Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-01258/USCOURTS-casd-3_10-cv-01258-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

RUSS BOYER, on behalf of himself and all

others similarly situated,

Plaintiffs,

v.

AT&T MOBILITY SERVICES, LLC, a

Delaware company; and DOES 1 through

100,

Defendants. 

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Civil No. 10CV1258 JAH (WMc)

ORDER GRANTING DEFENDANT’S

MOTION TO COMPEL

ARBITRATION AND DENYING

DEFENDANT’S MOTION TO STAY 

INTRODUCTION

Pending before the Court is defendant’s Motion to Compel Arbitration and to Dismiss Claims

or, in the Alternative, to Stay Case. For the reasons below, the Court GRANTS IN PART and

DENIES IN PART defendant’s motion.

 BACKGROUND

Plaintiff filed a First Amended Complaint (“FAC”) asserting the following claims for relief:

1) Fraud in the Inducement; 2) Violation of the Consumer Legal Remedies Act (“CLRA”); 3)

Violation of the Unfair Competition Law (“UCL”); and 4) False and Deceptive Advertising. 

According to the FAC, defendant AT&T Mobility Services, LLC (“ATTM”) engaged in the deceptive

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business practice of informing consumers who purchased the iPhone along with a data service plan

that a specific plan costing forty-five dollars per month, known as the Enterprise Data Plan (“EDP),

would be necessary if the consumer wished to use their iPhone to connect to corporate email, company

intranet sites, or other business applications [hereinafter “business applications”]. Comp ¶1. The

FAC alleges defendant falsely stated that the thirty dollar per month unlimited data plan would not

allow user access to business applications; however, the thirty dollar data plan in fact allows users to

access business applications, making the more expensive EDP unnecessary. Plaintiff seeks to bring

an action on behalf of both a nationwide class and a State of California class, comprised of “All

persons or entities who, at any time from January 1, 2007 to the time of commencement of trial in this

action, are AT&T account holders who purchased the ‘Enterprise Data Plan for the iPhone’ from an

authorized AT&T retailer.” Comp ¶ 23-28.

After filing its Answer, Defendant AT&T Mobility LLC (“ATTM”) filed the instant Motion

to Compel Arbitration and Dismiss Claims or, in the Alternative, to Stay Case. Plaintiff filed an

Opposition and defendant filed a Reply.

DISCUSSION

A. Legal Standard

Under the Federal Arbitration Act (“FAA”):

 a contract evidencing a transaction involving commerce to settle by arbitration a controversy

thereafter arising out of such contract or transaction, or the refusal to perform the whole or any

part thereof, or an agreement in writing to submit to arbitration an existing controversy arising

out of such a contract, transaction, or refusal, 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 “leaves no place for the exercise of discretion by a district court, but instead

mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an

arbitration agreement has been signed.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218

(1985). As such, there is liberal policy favoring arbitration. Moses H. Cone Memorial Hosp. v.

Mercury Const. Corp., 460 U.S. 1 (1983). However, “state law, whether of legislative or judicial

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Defendant also requests a stay of this matter pending the U.S. Supreme Court Decision in

AT&T Mobility LLC v. Concepcion. As the Supreme Court issued its opinion on this matter on April

27, 2011, and both parties have submitted supplemental briefing on the applicability of the AT&T

Mobility decision to this motion, the Court DENIES defendant’s request for stay as MOOT.

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origin, is applicable if that law arose to govern issues concerning the validity, revocability, and

enforceability of contracts generally.” Perry v. Thomas, 482 U.S. 483, 492 n.9. Therefore, “generally

applicable contract defenses, such as fraud, duress or uncsoncionability, may be applied to invalidate

arbitration agreements without contravening Section 2" of the FAA.” Doctor’s Associates, Inc. v.

Casarotto, 517 U.S. 681, 687 (1996).

In a motion to compel arbitration, the court may not review the merits of the action but must

limit its inquiry to “(1) whether the contract containing the arbitration agreement evidences a

transaction involving interstate commerce, (2) whether there exists a valid agreement to arbitration,

and (3) whether the dispute(s) fall within the scope of the agreement to arbitrate.” Estrella v. Freedom

Financial, 2011 WL 2633643, at *3 (N.D.Cal. 2011)(citing Republic of Nicaragua v. Standard Fruit

Co., 937 F.2d 469, 477-78 (9th Cir. 1991). “If the answer to each of these queries is affirmative, then

the court must order the parties to arbitration in accordance with the terms of their agreement.” Id.

(citing 9 U.S.C. §4). In sum, under the FAA the scope of federal court authority to invalidate

arbitration agreements under state law contract principles is limited to determining “whether the

arbitration clause at issue is valid and enforceable under §2 of the Federal Arbitration Act . . . In

making this determination, federal courts may not address the validity or enforceability of the contract

as a whole.” Tiknor v. Choice Hotels Intern., Inc., 265 F.3d 931, 937 (9th Cir. 2001). 

B. Analysis

According to Defendant, plaintiff signed ATTM’s Terms of Service which contains an

agreement by both ATTM and plaintiff to “arbitrate all disputes and claims between us” on an

individual basis. Based on this agreement, ATTM requests this Court dismiss plaintiff’s FAC and

compel him to pursue any disputes through arbitration.1

 

In opposition, plaintiff argues the FAA does not apply when there is a legal basis to deny

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In plaintiff’s declaration, he claims “he never signed any documents that included any

discussion of arbitration” and that he did not receive any documents that discussed arbitration at the

time of purchase. Doc. 14-1 ¶2-3. Because plaintiff does not raise these arguments in his motion,

however, the Court declines to address these points. 

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arbitration that does not relate to contract principles or is based on state law contract principles of

general applicability. According to plaintiff, the arbitration agreement is unconscionable under

generally applicable California contract principles due to its requirement that claims be pursued on

an individual basis, rather than as a class action. Plaintiff argues the FAA is also inapplicable because

his claim that he was fraudulently induced to enter the contract is based solely on common law

principles of deceit, concealment, and reliance, which, if proven, would invalidate the entire

agreement. In addition, plaintiff argues that the law pertaining to the California class is also

exclusively based on established contract principles of general applicability, specifically the CLRA

which “provide[s] citizens of the forum state with a substantive right to assert class action claims for

deceptive business practices, and cannot be waived as a matter of law.” Doc. 14 at 7. Finally, plaintiff

contends he is not seeking contractual remedies but rather tort damages related to the fraud and argues

defendant cannot “rely on its artifice of fraud to prevent judicial resolution of these claims by relying

on other items in the instrument whose assent was procured by fraud.” Id. at 12.2

The parties do not dispute the existence of an arbitration agreement, its terms, or that the

agreement involves interstate commerce. The only issue is whether the arbitration agreement is

unenforceable due to its requirement that all claims be pursued on an individual basis.

At the time of this motion, Ninth Circuit precedent dictated that an arbitration agreement

similar to the one at issue here was unconscionable under California law due to its prohibition of class

actions. See Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir. 2009). However, the Supreme

Court recently reversed Laster in AT&T Mobility LLC v. Concepcion, and held that the FAA

preempts California’s rule that class arbitration waivers in consumer contracts are unconscionable. 

131 S.Ct 1740 (2011). Accordingly, plaintiff’s argument that the class action waiver is

unconscionable under California law no longer has merit. 

The only remaining issues are: 1) whether plaintiff’s argument that he was fraudulently

induced to enter the contract affects its arbitrability; and 2) whether the CLRA’s provision that “[a]ny

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 This Court notes that the California Court of Appeals has expressed its disagreement with

the Ninth Circuit’s reasoning in Ting, and found that the “right to bring a class action lawsuit, an

unwaiveable statutory right under the CLRA, is a separate, generally available contract defense not

preempted by the FAA.” Fischer v. DCH Temecula Imports LLC, 187 Cal.App.4th 601, 617 (Cal.

Ct. App. 2010) (citing Gutierrez v. Autowest, Inc., 114 Cal.App.4th 77, 95 (Cal.Ct. App. 2003). See

also Gentry v. Superior Court, 42 Cal.4th 443 (2007)(finding class arbitration waiver unenforceable

because it constituted a de facto waiver of plaintiff’s unwaiveable statutory right to receive overtime

pay). However, this Court is bound to follow the Ninth Circuit’s ruling on this issue. See Budinich

v. Becton Dickinson and Co., 486 U.S. 196, 198 (“Although state law generally supplies the rules of

decision in federal diversity cases . . . it does not control the resolution of issues governed by federal

statute”)(internal citations omitted). 

Additionally, this Court recognizes the recent California Court of Appeals decision in Brown

v. Ralphs Grocery Co., 2011 WL 2685959 (Ca. Ct. App. 2011), where the court found that AT&T

Mobility does not preclude plaintiffs who signed a class action waiver from bringing representative,

as opposed to class, actions under the Private Attorney General Act of 2004.

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Plaintiff also argues that the factual distinctions between the instant matter and AT&T

Mobility warrants invalidating the arbitration agreement on public policy grounds to prevent

defendant from continuing to engage in fraud. Doc. 21 at 4-5. However, in response to the dissent’s

point that class actions are necessary to prosecute small dollar claims that might otherwise not be

pursued, the AT&T Mobility Court iterated that “[s]tates cannot require a procedure that is

inconsistent with the FAA, even if it is desirable for unrelated reasons.” AT&T Mobility, 131 S.Ct

at 1753. Therefore, the Court declines to find the arbitration agreement unenforceable for public

policy reasons. 

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waiver by a consumer of the provisions of this title is contrary to public policy and shall be

unenforceable and void” renders the class arbitration waiver unenforceable. See Cal. Civ. Code

§1751.

With respect to the first issue, the Supreme Court has held that fraudulent inducement claims

should be submitted to arbitration when the issue is fraud in the inducement of the contract itself, like

the claim at issue here, rather than fraud in the inducement of the arbitration agreement. See Prima

Paint Corp v. Flood & Conklin Mfg.Co., 388 U.S. 395, 403-04 (1967); Sparling v. Hoffman

Const.Co., Inc., 864 F.2d 635, 638 (9th Cir. 1988). 

Regarding the second issue, the Ninth Circuit has found that because the CLRA applies only

to noncommerical and consumer contracts, it is not a law of general applicability and therefore is

preempted by the FAA3

. See Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003). See also Tiknor v.

Choice Hotels Int’l, Inc., 265 F.3d 931, 937 (“as long as state law defenses concerning the validity,

revocability, and enforceability of contracts are generally applied to all contracts, and not limited to

arbitration clauses, federal courts may enforce them under the FAA.”)(emphasis added).4

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Based on the foregoing, the Court finds that each of plaintiff’s arguments lacks merit.

Accordingly, the Court GRANTS defendant’s motion to compel arbitration and DISMISSES

plaintiff’s claims.

IT IS SO ORDERED.

Dated: July 25, 2011 ________________________

John A. Houston

United States District Judge

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