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Monday, October 8, 2012

Phillips v. Sprint: Court of Appeal Affirms Individual Arbitration on Renewed Motion After Concepcion

A recurring issue over the last year or so has been whether defendants can bring or renew motions to compel arbitration in the wake of the Supreme Court's decision in AT&T Mobility LLC v. Concepcion (discussed here). 

In Phillips v. Sprint PCS (9/26/12), a putative consumer class action, the trial court denied Sprint's motion to compel individual arbitration in 2006.  Sprint renewed its motion in June, 2011, just two months after Concepcion.  The trial court granted the motion, compelling individual arbitration.  The plaintiffs appealed, and the Court of Appeal affirmed.  

First, the Court held that the order compelling individual arbitration was not appealable, but exercised its discretion to consider the appeal as a writ.  Slip op. at 5-7.  The Court held that the death knell doctrine did not apply because the trial court did not rule on Sprint's request to dismiss the class claims before the plaintiff filed his appeal.  Slip op. at 6-7.  Regardless, the Court held that "the unusual circumstances of this case warrant immediate review."  Slip op. at 7.  

Second, the Court held that the trial court did not abuse its discretion in allowing Sprint to renew its motion to compel after Concepcion.  Slip op. at 7-9.  The trial court relied at least in part on its observation that, "despite the great age of this case, plaintiff has done little to advance it to trial."  Slip op. at 9.  

Third, the Court held that the prior order denying the motion to compel was not res judicata.  Slip op. at 9-13.  The Court agreed with Sprint that "the arbitrability issue was raised and renewed by motion in a single ongoing class action lawsuit, making res judicata principles inapplicable because there is no prior judgment."  Slip op. at 10.  

Fourth, the Court held that Sprint did not waive its right to compel arbitration by not appealing the denial of its original motion to compel arbitration.  Slip op. at 13-14.  The Court held that any such appeal would have been futile in the face of Discover Bank.  Ibid.  

Finally, the Court affirmed that trial court's ruling that the arbitrator should decide whether the contract as a whole, rather than just its class action waiver clause, was unconscionable and unenforceable.  Slip op. at 14-15.  The plaintiff challenged provisions -- a shortened statute of limitations and a limitation on damages -- that lay outside the arbitration clause and that presumably would apply whether the matter proceeded in arbitration or in court.  Ibid.  "[A] challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator." Ibid., citing Buckeye Check Cashing, Inc. v. Cardegna (2006) 546 U.S. 440, 449. "The basis of the challenge must be 'directed specifically to the agreement to arbitrate before the court will intervene.'" Ibid., citing Rent-A-Center, West, Inc. v. Jackson (2010) ___ U.S. ___ (discussed here). 

The opinion is available here

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