For nearly a century, federal law has favored arbitration where the parties agree to it. This rule typically extends to a “nonsignatory” who does not sign the contract but who seeks the benefit of the contractual bargain. However, a recent decision from the United States District Court for the District of Hawaii continues a troubling trend excluding certain TCPA cases from that general rule.
In Ioane v. MS BPO, LLC, No. 20-0004- JAO-WRP, 2020 U.S. Dist. LEXIS 161990 (D. Hawaii Sept. 4, 2020), the plaintiff asserted TCPA claims against a debt collector for “sending him various text messages in connection with a debt he allegedly owed.” The debt collector moved to compel arbitration because the debt related to the plaintiff’s past-due account with Verizon. And the plaintiff’s agreement with Verizon included an arbitration clause, requiring the parties to arbitrate any dispute about the agreement. The plaintiff argued that his agreement to arbitrate with Verizon did not apply to his TCPA claim against the debt collector because the debt collector was not a party to the Verizon agreement.
The Court agreed, holding that the TCPA claim against the nonsignatory debt collector “did not rely on an agreement with his cellphone provider.” The Court reasoned that because “express consent” is not an element of plaintiff’s claim but instead an affirmative defense, the plaintiff’s TCPA claim “did not rely on an agreement with his cellphone provider.” The Court cited Ninth and Seventh circuit decisions reaching a similar result. The Court explained further that Hawaii law allows a “nonsignatory [to] compel arbitration under a theory of equitable estoppel because plaintiff’s claims rely on the terms of the agreement,” but distinguished the plaintiff’s TCPA claim as “not relying” on the Verizon agreement.
This decision reflects hostility towards compelling arbitration in the TCPA context, and thus should serve as a warning for companies seeking to utilize arbitration for dispute resolution. Namely, the careful drafter should understand controlling state law that might govern enforcement–particularly as it relates to third parties. Notably, some courts have reached the opposite conclusion on similar facts, and so this is also an issue that litigants should carefully frame for the best shot at compelling arbitration. See Bailey v. Diversified Consultants, Inc., 2020 U.S. Dist. LEXIS 37276 (N.D. Ala. 2020) (compelling arbitration for a nonsignatory against a Verizon customer).
The bottom line: The plaintiff here successfully avoided arbitration by claiming that debt collection texts based on his failure to pay under his cell phone contract did not “rely on” that cell phone contract. Any party hoping to compel arbitration with a different party’s agreement to arbitrate should take note.