
We therefore evaluate Adell’s arguments under Ohio’s unconscionability doctrine. A party
arguing unconscionability under Ohio law must show:
(1) substantive unconscionability, i.e., unfair and unreasonable contract terms, and
(2) procedural unconscionability, i.e., individualized circumstances surrounding
each of the parties to a contract such that no voluntary meeting of the minds was
possible. Both elements must be present to find a contract unconscionable.
Id. “The party asserting unconscionability of a contract bears the burden of proving that the
agreement is both procedurally and substantively unconscionable.” Hayes v. Oakridge Home, 908
N.E.2d 408, 412 (Ohio 2009).
Beyond her general arguments against the arbitration clause, Adell does not offer any
example of how the Customer Agreement is substantively unconscionable. Instead, she focuses
on the fact that she could not receive Verizon services and equipment without waiving her personal
Article III rights. She rejects the district court’s finding that she could refuse to sign the Customer
Agreement and seek cell phone equipment and service elsewhere, countering that this argument
does not comport with the discussion of the importance of cell phones in recent Supreme Court
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opinions and oral argument. However, our precedent has squarely rejected similar arguments. In
evaluating analogous claims that an arbitration clause in a cell-phone contract was procedurally
unconscionable, we explained that the plaintiff was not entitled to use a particular wireless
provider. Ozormoor v. T-Mobile USA, Inc., 354 F. App’x 972, 974 (6th Cir. 2009). Adell does
argue in her reply that the three other major carriers include similar arbitration clauses in their
customer agreements, but that alleged fact does not negate the voluntariness of her decision to
contract for cell-phone service with Verizon. Although Verizon undoubtedly has greater economic
power than Adell, she has not offered the proof necessary to show that the Customer Agreement
was both procedurally and substantively unconscionable, especially given that she has offered no
evidence that Verizon was her only option for cell-phone service. Without more, we must find
Adell’s arbitration agreement with Verizon enforceable.
B. The Class Action Fairness Act
Adell further argues that her agreement to bilateral arbitration in the Verizon Customer
Agreement is unenforceable because CAFA conflicts with and displaces the FAA with respect to
class action claims like hers. According to Adell, Congress’s grant of jurisdiction to the federal
courts over smaller class action lawsuits in CAFA guaranteed her right to federal adjudication of
her claim. She points to the statutory language on Congress’s purpose in enacting CAFA, the
legislative history, and the statutory text granting federal courts jurisdiction over class action
lawsuits such as hers. Adell asserts that even applying the Supreme Court’s instructions in Epic
Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), for evaluating possible displacement of the FAA,
CAFA clearly displaces the FAA.
In Epic Systems Corp., the Supreme Court considered whether the National Labor
Relations Act (NLRA) overrode the enforceability of arbitration clauses in employment
agreements. 138 S. Ct. at 1624. The goal when construing two statutes, the Court explained, is to
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interpret the acts “to give effect to both.” Id. (quoting Morton v. Mancari, 417 U.S. 535, 551
(1974)). Courts may find displacement only when there is “‘clear and manifest’ congressional
intention to displace one Act with another.” Id. (quoting Morton, 417 U.S. at 551); see also Gaffers
v. Kelly Servs., Inc. 900 F.3d 293, 295 (6th Cir. 2018). Furthermore, courts must embrace “the
‘stron[g] presum[ption]’ that repeals by implication are ‘disfavored’ and that ‘Congress will
specifically address’ preexisting law when it wishes to suspend its normal operations in a later
statute.” Epic Sys. Corp., 138 S. Ct. at 1624 (alterations in original) (quoting United States v.
Fausto, 484 U.S. 439, 452–53 (1988)). Applying these standards, the Supreme Court concluded
that the NLRA, although creating rights to unionization, collective bargaining, and union
bargaining to prohibit arbitration, did not show a clear congressional intent to displace the FAA.
Id. Also compelling was “the fact that when Congress wants to mandate particular dispute
resolution procedures[,] it knows exactly how to do so.” Id. at 1626. Given the absence of such
obvious language on the proper “procedures for resolving ‘actions,’ ‘claims,’ ‘charges,’ and
‘cases,’” the Court concluded that the evidence pointed against a displacement of the FAA. Id.
The Court further emphasized the losing record of cases arguing conflicts between the FAA and
other statutes. Id. at 1627. “[E]ven a statute’s express provision for collective legal actions does
not necessarily mean that it precludes ‘individual attempts at conciliation’ through arbitration.”
Id. Ultimately, “the absence of any specific statutory discussion of arbitration or class actions is
an important and telling clue that Congress has not displaced the Arbitration Act.” Id.
Adell has not pointed to evidence that could overcome the high barrier for displacement of
the FAA, and no other argument she makes in support of her reading requires a different outcome.
CAFA undoubtedly discusses class actions, but it neither mentions arbitration nor offers the “clear
and manifest congressional intention” signaling FAA displacement. CAFA focuses on the
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jurisdiction of the federal courts and grants district courts “original jurisdiction” for class actions
“in which the matter in controversy exceeds the sum or value of $5,000,000.” 28 U.S.C.
§ 1332(d)(2). The “findings and purposes” set out in CAFA express the importance of class action
lawsuits, including that broader jurisdiction for class action lawsuits will “restore the intent of the
framers of the United States Constitution by providing for Federal court consideration of interstate
cases of national importance under diversity jurisdiction.” Class Action Fairness Act of 2005,
Pub. L. No. 109-2, § 2(a)–(b), 119 Stat. 4 (2005). These are not clear statements displacing the
FAA. The legislative history that Adell cites is similarly unable to surmount the “uphill climb” to
prove displacement. Epic Sys. Corp., 138 S. Ct. at 1624. Although the Senate Report expresses
the importance of district-court jurisdiction over—meaning the ability to hear—class action cases,
it does not indicate that CAFA was meant to preclude parties from privately contracting to
adjudicate such cases through bilateral arbitration instead. See S. Rep. No. 109-14 (2005).
Ultimately, the jurisdictional changes wrought through CAFA do not show an obvious conflict
with the FAA that would make Adell’s arbitration agreement with Verizon unenforceable. We
can, and the district court did, give effect to both. The district court here had jurisdiction over
Adell’s case through CAFA and exercised that jurisdiction when compelling arbitration and
enforcing the arbitration award.
III. CONCLUSION
For the reasons discussed above, we reject Adell’s challenges to the enforceability of her
arbitration agreement with Verizon and AFFIRM the district court’s judgments.
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