Court Opinion

ID: 6339619
Source: CourtListenerOpinion
Date Created: 2022-05-11 18:00:47.660219+00
Date Added: 2024-06-11T15:49:12.819629
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION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

                                                -2-
No. 21-3570, Adell v. Cellco Partnership

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

                                                 -3-
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

                                              -4-
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

                                                 -5-
No. 21-3570, Adell v. Cellco Partnership

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

                                                -6-
No. 21-3570, Adell v. Cellco Partnership

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

                                                 -7-
No. 21-3570, Adell v. Cellco Partnership

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

                                               -8-
No. 21-3570, Adell v. Cellco Partnership

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

                                                -9-
No. 21-3570, Adell v. Cellco Partnership

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.

                                                 -10-