RICHARD J. HOLWELL, District Judge:
Before the Court is a motion, pursuant to sections 3 and 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 et seq., by plaintiffs Kristen Schatz ("Schatz") and Patrick Witty ("Witty," and, together, the "plaintiffs") to compel defendant Cellco Partnership d/b/a Verizon Wireless ("Verizon") to arbitrate. The plaintiffs ask the Court (1) to order Verizon to arbitrate a claim, pursuant to the New Jersey Consumer Fraud Act, N.J.S.A. §§ 56:8-1 et seq., or, alternatively, the New York General Business Law § 349, for "general injunctive relief benefitting all Verizon customers currently being charged $99.99 per month for Verizon's Nationwide Unlimited Plan ("NUP"), and (2) to declare invalid a provision in the parties' arbitration agreement that purports to limit the arbitrators' power to award such relief. Since the Court already has referred all claims in this action to arbitration, and since the question of the availability of "general injunctive relief must be left to the arbitrators in the first instance, the plaintiffs' motion is denied without prejudice to plaintiffs' right to move to vacate any future arbitration award.
Plaintiff Schatz was a customer of Verizon. (Amended Complaint ("AC") ¶ 27.) Pursuant to a two-year contract with Verizon, Schatz obtained cell-phone service from Verizon under its Nationwide Unlimited Plan ("NUP"). (Id.) Schatz paid $99.99 per month for this service. (Id.) On January 18, 2010, Verizon lowered the price of its NUP from $99.99 per month to $69.99 per month. (Id. ¶ 30.) Verizon, however, did not notify Schatz of this change and did not reduce her monthly payments. (See id. ¶¶ 30-31.) In April 2010, when Schatz learned of Verizon's decision to reduce the price of the NUP, she called Verizon and requested that she be charged the lower amount. (Id. ¶ 31.) Verizon agreed without objection, but refused to refund Schatz the excess she had paid between the time Verizon enacted the price decrease and the time Schatz requested it. (Id.) Schatz alleges that Verizon's conduct amounts to a breach of its obligations under a Customer Agreement to which Schatz agreed as part of her contract with Verizon. (See id. ¶ 36.)
In July 2010, Schatz filed this putative class action "on behalf of all Verizon wireless telephone customers with the individual Nationwide Unlimited Plan (`NUP') as of January 18, 2010 who were charged amounts in excess of the $69.99 monthly price that became effective for the NUP on January 18, 2010." (Id. ¶ 19.) The plaintiffs sought relief on behalf of the class to require, among other things, "Verizon to specifically perform its Customer Agreement with all customers entitled to but not yet being charged the $69.99 price for their NUP." (Id., "Prayer for Relief ¶ D.) On November 1, 2010, Verizon moved to compel arbitration of Schatz's individual claim based on an arbitration provision in the Customer Agreement that provides,
(Customer Agreement 12-13.
The plaintiffs originally opposed Verizon's motion on the ground that the provision barring class arbitration (the "class waiver") was unenforceable. Then, on April 27, 2011, the Supreme Court decided AT & T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), and held that a California state-law rule that rendered class waivers unenforceable under California's law of unconscionability was preempted by the FAA. Id. at 1753. This Court then directed the parties to address the effect of Concepcion on Verizon's motion to compel arbitration. In a letter dated May 11, 2011, the plaintiffs informed the Court that they "have determined not to challenge the applicability to Verizon's motion to compel arbitration of the majority's holding in Concepcion -that states are preempted under the [FAA] from holding class action waivers in arbitration agreements to be unconscionable and unenforceable." (Letter from William
Section 2 of the FAA makes agreements to arbitrate "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. Section 2 reflects the liberal federal policy favoring arbitration. Concepcion, 131 S.Ct. at 1745 (quoting Moses H. Cone Meml. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). This policy extends to agreements to arbitrate certain statutory claims. See, e.g., 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 129 S.Ct. 1456, 1474, 173 L.Ed.2d 398 (2009); Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). However, "[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral forum." Preston v. Ferrer, 552 U.S. 346, 359, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). Thus, where the parties have agreed to arbitrate statutory claims, and where Congress has not manifested an intent that such claims should not be arbitrated, the agreement will be enforced, "so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum." Mitsubishi, 473 U.S. at 637, 105 S.Ct. 3346.
The Supreme Court, in Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), addressed an argument that an arbitration agreement would interfere with the plaintiff's ability to vindicate her rights under the federal Truth in Lending Act ("TILA") because the arbitration agreement was silent on the issue of attorneys fees and costs. The plaintiff argued that the agreements silence on the issue could render arbitration prohibitively expensive and thus deprive her of the ability to assert her statutory claim. The Supreme Court rejected this argument. It stated that "where, as here, a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs." Id. at 92, 121 S.Ct. 513. For the plaintiff in Randolph, "[t]he `risk' that [she would] be saddled with prohibitive costs [was] too speculative to justify the invalidation of an arbitration agreement." Id. at 91, 121 S.Ct. 513.
In PacifiCare Health Systems, Inc. v. Book, 538 U.S. 401, 123 S.Ct. 1531, 155 L.Ed.2d 578 (2003), the Supreme Court considered an argument that a claim under
The Court of Appeals for the District of Columbia Circuit has taken from these cases two propositions:
Booker v. Robert Half Intl., Inc., 413 F.3d 77, 81 (D.C.Cir.2005) (emphasis in original).
In addition, the Second Circuit Court of Appeals recently has applied these principles, in the context of an antitrust action, to hold that if a plaintiff can "adequately demonstrate[]" that the provisions of an arbitration agreement "would effectively preclude any action seeking to vindicate the statutory rights asserted by the plaintiff[]," the arbitration agreement may be unenforceable. See In re Am. Express Merchants' Litig., 554 F.3d 300, 304 (2d Cir.2009) ("Am. Express I") (finding a class waiver in an arbitration agreement unenforceable where the plaintiffs made a "substantial demonstration" that "they would incur prohibitive costs if compelled to arbitrate under the class action waiver," such that "an inability to pursue arbitration on a class basis would be tantamount to an inability to assert their claims at all"), vacated sub nom. Am. Express Co. v. Italian Colors Rest., ___ U.S. ___, 130 S.Ct. 2401, 176 L.Ed.2d 920 (2010), reaff'd, 634 F.3d 187 (2d Cir.2011) ("Am. Express II").
In arbitration, the plaintiffs wish to seek what they call "general injunctive relief" under either the New York or New Jersey consumer-protection statute. This means the plaintiffs wish to obtain an injunction requiring Verizon to lower the monthly price of its NUP for all customers who still are being charged the higher rate of $99.99 per month. In addition, if the plaintiffs amended complaint is any indication, in arbitration they also will seek compensatory damages, punitive damages, a declaration that Verizons conduct violates the consumer protection statutes and the Customer Agreement, and attorneys fees.
The underlying relief plaintiffs seek in this motion is an order declaring unenforceable the second sentence of section 3 of the arbitration agreement — which limits the relief an arbitrator may award to "money or injunctive relief only in favor of the individual party and only to the extent necessary to provide relief warranted by that party's individual claim" (Customer Agreement at 13) — on the ground that it prevents plaintiffs from vindicating their asserted statutory rights under the applicable consumer-protection statute.
"In analyzing a given vindication of statutory rights claim, [the Court] must first decide who the proper decision maker is for such a claim: an arbitrator or a court." Kristian v. Comcast Corp., 446 F.3d 25, 37 (1st Cir.2006).
In Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002), the Supreme Court reiterated that "question[s] of arbitrability" are presumptively for the court, not the arbitrator, unless the parties have "clearly and unmistakably" agreed otherwise. Id. at 83, 123 S.Ct. 588. The Court in Howsam recognized two categories of disputes that constitute clear questions of arbitrability. The first category includes "dispute[s] about whether the parties are bound by a given arbitration clause." Id. at 84, 123 S.Ct. 588. The second category encompasses "disagreement[s] about whether an arbitration clause in a concededly binding contract applies to a particular type of controversy." Id. These "question[s] of arbitrability" are left to the court because they refer to
Id. at 83-84, 123 S.Ct. 588.
The parties here agree that this dispute does not fall into Howsam's first category of "question[s] of arbitrability" — whether the parties are bound by a given arbitration clause. Both parties agree that they are bound, in the sense that the Customer Agreement, which includes the arbitration agreement, "establishes a valid contractual
As relevant to this motion, that dispute involves two questions: (1) whether Verizon has committed a deceptive business practice in violation of the applicable consumer-protection statute by failing to lower the price of the NUP for existing customers, and (2) if so, whether plaintiffs, proceeding on an individual basis, may obtain in arbitration an award requiring Verizon to lower the price to all customers still being charged the higher rate. Plaintiffs contend that these two issues together constitute the "claim," and that the Court must decide whether it falls within or outside the scope of the parties arbitration agreement. In other words, plaintiffs characterize the issue as whether their claim for "general injunctive relief" falls within the scope of the arbitration clause. On the merits of that issue, plaintiffs contend that their "general injunctive relief" claim falls outside the scope of the arbitration agreement because while the arbitration agreement provides that "any dispute that results from this agreement or from Services you receive from us ... will be resolved by one or more neutral arbitrators," it also limits the relief an arbitrator may award to "money or injunctive relief only in favor of the individual party seeking relief and only to the extent necessary to provide relief warranted by that party's individual claim."
Verizon, on the other hand, contends that the only "question[] of arbitrability" for the Court to decide is whether the first issue — i.e. whether Verizon violated the consumer-protection statute — falls within the scope of the arbitration agreement. The second issue — i.e. the availability of general injunctive relief — says Verizon, should be left to the arbitrators to decide in the event plaintiffs prevail on the first issue. With regard to the first issue, both parties agree that a consumer protection claim falls within the scope of the arbitration agreement in the sense that the arbitration agreement is broad enough to encompass claims for alleged violations of the consumer-protection statutes.
Plaintiffs seek support for their position in a recent line of cases arising out of the proposed merger between AT & T Mobility (AT & TM) and T-Mobile USA, Inc. See AT & T Mobility LLC v. Fisher, 11
E.g., id. at *3. AT & TM's arbitration agreement also provides, "AT & T and you agree to arbitrate all disputes and claims between us. This agreement is intended to be broadly interpreted." Id.
In the AT & TM cases, the parties purported to agree that the issue of the scope of the arbitration agreement was a question for the courts to decide.
A third court took a different view. The U.S. District Court for the Eastern District
Id. The court in Smith went on to find that the customers' claims nonetheless fell outside the scope of the arbitration clause because they amounted, in substance, to claims brought in a "class or representative proceeding." Id. at *6-7. The court in Smith, as well as the other AT & TM courts, found that the consumers' arbitrations bore "all the hallmarks of `class arbitration' laid out in Concepcion." Id. at *7; see Bushman, 2011 WL 5924666, at *2; Bernardi, 2011 WL 5079549, at *4. First, each consumer represented "but one of over 1,000 people who, represented by the same firm, filed essentially identical arbitration demands, all seeking the same, non-individualized relief." Smith, 2011 WL 5924460, at *6. Second, "the multiple, functionally identical arbitrations ... would likely result in `procedural morass,' not `final judgment,'" and so would "sacrifice the principal advantage of arbitration — its informality." Id. (quoting Concepcion, 131 S.Ct. at 1751). Third, the consumers' arbitrations may not have provided adequate protection to absent third parties, such as T-Mobile, cellular technology companies, public interest groups, and "the numerous government bodies that are also evaluating the merger." Id. Finally, the arbitrations implicated the concern that arbitration is poorly suited to the "higher stakes of class litigation." Id. at *7 ("The immense magnitude of the risk, i.e., the fate of a $39 billion merger, may pressure AT & TM to settle claims that it believes to be meritless."). The consumers' arbitration demands thus implicated the precise concerns about class arbitration that at least in part animated the Concepcion decision. This led all of the AT & TM courts to conclude that the consumers were seeking to arbitrate on a "class or representative" basis and that AT & TM therefore was "likely to succeed on the merits" of its claim that the customers' arbitration demands fell outside the scope of the arbitration clause. Id. at *5-7; see Bushman, 2011 WL 5924666, at *2-3; Gonnello, 2011 WL 4716617, at *4; Bernardi, 2011 WL 5079549, at *4; Fisher, 2011 WL 5169349, at *7.
The situation here is in some ways similar. Most significantly, like the consumers in the AT & TM cases, the plaintiffs here seek broad injunctive relief under a statute, and the arbitration agreement purports to prohibit the arbitrator
In addition, unlike the consumers arbitrations in the AT & TM cases, plaintiffs claims do not fall outside the scope of the arbitration clause as de facto "class arbitrations." To be sure, plaintiffs seek general injunctive relief on behalf of other Verizon customers, but their claim for such relief does not "bear[] all the hallmarks of `class arbitration' laid out in Concepcion," Smith, 2011 WL 5924460, at *7. First, there is no indication that plaintiffs plan to file multiple, identical arbitrations. Thus, there is little reason to believe that the plaintiffs' claims will result in "`procedural morass,' not `final judgment,'" id. (quoting Concepcion, 131 S.Ct. at 1751). Second, absent parties are unlikely to be inadequately protected. The only absent parties that potentially would be affected by plaintiffs' claim for general injunctive relief are existing Verizon customers still being charged the higher monthly rate for the NUP, and their interests with respect to the "general injunctive relief" claim are straightforward and directly in line with the plaintiffs' interests. Compare id. at *6 (noting that in an individual arbitration to enjoin the AT & TM merger, T-Mobile, cellular technology consumers, public interest groups, and government bodies that both oppose and support the merger would lack protection). Moreover, as the complaint indicates, Verizon willingly lowers the price of the NUP upon a customer's request. Thus, even an adverse decision on plaintiffs' "general injunctive relief" claim would not appear to preclude the absent customers' from obtaining the lower price on the NUP.
Accordingly, the question of whether a particular form of relief is available under the parties' arbitration agreement is not, under these circumstances, a question of whether a particular dispute falls within the scope of the parties' arbitration agreement. Thus, the plaintiffs' motion does not present one of Howsam's "clear questions of arbitrability" for the Court to decide. See Kristian, 446 F.3d at 42 (where plaintiffs claimed that an arbitration agreement prevented them from vindicating their statutory rights (by, for example, prohibiting punitive damages), plaintiffs' argument did not involve the question of whether their claims fell within the scope of the arbitration provision, but rather the question of whether "arbitration subject to the provisions at issue shields [the defendant] from antitrust liability, and hence conflicts with the statutes providing for such liability"); see also Am. Express I, 554 F.3d at 309 (vindication-of-statutory-rights claim did not involve question of whether arbitration agreement was broad enough to cover plaintiffs antitrust claims).
This does not mean, however, that the plaintiffs' motion necessarily fails to raise a question of arbitrability at all. Indeed, where a plaintiff contends that an arbitration provision prohibits him or her from vindicating statutory rights, the plaintiffs' argument may raise a question of arbitrability for a court to decide, even if the question does not fall into one of Howsam's "clear questions of arbitrability." Kristian, 446 F.3d at 42. For example, in Randolph, the Supreme Court "assume[d] that the issue of arbitration costs raises a question of arbitrability." Kristian, 446 F.3d at 51; accord Am. Express II, 634 F.3d at 197.
The Supreme Court's decision in PacifiCare is particularly relevant here. In PacifiCare, the Supreme Court declined to decide in the first instance whether an arbitration provision that prohibited punitive damages was unenforceable on the ground that it prevented a plaintiff from obtaining statutorily authorized treble damages. PacifiCare, 538 U.S. at 407, 123 S.Ct. 1531. The Court found ambiguity in the issue of whether the agreements prohibition on punitive damages in fact prohibited
"Implicit in the PacifiCare analysis is the proposition that if the remedies limitation in the arbitration agreement posed a clear conflict with the remedies available in the RICO statute, that clear conflict would pose a question of arbitrability." Kristian, 446 F.3d at 46 (emphasis added). In Kristian, the Court of Appeals for the First Circuit found such a clear conflict. There, the parties arbitration agreement explicitly prohibited treble damages,
With respect to the right to treble damages under the federal antitrust laws, the court found the right unwaivable. The court noted,
Id. at 47 (quoting Mitsubishi, 473 U.S. at 637 n. 19, 105 S.Ct. 3346). Accordingly, the First Circuit found the question of whether the ban on treble damages rendered the arbitration agreement unenforceable to be a question of arbitrability for the court to decide. Id.
With respect to the state antitrust claims (which were brought by different plaintiffs in a separate complaint), the First Circuit found ambiguity on the waiver issue, and, relying on PacifiCare, left the question of enforceability to the arbitrators in the first instance. See id. at 50. The court read a case from the Supreme Judicial Court of Massachusetts as "hinting that waiver of statutory remedies will not be allowed in situations involving a consumer plaintiff and/or antitrust claims." Id. And because the plaintiffs in Kristian were consumers asserting antitrust claims, the First Circuit found the waiver issue "ambiguous at best." Id. Accordingly, "Plaintiffs' vindication of statutory rights claim, based on the conflict between the arbitration agreements and Massachusetts antitrust law, does not raise a question of
The Kristian court's application of PacifiCare is persuasive, and the Court is aware of no Second Circuit decision that similarly addresses the analysis to be undertaken when a plaintiff challenges the validity of a remedial limitation contained in an arbitration agreement.
The private right of action under New York General Business Law § 349(h) provides:
N.Y. Gen. Bus. Law § 349(h). Similarly, the private right of action under the New Jersey Consumer Fraud Act provides:
N.J. Stat. Ann. § 56:8-19.
Plaintiffs concede that their arbitrations may not proceed on a class basis. Nonetheless, plaintiffs contend that under these statutes an individual may obtain injunctive relief effectively on behalf of others, even if a class device is not used. Verizon, on the other hand, argues that a class proceeding is necessary to obtain the relief that the plaintiffs desire.
The starting point for this analysis is the language of the statutes. The New York consumer-protection statute provides, "In addition to the right of action granted to the attorney general pursuant to this section, any person who has been injured by reason of any violation of this section may bring an action in his own name to enjoin such unlawful act or practice." N.Y. Gen. Bus. Law § 349(h). The right of action granted to the attorney general similarly provides, "[The attorney general] may bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices." Id. 349(b). On one hand, the language contained in the attorney generals right of action ("in the name and on behalf of the people") provides at least some suggestion that the injunctive relief the attorney general may obtain is broader than the injunctive relief available to an individual suing "in his own name" (and not "on behalf of" anybody). The language also may suggest that in order for an individual suing in his own name to obtain the same scope of injunctive relief as the attorney general, the individual must act "on behalf of others, which plaintiffs here acknowledge they cannot do (at least in terms of proceeding as a class).
On the other hand, both the attorney generals right of action and the private right of action permit the plaintiff "to enjoin such unlawful act[s] or practice[s]." Nothing in the private right of action purports to limit the scope of injunctive relief an individual suing "in his own name" may obtain, as long as the individual "has been injured by reason of any violation of this section." In addition, the language at the beginning of the private right of action ("In addition to the right of action granted to the attorney general") suggests some level of equivalence between the scope of injunctive relief obtainable by an individual suing in his own name and that obtainable by the attorney general on behalf of the
Verizon contends that plaintiffs' position is meritless because all of the cases plaintiffs cite for the proposition that an individual may obtain "general injunctive relief" are either class actions or suits by individual parties seeking relief that benefits only themselves. See Weinberg v. Sprint Corp., 173 N.J. 233, 801 A.2d 281, 291 (2002) (class action); Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 623 N.Y.S.2d 529, 647 N.E.2d 741 (1995) (pension funds brought suit on their own behalf); Goldman v. Simon Property Group, Inc., 58 A.D.3d 208, 869 N.Y.S.2d 125 (2d Dep't 2008) (class action). For example, plaintiff relies on Goldman v. Simon Property Group, Inc., 58 A.D.3d 208, 869 N.Y.S.2d 125 (2d Dep't 2008). In Goldman, the plaintiff sued the defendant under the New York consumer-protection statute for selling gift cards that were subject to a "dormancy fee" of $2.50 per month after seven months, without proper notice to the purchasers or cardholders. Id. at 211, 869 N.Y.S.2d 125. The plaintiff sought an injunction against the practice, including an order prohibiting the defendant from continuing to deduct the fee from certain cards that remained outstanding. See id. at 212, 218, 869 N.Y.S.2d 125. The New York Supreme Court, Appellate Division, held that the trial court should not have dismissed plaintiffs claim for injunctive relief. Id. at 218, 869 N.Y.S.2d 125. The plaintiffs here contend that Goldman was brought by an individual and not as a class action. But Goldman clearly states, "The plaintiff filed an amended class action complaint." Id. at 212, 869 N.Y.S.2d 125. Accordingly, Goldman does little to help plaintiffs.
The Court, however, has identified at least one case in which an individual plaintiff was able to obtain a preliminary injunction against false advertising under New York General Business Law 350-e.
Id. at 593-94. The court made no mention of the fact that the plaintiff had brought suit individually, and not as a class action. Thus, there is authority to support the plaintiffs position that an individual may seek an injunction for the benefit of the public under New York's consumer-protection statutes.
An injunction against false advertising, however, more clearly amounts to relief sought to benefit the "public at large," id. at 594, than would an order directing Verizon to lower the price of its NUP for a definable class of existing customers. A false advertisement potentially may impact any member of the public that utilizes the channels of communication through which the advertisement is broadcast. By contrast, the alleged illegal conduct that plaintiffs seek to enjoin impacts only a distinct group of existing customers. In that sense, plaintiffs claim for "general injunctive relief is less like an injunction in favor of "the public at large," id., and more like a claim simply asserting the rights of others to receive lower prices. So viewed, plaintiffs general injunctive relief claim would contravene the notion that "one does not, as a general rule, have standing to assert claims on behalf of another." Caprer v. Nussbaum, 36 A.D.3d 176, 825 N.Y.S.2d 55, 62 (2d Dep't 2006) (citing Socy. of Plastics Indus. v. County of Suffolk, 77 N.Y.2d 761, 570 N.Y.S.2d 778, 573 N.E.2d 1034 (1991); Matter of Hebel v. West, 25 A.D.3d 172, 803 N.Y.S.2d 242 (3d Dep't 2005)); see also Jersey Shore Med. Ctr.-Fitkin Hosp. v. Baum's Estate, 84 N.J. 137, 417 A.2d 1003, 1007 (1980) ("Ordinarily, a litigant may not claim standing to assert the rights of a third party.").
Of course, there is a sensible public policy argument supporting the ability of an individual consumer to seek an injunction against a defendants allegedly fraudulent consumer practices. To the extent the consumer protection acts authorize individuals to act as private attorneys general, it is sensible to interpret the acts to permit an individual to obtain broad injunctive relief. Moreover, as a practical matter, it would make little sense to require thousands of individual consumers to bring individual consumer protection act claims to stop a practice after one consumer has succeeded in showing that the practice is fraudulent. Without resolving the conflicting policies, the Court simply points out that the language of the statute is open to varying interpretations, which suggests that the issue should be left to the arbitrators to decide in the first instance.
The parties arbitration agreement provides, on the one hand, that the arbitrators may "award the same damages and relief... as a court would." (Customer Agreement 12.) This presumably would include the "general injunctive relief" the plaintiffs here seek, provided such relief in fact were available to an individual plaintiff under the consumer protection statutes. On the other hand, the arbitration agreement purports to limit the arbitrators' remedial powers. The agreement provides, "[T]he arbitrator may award money or injunctive relief only in favor of the individual party
While these provisions at first glance might suggest that there is some ambiguity in the agreement, a closer inspection reveals otherwise. A contract is ambiguous where it "could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905, 914 (2d Cir.2010) (internal quotation marks omitted).
Here, the provision stating that an arbitrator may award the same relief as a court is contained in a sentence that provides in full, "There's no judge or jury in arbitration, and the procedures may be different, but an arbitrator can award the same damages and relief, and must honor the same terms in this agreement, as a court would." (Customer Agreement at 12.) This provision is best considered a "description of the arbitration process and how it operates." Gonnello, 2011 WL 4716617, at *4. As such, it "does not supplant the specific limitations ... regarding the type of declaratory or injunctive relief that may be awarded." Id.; see Bushman, 2011 WL 5924666, at *3 (S.D.Fla. Sept. 23, 2011) (construing a materially similar arbitration clause); see also County of Suffolk v. Alcorn, 266 F.3d 131, 139 (2d Cir.2001) ("It is axiomatic that courts construing contracts must give `specific terms and exact terms ... greater weight than general language.'" (quoting Aramony v. United Way, 254 F.3d 403, 413 (2d Cir.2001))). Accordingly, it is clear that the arbitration agreement would prohibit an arbitrator from awarding the "general injunctive relief" that the plaintiffs desire.
Although the arbitration agreement may prohibit plaintiffs from obtaining the relief they desire, that prohibition may not raise a question of arbitrability if the law is ambiguous on the plaintiffs ability to waive the right (if any) to such relief. See Kristian, 446 F.3d at 49-50 (where arbitration agreement prohibited treble damages, and where state statute permitted them, no question of arbitrability was raised where the waiver issue was ambiguous). In that regard, the New York Court of Appeals has held, "Generally and excepting instances where there would be transgressions of public policy, all rights and privileges to which one is legally entitled, Ex contractu or Ex debito justitiae, may be waived." Hadden v. Consol. Edison Co. of N.Y., Inc., 45 N.Y.2d 466, 410 N.Y.S.2d 274, 382 N.E.2d 1136, 1138 (1978); see also Midland Funding, L.L.C. v. Giambanco, 422 N.J.Super. 301, 28 A.3d 831, 837 (N.J.Super.Ct.App.Div.2011) ("We first begin our discussion by reiterating the well-settled principle that parties, by agreement, may waive statutory and constitutional rights." (citations omitted)). Notably, courts in New York have permitted plaintiffs to waive their right to treble damages under New York General Business Law section 349(h) in order to allow the plaintiffs to bring their claims as class actions. See Leider v. Ralfe, 387 F.Supp.2d 283, 292-93 (S.D.N.Y.2005); Super Glue Corp. v. Avis Rent A Car Sys., Inc., 132 A.D.2d 604, 517 N.Y.S.2d 764, 767
There is a credible argument, then, that a waiver of an individual's right to seek an injunction to protect the public at large contravenes the statutory policy behind section 349(h). Indeed, in discussing the statute, the New York Court of Appeals has noted, "`The power to obtain injunctions against any and all deceptive and fraudulent practices will be an important new weapon in New York States long standing efforts to protect people from consumer frauds.'" Oswego Laborers' Local 214, 85 N.Y.2d at 25, 623 N.Y.S.2d 529, 647 N.E.2d 741 (quoting Mem. of Governor Rockefeller, 1970 N.Y. Legis. Ann., at 472). But the "new weapon" referred to by the Court of Appeals was the right of action afforded to the attorney general. And, of course, an "arbitration agreement[] [in a consumer contract] will not preclude the [attorney general] from bringing actions seeking class-wide and equitable relief." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991).
The same is true with respect to the New Jersey statute. The New Jersey Supreme Court, in discussing the purposes of the private right of action under the consumer-protection law, noted that the private right of action
Weinberg, 801 A.2d at 291. The court said little about the need to allow an individual plaintiff to obtain an injunction in favor of a group of individuals in order to vindicate the private right of action provided in the statute. Thus, it is not clear that the remedial limitation in the parties' arbitration agreement would not amount to a lawful waiver of their right to seek injunctive relief on behalf of others.
In sum, although the arbitration agreement prohibits the plaintiffs from obtaining "general injunctive relief," it is not clear whether (1) the state consumer statutes would authorize an individual to obtain such relief in the absence of a class action, and (2) even if such relief were available under the statutes, whether it lawfully could be waived. "In the presence of this ambiguity, PacifiCare is dispositive. When there is an underlying legal ambiguity, ... an arbitrator must decide the underlying legal question in the first instance so that the federal policy in favor of arbitration is not frustrated." Kristian, 446 F.3d at 50. Accordingly, plaintiffs motion does not raise a question of arbitrability, and the arbitrators must decide in the first instance whether plaintiffs are entitled to "general injunctive relief."
In any event, even if the issue posed a question of arbitrability for the Court, under these circumstances the Court would be hard-pressed to say that the plaintiffs' inability to obtain "general injunctive relief on behalf of others would render the arbitral forum inadequate such that plaintiffs no longer "effectively may vindicate [their] statutory cause of action in the arbitral forum." Mitsubishi, 473 U.S. at 637, 105 S.Ct. 3346. Plaintiffs have already
For the reasons stated above, plaintiffs' motion to compel arbitration [24] is DENIED to the extent it seeks a declaration that a clause of the arbitration agreement is invalid. To the extent it seeks an order compelling arbitration of the plaintiffs' statutory claims, it is DENIED as moot because the Court already has ordered the parties to proceed with arbitration. (See Order, May 13, 2011, Docket No. 23.)
SO ORDERED.
By contrast, a class action/arbitration ban, if clear, implicates the adequacy of the arbitral forum (and thus the validity of the arbitration agreement) from the outset because it affects the manner in which a plaintiff may pursue his or her statutory rights in the first instance. As such, the adequacy of the arbitral forum (and thus the validity of the arbitration agreement) is implicated whenever there is a question of whether an inability to pursue statutory claims as a class amounts to an inability to pursue statutory claims at all. See Kristian, 446 F.3d at 54-55. This is a question for the court because, if left to the arbitrators in the first instance, it may never be addressed if indeed the class waiver effectively prevents the plaintiff from arbitrating at all.
