Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-36080/USCOURTS-ca9-13-36080-0/pdf.json

Parties Involved:
Richard A. Geier
Appellee
M-Qube Inc
Appellant
Mobile Messenger Americas Inc
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RICHARD A. GEIER, individually

and on behalf of all others

similarly situated,

Plaintiff-Appellee,

v.

M-QUBE INC.; MOBILE

MESSENGER AMERICAS INC.,

DBA Mobile Messenger,

Defendants-Appellants.

No. 13-36080

D.C. No.

2:13-cv-00354-TSZ

OPINION

Appeal from the United States District Court

for the Western District of Washington

Thomas S. Zilly, Senior District Judge, Presiding

Argued and Submitted February 4, 2016

Seattle, Washington

Filed May 26, 2016

Before: Alex Kozinski, Diarmuid F. O’Scannlain

and Ronald M. Gould, Circuit Judges.

Per Curiam Opinion

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2 GEIER V. M-QUBE, INC.

SUMMARY*

Arbitration

The panel reversed the district court’s denial of

defendants’ motion to compel arbitration in a class action

alleging that defendants engaged in a scheme that caused

Washington consumers to become unknowingly and

unwittingly subscribed to premium text messages services,

and remanded for further proceedings.

Defendants are “billing aggregators” who serve as

financial intermediaries between customers and content

providers. Pow! Mobile, not a party, is a mobile content

provider that marketed a game called “Bid and Win,” and is

defined as the “Company” in the subscription contract’s

Terms and Conditions. Plaintiff’s wife allegedly subscribed

to the mobile version of Bid and Win.

The panel held that under Washington law, the Terms and

Conditions provide that the “Company’s suppliers” are

intended third-party beneficiaries of the Terms and

Conditions. The panel further held that if defendants are

Company’s suppliers, theymay enforce the arbitration clause

in the Terms and Conditions. The panel remanded for the

district court to determine whether plaintiff’s wife assented to

the Terms and Conditions, and whether defendants are Pow!

Mobile’s suppliers.

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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GEIER V. M-QUBE, INC. 3

COUNSEL

Stephen M. Rummage, Candice M. Tewell (argued), Colin G.

Prince, Davis Wright TremaineLLP, Seattle, Washington, for

Defendants-Appellants.

Toby J. Marshall, Erika L. Nusser (argued), Terrell Marshall

Law Group PLLC, Seattle, Washington; Darrell W. Scott,

Matthew J. Zuchetto, The Scott Law Group, P.S., Spokane,

Washington, for Plaintiff-Appellee.

OPINION

PER CURIAM: 

We consider whether defendants are third-party

beneficiaries of an arbitration clause that accompanied the

subscription to a mobile game.

FACTS

Pow! Mobile, not a party here, is a mobile content

provider that marketed a “reverse auction” game called “Bid

and Win.” In this type of game, players bid on prizes, and

whoever makes the lowest unique bid wins. Users could

subscribe to Pow! Mobile’s cell phone content service, and

play by submitting bids via text message. Bid and Win’s

$9.99 monthly subscription charge was billed directly to the

subscriber’s cell phone bill.

Defendant m-Qube, Inc. is a “connection aggregator.” It

markets mobile games and other subscription-based content

to the public. Defendant Mobile Messenger Americas, Inc.

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4 GEIER V. M-QUBE, INC.

(“Mobile Messenger”) “built a computer ‘gateway’ to each of

the major wireless carriers (e.g., AT&T, Verizon, Sprint, TMobile), allowing charities and businesses to send and

receive text messages with customers.” Both Mobile

Messenger and m-Qube are “billing aggregators” who serve

as financial intermediaries between customers and content

providers. Defendants’ parent companyis Messenger Global,

Inc.

Margaret Wells, Richard Geier’s wife, allegedly

subscribed to the mobile version of Bid and Win. According

to defendants, Wells accepted Pow! Mobile’s Terms and

Conditions (the “Terms”) upon subscribing. Geier, however,

counters that his wife never subscribed to the service and thus

didn’t assent to the Terms. The Terms include a clause

compelling arbitration for “any controversy . . . arising out of

or relating to a service agreement between” Pow! Mobile and

its subscriber.

Geier’s class action complaint alleges defendants have

engaged in a scheme “that causes Washington consumers to

become unknowingly and unwittingly subscribed to premium

text message services.” Geier filed his complaint in state

court, but defendants removed the case to federal court

pursuant to the Class Action Fairness Act. After Geier filed

an amended complaint, defendants moved to compel

arbitration.

Without determining whether Wells agreed to the Terms,

the district court held that “defendants are not intended thirdparty beneficiaries entitled to enforce the arbitration clause”

and thus denied defendants’ motion to compel arbitration.

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GEIER V. M-QUBE, INC. 5

DISCUSSION

We review the district court’s ruling on the validity and

scope of an arbitration clause de novo. Nagrampa v.

MailCoups, Inc., 469 F.3d 1257, 1267 (9th Cir. 2006) (en

banc). Under the Federal Arbitration Act, federal district

courts must compel arbitration if (1) a valid agreement to

arbitrate exists and (2) the dispute falls within the scope of

that agreement. See Chiron Corp. v. Ortho Diagnostic Sys.,

Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).

Under paragraph 11 of the Terms, the Bid and Win

subscriber agrees to waive all claims “against [his] wireless

carrier, any of Company’s suppliers, or anyone other than

Company, relating to the Service.” The Terms define

“Company” as Pow! Mobile, but do not define “Company’s

suppliers.” Geier argues that defendants aren’t Company’s

suppliers, but the district court for purposes of its analysis

assumed that they were.

Pursuant to the arbitration clause contained in paragraph

12 of the Terms, subscribers “agree that any dispute will be

resolved by binding arbitration.” Subscribers “also agree

[that] any arbitration will be limited to the dispute between

[them] and the Company and will not be part of a class-wide

or consolidated arbitration proceeding.”

When interpreting the Terms, the district court here held

that Rajagopalan v. NoteWorld, LLC, 718 F.3d 844 (9th Cir.

2013) (per curiam), controls. Rajagopalan signed up for a

debt settlement program with First Rate Debt Solutions

(“First Rate”). Id. at 845. First Rate’s contract included an

arbitration clause; so, rather than suing First Rate, plaintiff

filed a class action against NoteWorld, a third party that

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6 GEIER V. M-QUBE, INC.

provided transaction management and processing services to

First Rate. Id. at 845–46.

On appeal, we affirmed the district court’s refusal to

compel arbitration: “Though it is true that NoteWorld’s name

is mentioned in the contract, ‘indirect reference to a third

party does not make the third party a beneficiary of the

[contract].’” Id. at 847 (alteration in original) (quoting

Tooley v. Stevenson Co-Ply, Inc., 724 P.2d 368, 371 (Wash.

1986)). We noted that under Washington law, a third party

is a beneficiary of a contract if “performance under the

contract would necessarily and directly benefit that party.” 

Id. (quoting Postlewait Constr., Inc. v. Great Am. Ins. Cos.,

720 P.2d 805, 807 (Wash. 1986)). Thus, “[t]he creation of a

third party beneficiarycontract requires that the parties intend

that the promisor assume a direct obligation to the intended

beneficiary at the time they enter into the contract.” Id.

(alteration in original) (quoting Burke & Thomas, Inc. v. Int’l

Org. of Masters, Mates &Pilots, 600 P.2d 1282, 1285 (Wash.

1979)). NoteWorld “submitted no evidence that Rajagopalan

intended to designate NoteWorld as a third-party beneficiary,

that NoteWorld assumed any duties or obligations under the

First Rate contract, or that any party assumed direct

obligations to NoteWorld.” Id. We thus held that NoteWorld

was not a third-party beneficiary of the contract containing

the arbitration clause. Id.

Unlike the agreement in Rajagopalan, the Terms here

create a direct obligation from the subscriber to the

Company’s suppliers. Under paragraph 11 of the Terms, the

subscriber waives all claims against Pow! Mobile’s suppliers. 

Because there is evidence of a direct obligation from a

subscriber to the Company’s suppliers, this case is

distinguishable from Rajagopalan.

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GEIER V. M-QUBE, INC. 7

This case is more akin to Gibson v. Wal-Mart Stores, Inc.,

181 F.3d 1163 (10th Cir. 1999). After Gibson was injured

while stocking shelves at a Wal-Mart store, an assistant

manager told her that Wal-Mart would pay for her medical

expenses if she signed release papers. Id. at 1165–66. 

Gibson released all claims “against Wal-Mart, its officers,

directors, employees, agents or attorneys as the result of any

accident.” Id. at 1166. Gibson also “agree[d] to arbitrate any

disputes as to entitlement to benefits under Wal-Mart’s

workers’ compensation plan.” Id. (alteration in original). 

Eventually she sued Wal-Mart and a former co-employee,

Becky Brooks, alleging that they negligently caused her

injuries. Id. Invoking the release agreement, Wal-Mart filed

a motion to compel arbitration, which the district court

granted as to both Wal-Mart and Brooks. Id.

The Tenth Circuit affirmed, reasoning that “[t]he fact that

Brooks did not individually sign the Agreement does not

preclude enforcement of the Agreement with respect to

Gibson’s claims against her because it is clear that Brooks

was, at the very least, a third party beneficiary of the

Agreement.” Id. at 1170 n.3. The Gibson court relied on the

Eleventh Circuit’s decision in MS Dealer Serv. Corp. v.

Franklin, 177 F.3d 942 (11th Cir. 1999), which it

characterized as having held that “a nonsignatory may

enforce an arbitration agreement under a third party

beneficiary theory when the parties to the agreement have

agreed, upon the formation of their agreement, to confer the

benefits thereof to the nonsignatory.” Gibson, 181 F.3d at

1170 n.3.

Although Gibson interprets Wyoming law, the factual

background there is informative. The parties here agree that

Washington law controls. Under that law, “[i]f the terms of

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8 GEIER V. M-QUBE, INC.

the contract necessarily require the promisor to confer a

benefit upon a third person, then the contract, and hence the

parties thereto, contemplate a benefit to the third person.” 

Lonsdale v. Chesterfield, 662 P.2d 385, 389 (Wash. 1983) (en

banc) (quoting Vikingstad v. Baggott, 282 P.2d 824, 825

(Wash. 1955)). As described above, the signatory to the

Terms agrees to waive all claims against the Company’s

suppliers. Therefore, the Company’s suppliers are intended

third-party beneficiaries of the Terms. Thus, if defendants

are suppliers of the Company, they may enforce the

arbitration clause.

Whether defendants may enforce the arbitration clause

against Geier requires two findings not made by the district

court: Did Wells assent to the Terms? And, are defendants

Pow! Mobile’s suppliers? We remand so that the district

court can make these determinations in the first instance.

We therefore REVERSE the district court’s denial of

defendants’ motion to compel and REMAND for further

proceedings consistent with this opinion.

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