Seventh Circuit Grants Motion to Compel Arbitration Where Underlying Contract Has Been Assigned

Ronald and Anna Andermann had had cell phone service through US Cellular since 2000.  Their service contract provided for arbitration of all claims.  The contract also provided that US Cellular could assign the contract without notice to the Andermanns.  The Andermanns renewed their contract every two years up until 2012.  In May 2013, they received notice that their contract had in fact been assigned to Sprint but that it could not be renewed because their phone was not compatible with Sprint’s network.  Sprint called the Andermanns six times (three times each) to try to persuade them to purchase a new phone that would be compatible with Sprint’s network, but the Andermanns decided to move to a different service provider instead.

They also decided to sue Sprint on behalf of a class of similarly situated consumers, alleging that the undesired calls violated the Telephone Consumer Protection Act (TCPA).  Sprint filed a motion to compel arbitration, which the District Court denied on the ground that the calls originated after the contract had terminated and thus the legality of the calls had no connection to the contract.  

In Andermann v. Sprint Spectrum L.P., the Seventh Circuit reversed and remanded with instructions to order arbitration.   Judge Posner an found intimate relation between the contract and the calls.  The case was an easy one according to Posner because the claims here clearly arose out of or related to the agreement.  Sprint was attempting to offer consumers a way to continue their services.  This case was thus easily distinguishable from other cases, more favorable to plaintiffs, in which the plaintiffs had agreements with defendants that were governed by arbitration provisions but plaintiffs’ claims related to contracts that did not contain arbitration provisions.

Having quickly dispensed with plaintiffs’ opposition to the motion to compel arbitration, Judge Posner then focused his attention on Sprint’s effusive celebration of arbitration provisions as “a darling of federal policy” (Judge Posner’s wording).  Judge Posner emphasized that language encouraging judges to enforce arbitration clauses was a corrective to an era when judges disfavored arbitration.  The aim of federal policy is neither to favor nor disfavor arbitration but to compel arbitration when the parties have agreed to arbitrate claims.  Fortunately for Sprint, this case was, in Judge Posner’s view, not a close call.

Judge Posner then when on to note Sprint’s motives in challenging the denial for arbitration when, in Judge Posner’s view, the Andermanns will lose on the merits wherever their claim is decided.  Judge Posner pointed out that Sprint wants to avoid class action litigation, which is prohibited under the applicable arbitration provision.  He also noted that without the class action option, the claim is unlikely to be brought at all.   Judge Posner then explained the absurd results that would follow from a finding that Sprint had violated the TCPA, thus effectively deciding a claim that the Seventh Circuit ruling will prevent from ever being brought, before catching himself and noting that the decision is really for the arbiter and limiting the Court’s ruling to the instruction that the claim be sent to arbitration.