United States District Court, N.D. Illinois, Eastern Division
October 20, 2005.
In re WIRELESS TELEPHONE 911 CALLS LITIGATION.
The opinion of the court was delivered by: JOHN GRADY, District Judge
Before the court is the motion of defendant Cellco Partnership
d/b/a Verizon Wireless ("Verizon") to compel arbitration and to
stay these proceedings. For the reasons explained below, the
motion is denied.
In this multidistrict litigation, plaintiffs contend that the
wireless telephones manufactured and sold by defendants fail to
comply with the Second Report and Order of the Federal
Communications Commission ("FCC") concerning the revision of the
FCC's rules to ensure compatibility with Enhanced 911 emergency
calling systems.*fn1 The background and procedural history
of this litigation is set forth in our Memorandum Opinion of June
3, 2005 and will not be repeated here. Verizon, one of the "carrier" defendants, has filed a motion to
compel arbitration of plaintiffs' claims against it and stay
these proceedings as against Verizon. The motion is based on the
arbitration clauses contained in the service agreements governing
the relationship between Verizon and four of the six plaintiffs
whose claims are based on phones sold or service provided by
Verizon. Those four plaintiffs are Christina Nguyen, Jed Becker,
Donna Clarke, and Advanced Systems Integration, Inc. ("ASI").
Verizon has been unable to locate the service agreements of the
remaining two Verizon plaintiffs, Alissa Liff and Stephen
Hubbard. With respect to those plaintiffs, Verizon submits the
declaration of Carline Hill, a Verizon Advertising Manager, who
states that all Verizon customer service agreements since
December 2000 have contained some type of mandatory arbitration
clause. In their responses to discovery requests, Liff and
Hubbard indicated that they purchased their phones and service in
2001 and 2002. Therefore, Hill states, Liff and Hubbard would
have signed arbitration agreements containing mandatory
arbitration clauses similar to those of the four other Verizon
The arbitration clauses contained in the "Customer Agreements"
of plaintiffs Nguyen, Becker and Clarke and the "Cellular Service
Agreement" of plaintiff ASI are all very similar. (No party
contends that there are any significant differences among the
clauses.) The clauses provide in relevant part that Verizon and the plaintiff agree to "arbitrate" or to "settle disputes only by
arbitration" to the fullest extent permitted or provided by law,
and that "any controversy or claim arising out of or relating to"
the agreement or any product provided under or in connection with
the agreement will be settled by one or more neutral arbitrators
on an "individual" basis (or, in the case of ASI, "independent
arbitration involving a neutral arbitrator"). (Motion to Compel
Arbitration, Exs. 4, 8, 9, 12.)
Verizon argues that the Federal Arbitration Act*fn2
compels the arbitration of plaintiffs' claims because the parties
have agreed to the mandatory arbitration of all disputes arising
out of or relating to their contractual relationship, and
plaintiffs' claims arise from or relate to products phones
provided by Verizon under or in connection with the contracts.
Plaintiffs present four arguments in response: (1) Verizon has
waived any arbitration rights it may have had; (2) the
arbitration clauses in the agreements are unconscionable and
therefore unenforceable; (3) certain of plaintiffs' claims are
inarbitrable as a matter of law; and (4) Verizon's request for a stay is
We begin with plaintiffs' argument that Verizon waived its
right to arbitrate by actively litigating the case in this court
for six months before filing the instant motion. "Courts may
refuse to enforce arbitration agreements on a number of grounds,
and federal courts have consistently held that among those
grounds is waiver of the right to arbitrate." St. Mary's Med.
Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co.,
969 F.2d 585, 587 (7th Cir. 1992). "Such a waiver can be implied as well
as express." Cabinetree of Wisconsin, Inc. v. Kraftmaid
Cabinetry, Inc., 50 F.3d 388, 390 (7th Cir. 1995). "Courts must
examine the totality of the circumstances and determine whether
based on all the circumstances, the party against whom the waiver
is to be enforced has acted inconsistently with the right to
arbitrate. Although several factors may be considered in
determining waiver, diligence or the lack thereof should weigh
heavily in the decision. . . ." Ernst & Young LLP v. Baker
O'Neal Holdings, Inc., 304 F.3d 753, 756 (7th Cir. 2002)
(quotation and citations omitted). We ask whether the party did all it could reasonably have been
expected to do to make the earliest feasible determination of
whether to proceed judicially or by arbitration. See id.
Although prejudice to the party asserting waiver is a relevant
factor for the court to consider, it is not necessary for that
party to show that it would be prejudiced were a stay to be
granted and arbitration ensue. See St. Mary's,
969 F.2d at 590; Cabinetree, 50 F.3d at 390.
Plaintiffs contend that "Verizon vigorously invoked the
judicial process in an attempt to obtain a favorable resolution
of plaintiffs' claims against it," Opposition at 2, and they
point to four instances of Verizon's participation in this forum
since Verizon was first named as a defendant in plaintiffs'
Consolidated Amended Complaint of October 15, 2004 and served
with that complaint on October 18, 2004. First, on October 19,
2004, Verizon joined in defendants' motion for partial summary
judgment (the motion that we suggested defendants file based on
the FCC's decision, using the phrase "partial summary judgment"
as shorthand for a pretrial order to the effect that the FCC's
decision regarding the 17-Second Rule would be the law of the
case). Second, on November 10, 2004, Verizon's counsel filed the
carrier defendants' motion to dismiss plaintiffs' claims against
Verizon, Sprint, and AT & T. Third, on the same date, Verizon
joined in defendants' separate motion to dismiss plaintiffs'
claims. Fourth, Verizon joined the other defendants in propounding the Second Set
of Interrogatories to plaintiffs on January 27, 2005, to which
plaintiffs responded on March 15, 2005.*fn4 In plaintiffs'
view, waiver can be inferred from these actions, taken together
with the six months that Verizon waited to file its motion to
We agree with plaintiffs that considering these circumstances,
Verizon has waived its right to arbitrate. Verizon's
characterization of its participation in this litgation as
"minimal" is incorrect. Most significant is the fact that Verizon
filed its own dispositive motion on behalf of the carrier
defendants that went to the merits of plaintiffs' entire case
against the carriers. (One of Verizon's contentions, among
others, was that the FCC's Second Report and Order applies only
to the manufacturer defendants and not to the carriers.) The
Seventh Circuit has emphasized that "[s]ubmitting a case to the
district court for decision is not consistent with a desire to
arbitrate." St. Mary's, 969 F.2d at 589.
Verizon points out that the Seventh Circuit has observed that
"a party does not waive its right to arbitrate merely by filing a
motion to dismiss," quoting Sharif v. Wellness International
Network, Ltd., 376 F.3d 720, 726 (7th Cir. 2004). Verizon, however, did more than file a single motion to dismiss: it joined
in the motion for partial summary judgment and thus tried to
obtain the benefit of the FCC's ruling as the law of the case; it
joined in the other defendants' separate motion to dismiss; and
it propounded written discovery and participated in oral argument
concerning discovery matters.
Verizon argues that this case can be distinguished from other
cases in which parties invoked their arbitration rights only
after an adverse ruling in that Verizon filed its motion to
compel arbitration before we issued our ruling on its motions on
the merits. We are unpersuaded. Verizon clearly did not do all it
could reasonably have been expected to do to make the earliest
feasible determination of whether to proceed judicially or by
arbitration. Verizon's explanation for the delay in invoking its
arbitration rights is that it was "searching its records and
weighing its options." (Reply at 5.) We have noted that Verizon
has submitted the declaration of one of its employees, who states
that all customer agreements since late 2000 contained some type
of mandatory arbitration clause. Surely this fact was well-known
to Verizon at the time it was served with plaintiffs' complaint.
Verizon did not have to do a "records search" to discover its
right to arbitrate. And as for "weighing its options," the
Seventh Circuit has noted that this is the "worst possible reason
for delay." Cabinetree, 50 F.3d at 391. "It amounts to saying
that [a party] wanted to see how the case was going in federal district
court before deciding whether it would better off there or in
arbitration. It wanted to play heads I win, tails you lose."
It is doubtful that plaintiffs would be greatly prejudiced by a
forum change, but that does not alter our conclusion. Prior to
filing its motion to compel arbitration, Verizon extensively
participated in this litigation, and it failed to act diligently
to make the earliest possible determination of whether to proceed
in this forum or by arbitration. Therefore, Verizon waived its
right to arbitrate.
In view of our ruling, it is unnecessary to address the
remainder of plaintiffs' arguments in response to Verizon's
For the foregoing reasons, the motion of Cellco Partnership
d/b/a Verizon Wireless to compel arbitration and to stay these
proceedings is denied.
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