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In re Cox Enterprises, Inc.Set-Top Cable Television Box Antitrust Litigation

United States Court of Appeals, Tenth Circuit

August 26, 2016

In re: COX ENTERPRISES, INC. SET-TOP CABLE TELEVISION BOX ANTITRUST LITIGATION
v.
COX COMMUNICATIONS, INC., Defendant-Appellee. ANDREW ALWERT, Plaintiff - Appellant In re: COX ENTERPRISES, INC. SET-TOP CABLE TELEVISION BOX ANTITRUST LITIGATION, STANLEY FELDMAN, Plaintiff - Appellant,
v.
COX COMMUNICATIONS, INC., Defendant-Appellee.

         Appeal from the United States District Court for the Western District of Oklahoma (D.C. No. 5:12-ML-02048-C)

          Todd Schneider, Schneider Wallace Cottrell Konecky Wotkyns, L.L.P., San Francisco, California (Rachel Lawrence Mor, P.C., Oklahoma City, Oklahoma, Michael J. Blaschke, Michael J. Blaschke, P.C., Oklahoma City, Oklahoma, Allan Kanner and Cynthia St. Amant, Kanner & Whiteley, L.L.C., New Orleans, Louisiana, Jason Kim, Schneider Wallace Cottrell Konecky Wotkyns, L.L.P., San Francisco, California, Garrett W. Wotkyns, Schneider Wallace Cottrell Konecky Wotkyns, L.L.C., Scottsdale, Arizona, Joe R. Whatley, Jr., Whatley Kallas, LLP, New York, New York, Gregory P. Dileo, Gregory P. Dileo, APLC, New Orleans, Louisiana, Jeffrey P. Berniard, Berniard Law Firm, New Orleans, Louisiana, Joseph C. Peiffer, Peiffer Rosca Abdullah Carr & Kane, LLP, New Orleans, Louisiana, and John Dean Curtis, II, Burch & Cracchiolo PA, Phoenix, Arizona, with him on the briefs) for Plaintiffs-Appellants.

          Alfred C. Pfeiffer, Jr., Latham & Watkins, LLP, San Francisco, California (Robert G. Kidwell, Mintz Levin Cohn Ferris Glovsky & Popeo, P.C., Washington, D.C., D. Kent Meyers, Crowe & Dunlevy, P.C., Oklahoma City, Oklahoma, Margaret M. Zwisler and Jennifer L. Giordano, Latham & Watkins, LLP, Washington, D.C., with him on the brief), for Defendant-Appellee.

          Before HARTZ, PHILLIPS, and MORITZ, Circuit Judges.

          HARTZ, Circuit Judge.

         Andrew Alwert and Stanley Feldman (Plaintiffs) brought putative class actions against Cox Communications, Inc. (Cox) claiming that it violated antitrust law by tying its premium cable service to rental of a set-top box. The district court granted Cox's motions to compel arbitration. It then certified the orders compelling arbitration for interlocutory appeal under 28 U.S.C. § 1292(b), and we granted Plaintiffs permission to appeal. They argue that the arbitration order is improper because (1) the dispute is not within the scope of the arbitration agreement, (2) Cox waived its right to invoke arbitration, and (3) Cox's promise to arbitrate was illusory, so the arbitration agreement is unenforceable. Exercising jurisdiction under 28 U.S.C. § 1292(b), we affirm. We hold that the arbitration clause in Plaintiffs' subscriber agreements with Cox covers the present litigation and that Cox did not waive its right to arbitration. We do not resolve Plaintiffs' argument that Cox's promises were illusory because the argument amounts to a challenge to the contract as a whole, which is a question to be decided in arbitration.

         I. BACKGROUND

         A. The Arbitration Agreement

         Plaintiffs are Cox premium-cable subscribers who pay a monthly rental fee for the accompanying set-top box. They also subscribe to Cox's high-speed Internet service and have the identical Internet-subscriber agreement. Language in the second paragraph of the Introduction to the agreement gives Cox the right to modify it as it chooses: "Cox reserves the right to modify the terms of this Agreement and prices for the Service . . . . Cox may discontinue or revise any or all other aspects of the Service, including features or enhancements, in its sole discretion at any time by posting changes online." Joint App., Vol. II at 179 (Alwert), 255 (Feldman). On November 18, 2011, Cox modified the agreements to add new dispute-resolution provisions that included an arbitration clause covering all Cox goods and services (not just Internet services). The clause states:

YOU AND COX AGREE TO ARBITRATE - RATHER THAN LITIGATE IN COURT - any and all claims or disputes between us (including any parents, subsidiaries, affiliates, officers, directors, employees, or agents of Cox) that arise out of or in any way relate to: (1) this Agreement; (2) services that Cox provides to you in connection with this Agreement; (3) products that Cox makes available to you; (4) bills that Cox sends to you or amounts that Cox charges you for services or goods provided under this Agreement; and (5) any services or goods that Cox or any of its affiliated entities provide to you under any other agreement . . . .

Id. at 186 (Alwert), 262 (Feldman). The new language also includes a provision allowing a subscriber to opt out of the arbitration clause by sending notice to Cox within 30 days of receipt.[1] And it includes a class-action waiver and a choice-of-law provision stating: "This Agreement is governed by the laws of the state in which your billing address in our records is located, and applicable federal law." Id. at 186-87 (Alwert), 262-63 (Feldman). Because Cox did not mail notice of the modified agreement to Plaintiffs until March (Feldman) and April (Alwert) of 2012, Cox contends that the agreements did not take effect until April and May 2012. Plaintiffs make no argument disputing this analysis, so we adopt it. See Gen. Motors Corp. v. Urban Gorilla, LLC, 500 F.3d 1222, 1227 (10th Cir. 2007).

         B. District Court Proceedings

         In 2009 Cox subscribers in several jurisdictions filed putative class-action suits against Cox alleging illegal tying of its premium-cable service to rental of a set-top box. See Gelder v. Coxcom Inc., 696 F.3d 966, 968 (10th Cir. 2012) (per curiam). Neither Plaintiff was a named party. These cases were consolidated and transferred to the United States District Court for the Western District of Oklahoma. See id. The subscribers sought to certify a national class. See id. But on December 28, 2011, the district court denied the request, see id.; and on August 8, 2012, we denied the subscribers' petition under Fed.R.Civ.P. 23(f) for permission to appeal the denial, see id. at 967-68.

         Subscribers then filed putative class-action suits for several geographic regions. See In re Cox Enterprises, Inc. Set-top Cable Television Box Antitrust Litig., 790 F.3d 1112, 1115 (10th Cir. 2015). Alwert filed his complaint on behalf of Cox subscribers in its New Orleans market on September 27, 2012; and Feldman filed his complaint on behalf of Cox subscribers in its Arizona market on October 15, 2012. The various regional actions were again consolidated and transferred to the Western District of Oklahoma. See id. The parties then agreed to stay all the cases except the one brought on behalf of Cox subscribers in its Oklahoma City market (the Healy litigation), which was to be litigated as a bellwether on the merits of the claims. See id. After the district court granted class certification in that case, Cox moved to compel arbitration. See id. The court denied the motion. Cox appealed and we affirmed. On August 11, 2014, while that appeal was pending, the district court lifted the stay on the cases before us. Cox answered both complaints on September 25. Eighteen days later, Plaintiffs submitted interrogatories and requests for production of documents. Three days later, on October 16, Cox, which had not sought discovery, moved to compel arbitration in both cases.

         The district court granted the motions. It held that the arbitration clauses covered the present litigation, that Cox had not waived arbitration, and that the arbitration clauses were supported by consideration, not illusory promises by Cox.

         II. DISCUSSION

         A. Scope of Arbitration Agreement

         "[T]he first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985); see also AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986) ("Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.") Plaintiffs contend that their dispute with Cox concerning rental of cable-service set-top boxes does not come within the provision in the Internet-subscriber agreement to arbitrate "any and all claims or disputes between us . . . that arise out of or in any way relate to . . . (5) any services or goods that Cox or any of its affiliated entities provide to you under any other agreement." Because the district court's interpretation of the arbitration agreement's scope was founded on "an analysis of the [contractual] language . . . rather than upon the credibility of extrinsic evidence, " our review of its decision is de novo. Milk 'N' More, Inc. v. Beavert, 963 F.2d 1342, 1345 (10th Cir. 1992) (internal quotation marks omitted); see also O'Connor v. R.F. Lafferty & Co., 965 F.2d 893, 901 (10th Cir. 1992).

         We begin with a strong presumption that the dispute is arbitrable. This presumption is not based on contract law but on the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. (1925), which creates the "federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). The FAA provides that arbitration agreements "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. The Supreme Court has described this section as "a congressional declaration of a liberal federal policy favoring arbitration agreements." Moses H. Cone, 460 U.S. at 24. In particular, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Id. at 24-25; see United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582- 83 (1960) ("An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage."). "Thus, as with any other contract, the parties' intentions control, but those intentions are generously construed as to issues of arbitrability." Mitsubishi Motors, 473 U.S. at 626. "In the absence of any express provision excluding a particular grievance from arbitration, . . . only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail . . . ." Warrior & Gulf, 363 U.S. at 584-85 (emphasis added).

         This court has already construed language in a contract governed by the FAA that is indistinguishable in the relevant respects from language in the agreement before us. In Zink v. Merrill Lynch Pierce Fenner & Smith, Inc., 13 F.3d 330 (10th Cir. 1993), the plaintiff had purchased securities through the defendant 18 months before entering into an agreement providing that "any controversy between us arising out of your business or this agreement shall be submitted to arbitration." Id. at 331 (emphasis added). When the plaintiff filed a lawsuit in connection with his original securities purchase, the defendant moved to compel arbitration. See id. The district court found that the arbitration clause covered the dispute, and we affirmed. See id. at 332. Noting the presumption in favor of arbitration (though we also said that the arbitration language was "susceptible of only one reasonable interpretation"), we held that the agreement was "clearly broad enough to cover the dispute at issue despite the fact that the dealings giving rise to the dispute occurred prior to the execution of the agreement." Id. We rejected the argument that the agreement to arbitrate "must pre-date the actions giving rise to the dispute" as "contrary to contract principles which govern arbitration agreements." Id. The clause here is even broader because it covers disputes that "arise out of or in any way relate to" any Cox goods or services. Joint App., Vol. II at 186 (Alwert), 262 (Feldman) (emphasis added). Following Zink, we hold that the language of the arbitration agreement encompassed Plaintiffs' antitrust claim even though it arises out of events that predated the agreement. We interpret the arbitration agreement to require that for any dispute between Cox and a customer, each must henceforth seek resolution of the dispute through arbitration rather than filing suit.

         The authority relied on by Plaintiffs does not persuade us to the contrary. In Russell v. Citigroup, Inc., 748 F.3d 677 (6th Cir. 2014) the court held that an arbitration agreement did not apply to litigation between the employee and employer that had commenced before the agreement was executed. The agreement covered "employment-related disputes . . . which . . . arise between" the employer and employee. In part the court based its conclusion on the language of the agreement. It said that "[t]he use of the present-tense 'arise' rather than the past-tense 'arose' or present-perfect 'have arisen, ' suggests that the contract governs only disputes that begin-that arise-in the present or future. The present tense usually does not refer to the past." Id. at 679. This analysis has some force. But it cannot overcome our Zink precedent. What Russell says about arise could also be said about the word arising in Zink (Russell distinguished have arisen, not arising, from the word arise) and we said in Zink that the "only . . . reasonable interpretation" of the arising language was that it applied to a dispute predating the arbitration agreement. In any event, the agreement in Russell did not include the language "or in any way relate to" that appears in the agreement here. And the word relate does not have the same temporal connotation as arise; we can say that something arises at a particular point in time; but relate is broader and includes a relationship in subject matter that is independent of time.

         There was, however, extrinsic evidence in Russell that could well be the sort of "forceful evidence" of the parties' intent that can overcome the presumption in favor of arbitrability: The plaintiff employee had already sued the defendant employer when he signed the arbitration agreement. See id. at 679. There was no evidence that either the plaintiff or the defendant had consulted with an attorney from that litigation before executing the arbitration agreement. See id. at 680. The circuit court, in our view quite reasonably, thought that this failure by either party would be highly unlikely if they understood the agreement to cover the dispute being litigated. See id.

         Plaintiffs argue that Russell is persuasive here because they were prospective plaintiffs in the putative national class action that had been filed before their arbitration agreements became effective. Although the district court had rejected class certification in December 2011, it was not until August 8, 2012 (after the effective dates of the arbitration agreements) that this court refused to consider an appeal from that denial. See Gelder, 696 F.3d at 966-68. Thus, Plaintiffs still had a chance to become plaintiffs in that lawsuit when they became bound by the arbitration clause. But prospective plaintiffs-that is, unnamed members of a putative class-are not parties to class litigation. See Smith v. Bayer Corp., 131 S.Ct. 2368, 2379-80 (2011) (unnamed member of putative class was not a "party" to proceeding in which court denied class certification, and unnamed member is not precluded by any judgment in that litigation). And the great weight of authority, some of which we set out in a footnote, is that the attorneys in the putative class action do not represent them as class counsel. [2] Plaintiffs have cited nothing suggesting that the law of Louisiana or Arizona is otherwise.

         Our case is therefore quite unlike Russell. In Russell the parties to the arbitration agreement were a single employee and a single employer who were already actively engaged in litigation when the arbitration agreement was executed. The Russell court, exercising common sense, could infer that the parties would surely have consulted their attorneys if they thought the arbitration agreement could possibly cover that litigation. No similar inference regarding Plaintiffs is possible here. Plaintiffs had no counsel with whom to confer; nor is there even any evidence that they thought they might have an antitrust claim against Cox when the arbitration agreement went into effect. We see no basis for an inference that Plaintiffs must have believed that the arbitration agreement did not encompass a dispute over set-top boxes because otherwise they would have consulted counsel. (Nor is there any reason to believe ...


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