Ronald Andermann v. Sprint Spectrum , 785 F.3d 1157 ( 2015 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-3478
RONALD and ANNA ANDERMANN, et al., on behalf of
themselves and all others similarly situated,
Plaintiffs-Appellees,
v.
SPRINT SPECTRUM L.P.,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 14 C 1004 — Rebecca R. Pallmeyer, Judge.
____________________
ARGUED APRIL 6, 2015 — DECIDED MAY 11, 2015
____________________
Before POSNER and SYKES, Circuit Judges, and SIMON, Chief
District Judge. *
POSNER, Circuit Judge. Sprint, the defendant, appeals from
the denial by the district court of its motion under 9 U.S.C.
§ 4 to order arbitration of a class action suit brought against
*
Hon. Philip P. Simon of the Northern District of Indiana, sitting by des-
ignation.
2 No. 14-3478
it by the Andermanns for alleged violation of the Telephone
Consumer Protection Act, 47 U.S.C. § 227. Interlocutory ap-
peals from denials of motions to order arbitration are au-
thorized by 9 U.S.C. § 16(a)(1)(B).
The Andermanns had obtained mobile phone service
from U.S. Cellular in 2000 under a renewable two-year con-
tract that was renewed for the last time in 2012. The contract
included an arbitration clause which provided that “any
controversy or claim arising out of or relating to this agree-
ment [i.e., the contract for mobile phone service] shall be re-
solved by binding arbitration” and that “this arbitration
agreement survives the termination of this service agree-
ment.”
The contract also provided that “U.S. Cellular may assign
this Agreement [again, the service contract] without notice
to you,” “you” being the customer. And in May of the fol-
lowing year (2013) U.S. Cellular did just that—it sold the
Andermanns’ service contract, complete with the arbitration
clause, to Sprint, without notice to the Andermanns. Several
months later Sprint sent a letter to them informing them of
the sale and that their mobile service would be terminated
on January 31 of the following year (2014). The reason given
in the letter was that some of U.S. Cellular’s cellphones—
including the Andermanns’—were not compatible with
Sprint’s network, and so the Andermanns would either have
to get new cellphones or obtain their mobile phone service
from another company. The letter added that Sprint was of-
fering attractive substitutes for the terminated service and
gave the recipients of the letter a Sprint phone number to
call if they were interested in the offers or devices.
14-3478 3
In December Sprint phoned the Andermanns to remind
them that their service was about to expire, and added that
Sprint had “a great set of offers and devices available to fit
[their] needs.” Sprint made six such calls (three to each of the
Andermanns), all to no avail—for all were made within a
month after the Andermanns had signed on with another
mobile service provider. And anyway the Andermanns an-
swered none of the calls; instead they brought this suit, con-
tending that the unsolicited advertisements contained in the
calls violated the Telephone Consumer Protection Act.
Sprint responded by asking the district court to order arbi-
tration, on the ground that the service contract renewed in
2012 that the Andermanns had signed required that the dis-
pute kicked off by their suit be decided by an arbitrator, be-
cause the dispute arose out of and thus related to that con-
tract. Although the contract had been between U.S. Cellular
and the Andermanns rather than between Sprint and them,
by virtue of the assignment to Sprint (and remember that the
Andermanns had consented in their contract with U.S. Cel-
lular to its assigning the contract without notice to them),
Sprint had stepped into U.S. Cellular’s shoes.
The Andermanns point out that the actual assignee was
Sprint Solutions, Inc., rather than the defendant in this suit,
Sprint Spectrum L.P., and they argue that because Sprint
Spectrum, though of course an affiliate of Sprint Solutions, is
not the assignee it can’t require them to arbitrate their dis-
pute with it. The argument has no merit. For reasons that the
Andermanns have not shown to have any connection to the
parties’ dispute, Sprint Solutions was designated to be Sprint
Spectrum’s agent to hold the contracts assigned to Sprint by
U.S. Cellular, including therefore the Andermanns’ contract.
4 No. 14-3478
The district court ruled for the Andermanns but on a dif-
ferent ground—that since Sprint’s contract with them termi-
nated before the phone calls that are the basis of this lawsuit,
the dispute over the legality of the calls could not have aris-
en from or related to the contract. Actually there’s an inti-
mate relation. The contract authorized an assignment, and
because of the incompatibility of the assignor’s (U.S. Cellu-
lar’s) cellphones and the assignee’s (Sprint’s) mobile phone
network, Sprint had had to terminate the U.S. Cellular cus-
tomers, such as the Andermanns, whom it had acquired by
virtue of the assignment; for they could not use their cell-
phones without switching to a different network. It was to
prevent the loss of all these customers because of the incom-
patibility that Sprint had told them in the calls that it could
offer them a substitute service. The calls gave rise to the dis-
pute; and so the Andermanns were required to arbitrate the
dispute.
Against this conclusion, which is strongly supported by
this court’s decision in Sweet Dreams Unlimited, Inc. v. Dial-A-
Mattress Int’l, Ltd., 1 F.3d 639 (7th Cir. 1993), the Ander-
manns offer an untenable interpretation of our decision in
Smith v. Steinkamp, 318 F.3d 775, 777 (7th Cir. 2003). They say
we said “that allowing the arbitration clause in the payday
loan agreement to apply to statutory and tort claims arising
after the transactions regarding that loan were completed
would lead to ‘absurd results.’” The quotation is from the
Andermanns’ brief; the only term quoted from the Smith
opinion is “absurd results.” What we said, which differs to-
tally from the Andermanns’ characterization of what we
said, is that “absurd results” would ensue if the arising-from
and relating-to provisions contained in a payday loan
agreement, defining what disputes would have to be arbi-
14-3478 5
trated rather than litigated, were cut free from the loan and
applied to a subsequent payday loan agreement that did not
contain those provisions. See id. at 776–77. That is not this
case. The Andermanns’ contract, containing the arising-out-
of or relating-to provisions, is a single contract.
Sprint gilds the lily, however, in telling us that arbitration
is a darling of federal policy, that there is a presumption in
favor of it, that ambiguities in an arbitration clause should
be resolved in favor of arbitration, and on and on in this
vein. It’s true that such language (minus the “darling”) ap-
pears in numerous cases. E.g., Moses H. Cone Memorial Hospi-
tal v. Mercury Construction Corp., 460 U.S. 1, 24–25 (1983);
Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 909
(7th Cir. 1999). But the purpose of that language is to make
clear, as had seemed necessary because of judges’ historical
hostility to arbitration, that arbitration was no longer to be
disfavored—especially in labor cases, see, e.g., Granite Rock
Co. v. International Brotherhood of Teamsters, 561 U.S. 287, 298–
99 (2010), where arbitration is now thought a superior meth-
od of dispute resolution to litigation.
The Federal Arbitration Act is inapplicable to labor dis-
putes, however, and merely makes clauses providing for the
arbitration of disputes arising out of transactions involving
interstate or foreign commerce, as the dispute in this case is
conceded to arise, enforceable in federal and state courts. 9
U.S.C. §§ 1, 2. The issue is then one of interpreting the clause
to see whether it covers the dispute. It’s not clear that arbi-
tration, which can be expensive because of the high fees
charged by some arbitrators and which fails to create prece-
dents to guide the resolution of future disputes, should be
preferred to litigation. And it’s not clear why, so far as elicit-
6 No. 14-3478
ing the meaning of a given arbitration clause is concerned,
such a clause should be distinguished from any other clause
in a contract. The cases do say that arbitration clauses are to
be “generously construed,” e.g., Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625–26 (1985), but
we take that to mean that judges should not allow any pref-
erence they might have for judicial resolution of a legal dis-
pute to override the parties’ dispute-resolution preferences
as embodied in an arbitration clause.
But this is an aside; with or without generous interpreta-
tion, Sprint is entitled to arbitrate. It may seem odd that it
wants arbitration, or at least wants it badly enough to appeal
the denial of its motion asking the district court to order ar-
bitration, since it appears to have a very strong substantive
defense to the suit—a defense at least as likely to persuade a
judge as an arbitrator. But doubtless it wants arbitration be-
cause the arbitration clause disallows class action arbitration.
If the Andermanns’ claims have to be arbitrated all by them-
selves, they probably won’t be brought at all, because the
Andermanns if they prevail will be entitled only to modest
statutory damages.
But in whatever form contested, the claims are unlikely
to prevail. To treat the phone calls as unsolicited advertise-
ments overlooks the fact that as U.S. Cellular’s successor in
providing mobile phone service to the Andermanns, Sprint
had a relation to them that preexisted the calls. The incom-
patibility of U.S. Cellular’s cellphones with Sprint’s network
required Sprint to inform the Andermanns that the service
they thought they had would soon be terminated, and it was
natural for Sprint to assume that they wanted to continue to
have a mobile communications service and would therefore
14-3478 7
appreciate knowing that Sprint offered a substitute service—
the knowledge would enlarge the Andermanns’ options.
One would expect that if not the Andermanns then some
other recipients of Sprint calls would want to know about
Sprint’s substitutes for U.S. Cellular service because they too
would soon need to find a replacement for that service.
What would Sprint have done if forbidden to call the cus-
tomers whom it had inherited from U.S. Cellular and must
now terminate because of technical incompatibility? Post on
highway billboards or subway advertisements the text of its
calls to the customers it had acquired from U.S. Cellular?
Post the messages in the ad sections of newspapers? In tele-
vision commercials? More likely the case falls within the ex-
ception in the Telephone Consumer Protection Act for tele-
phone solicitations made “to any person with whom the
caller has an established business relationship.” 47 U.S.C.
§ 227(a)(4)(B); see, e.g., CE Design Ltd. v. King Architectural
Metals, Inc., 637 F.3d 721, 726–27 (7th Cir. 2011). By stepping
into U.S. Cellular’s shoes Sprint established a business rela-
tionship that Sprint would have disrupted had it told the
Andermanns only that their services was going to be cut off,
without adding its offer to substitute an equivalent service.
So truncated a communication would gratuitously have de-
prived the Andermanns of what might have been an attrac-
tive opportunity for them, though whether it was or not
we’ll never know because the Andermanns neither took any
of Sprint’s calls nor called back, instead signing on with an-
other service provider before they learned whether Sprint
would make than an offer as good or better.
We don’t want to step on the arbitrator’s toes; the evi-
dence presented and arguments made to him or her may
8 No. 14-3478
cast the substantive issue in a different light. All we hold,
therefore, is that Sprint’s motion to order arbitration should
have been granted. The judgment of the district court is
therefore reversed and the case remanded to that court with
instructions to order arbitration.
REVERSED AND REMANDED.