Consumers must arbitrate their Telephone Consumer Protection Act claims against Sprint, the Seventh Circuit Court of Appeals ruled, after concluding that a user contract with an arbitration clause was valid.
In 2000, Ronald and Anna Andermann obtained mobile phone service from U.S. Cellular pursuant to a contract. The contract, which was renewed multiple times until 2012, included an arbitration clause providing that “any controversy or claim arising out of or relating to this agreement [i.e., the contract for mobile phone service] shall be resolved by binding arbitration” and that “this arbitration agreement survives the termination of this service agreement.” U.S. Cellular also had the right pursuant to the contract to assign the agreement.
In 2013, the company assigned the agreement to Sprint. A few months later, Sprint sent the Andermanns a letter explaining that some of U.S. Cellular’s cellphones (including theirs) were not compatible with Sprint’s network. As a result, the Andermanns either needed to purchase new phones or obtain mobile phone service from another company.
When the Andermanns did not respond, Sprint made a total of six calls (three to each of their phones) to remind them that the service was set to expire, adding that the company had “a great set of offers and devices available to fit [their] needs.” The Andermanns did not answer any of the calls and signed on with another mobile service provider.
They also filed a TCPA lawsuit against Sprint. The company filed a motion seeking to compel arbitration based on the clause in the Andermanns’ service agreement. By virtue of the assignment to Sprint, the company had stepped into U.S. Cellular’s shoes, the company told the court.
The Andermanns countered that the actual assignee in the deal was Sprint Solutions, a different arm of the company, and that the dispute over the legality of the calls did not arise from or relate to the service agreement.
The Seventh Circuit disagreed, finding an “intimate relation” between the calls and the contract.
“The contract authorized an assignment, and because of the incompatibility of the assignee’s (U.S. Cellular’s) cellphones and the assignee’s (Sprint’s) mobile phone network, Sprint had to terminate the U.S. Cellular customers, such as the Andermanns, whom it had acquired by virtue of the assignment; for they could not use their cellphones without switching to a different network,” the court wrote. “It was to prevent the loss of all these customers because of the incompatibility that Sprint had told them in the calls that it could offer them a substitute service. The calls gave rise to the dispute; and so the Andermanns were required to arbitrate the dispute.”
Sprint had a “very strong” substantive defense to the suit, the panel added, but speculated that the company was pushing for arbitration because the clause disallowed class arbitration. Given the modest statutory damages, it was unlikely that the Andermanns would pursue the case through arbitration by themselves.
“But in whatever form contested, the claims are unlikely to prevail,” the court said. Sprint had a relationship with the Andermanns that preexisted the calls, and the incompatibility of U.S. Cellular phones with Sprint’s network “required” the company to inform the plaintiffs that their service would soon be terminated. “[I]t was natural for Sprint to assume that they wanted to continue to have a mobile communications service and would therefore appreciate knowing that Sprint offered a substitute service—the knowledge would enlarge the Andermanns’ options,” the panel said.
Practically speaking, “what would Sprint have done if forbidden to call the customers whom it had inherited from U.S. Cellular and must now terminate because of technical incompatibility?” the court asked. “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 television commercials?”
The panel noted that the case likely falls within a TCPA exception for telephone solicitations made “to any person with whom the caller has an established business relationship,” pursuant to Section 227(a)(4)(B).
“By stepping into U.S. Cellular’s shoes Sprint established a business relationship that Sprint would have disrupted had it told the Andermanns only that their services were going to be cut off, without adding its offer to substitute an equivalent service,” the court concluded.
To read the opinion in Andermann v. Sprint Spectrum, click here.
Why it matters: The decision not only provides support for the enforcement of arbitration provisions in TCPA disputes, but also sets out a road map for a substantive defense to the suit. Although the panel noted that “[w]e don’t want to step on the arbitrator’s toes,” the court said it appeared Sprint’s calls fell under Section 227(a)(4)(B), an exception to TCPA liability where the caller has an established business relationship with the recipient. The panel emphasized that Sprint stepped “into the shoes” of U.S. Cellular when the contract was assigned and that “it was natural for Sprint to assume” the Andermanns would want to continue their mobile communications service.