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Zobrist v. Verizon Wireless

December 29, 2004

DAWN M. ZOBRIST, INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLEE,
v.
VERIZON WIRELESS AND VERIZON COMMUNICATIONS, INC., DEFENDANTS, AND CELLCO PARTNERSHIP, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Madison County. No. 02-L-1088. Honorable Nicholas G. Byron, Judge, presiding.

The opinion of the court was delivered by: Justice Kuehn

This appeal stems from the trial court's October 7, 2003, order denying the defendants' motion to compel arbitration and stay judicial proceedings. The contract provision at issue provides that the majority of the claims between the parties "shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ('Rules')" and that "[a] judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction." The trial court essentially concluded that the arbitration clause at issue was unenforceable and unconscionable and, further, that the parties had intended that claims for small amounts should be litigated in small claims court. This appeal is before this court pursuant to Supreme Court Rule 307(a)(1) (188 Ill. 2d R. 307(a)(1)), because the motion denied sought injunctive relief.

[9]     Verizon Wireless*fn1 is a provider of various wireless services, including cellular phone services. To become a Verizon customer, Verizon required each prospective customer to sign a Verizon contract. The typical Verizon contract was for a 12- or 24-month service term. If the Verizon customer decided for whatever reason to terminate the contract before the service term's natural expiration, the Verizon contract in question required the Verizon customer to pay a $175 early cancellation penalty. There was no sliding scale relative to cancellation of the Verizon contract. In other words, regardless of when the contract was canceled, the fee was $175.

The Verizon contract also contained an arbitration clause, stating as follows:

"Any controversy or claim arising out of or relating to this Agreement, other than a claim by Verizon Wireless as to non[]payment, shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ('Rules'), and judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction. Each party shall bear their own costs of arbitration[] and shall split the cost of the arbitrator between them."

Dawn M. Zobrist was a Verizon customer beginning in July 2001, at which time she elected to enter into a two-year service plan. She terminated her relationship with Verizon in March 2002. Because she did not complete her two-year service plan, Verizon billed her the $175 cancellation penalty in her final, April 2002 statement. Dawn M. Zobrist (the plaintiff) paid this cancellation penalty "under protest."

On August 9, 2002, the plaintiff brought a lawsuit against Verizon. She sued individually and as the representative of a purported class of similarly situated individuals. Specifically, the plaintiff's proposed class included "[a]ll persons in Illinois who were billed an 'Early Cancellation Fee' (or substantially similar termination or cancellation fee) by Verizon Wireless when they cancelled their agreement before the end of its Service Term." Specifically excluded from this purported class were "the Verizon Wireless defendants, any entity in which they have a controlling interest, any of their parents, subsidiaries, affiliates, officers, directors, employees and members of their immediate families[,] and members of the Illinois state court judiciary and their immediate families."

A first amended complaint was filed on March 14, 2003. One week later, Verizon filed a motion to compel arbitration and stay judicial proceedings. On October 7, 2003, the trial court denied the motion without holding an evidentiary hearing. Verizon appeals that order. That order thoroughly detailed the trial court's rationale. The trial court found the arbitration clause to be unenforceable because the proposed class action sought to have claims decided that went beyond the dictates of the arbitration clause and would thwart the plaintiff's right to obtain attorney fees pursuant to the Illinois Consumer Fraud and Deceptive Business Practice Act (815 ILCS 505/1 et seq. (West 2000)) and because arbitration of the plaintiff's claims would be prohibitively expensive. The trial court also found the arbitration clause to be both procedurally and substantively unconscionable. The procedural unconscionability was found in the fact that the arbitration clause was within a brochure separate from the cellular contract the plaintiff signed. The trial court concluded that the arbitration clause was substantively unconscionable because it was one-sided and harsh. Finally, the trial court concluded that the language of the contract supported the conclusion that the parties intended for claims of this type to be litigated in small claims court.

Thereafter, Verizon filed a motion to reconsider this order in the trial court, on the bases that it had no notice that the court's order had been drafted by counsel for the plaintiff and that it had been denied an opportunity to respond to and point out substantive errors contained within the order. The trial court has not yet ruled upon this motion.

In an appeal from a denial of a motion to compel arbitration without an evidentiary hearing, the standard of review is de novo. Travis v. American Manufacturers Mutual Insurance Co., 335 Ill. App. 3d 1171, 1174, 782 N.E.2d 322, 325 (2002).

In 1925, Congress enacted the Federal Arbitration Act (FAA) (now 9 U.S.C. §1 et seq. (2000)) " 'to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts[] and to place arbitration agreements upon the same footing as other contracts.' " Borowiec v. Gateway 2000, Inc., 209 Ill. 2d 376, 384, 808 N.E.2d 957, 962 (2004) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 114 L.Ed. 2d 26, 36, 111 S.Ct. 1647, 1651 (1991)). The FAA provides:

"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction *** 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 (2000).

Section 4 of the FAA provides for orders compelling arbitration when one party has failed, neglected, or refused to comply with an arbitration agreement. 9 U.S.C. §4 (2000). Generally speaking, the arbitration agreement's own language defines the scope of disputes subject to arbitration. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 57, 131 L.Ed. 2d 76, 84, 115 S.Ct. 1212, 1216 (1995); Equal Employment Opportunity Comm'n v. Waffle House, Inc., 534 U.S. 279, 289, 151 L.Ed. 2d 755, 766, 122 S.Ct. 754, 762 (2002). "While ambiguities in the language of the agreement should be resolved in favor of arbitration [citation], we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated." Waffle House, Inc., 534 U.S. at 294, 151 L.Ed. 2d at 769, 122 S.Ct. at 764.

In Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 134 L.Ed. 2d 902, 116 S.Ct. 1652 (1996), the United States Supreme Court ...


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