MEMORANDUM OPINION

ROBERT B. PROPST, Senior District Judge.

This cause comes on to be heard on the objection of the plaintiff to the Report and Recommendation ("R & R") of the magistrate judge filed on December 10, 2010. The issue is whether the defendants' motion to compel arbitration should be granted.

The issue revolves around the following language in the Residential Services Agreement ("RSA") referenced in the R & R:

In this Section, references to "AT & T", "you", and "us" include our respective subsidiaries, affiliates, agents, officers, employees, predecessors in interest, successors and assigns, as well as all authorized or unauthorized users or beneficiaries of services or equipment under this or prior Agreements between us.... This arbitration provision shall survive termination of this Agreement.

(Doc. 25-1, § 9a (some emphasis in original)).

Although the plaintiff argues that the RSA is inapplicable to this dispute, he states the following in his objection:

(1) "There was then change of service that affected the related RSA, ...;

(2) "AT & T created a contract that in one sense was broad and far reaching so as to allow it to commit tortious and criminal acts with impunity...." The fact that an available remedy may be limited to arbitration does not mean that there can be violations (alleged) with impunity.

This court will adopt and apply the R & R and will not address all of its discussion. This court does further note:

The Alabama Supreme Court has repeatedly stated that the words "relating to in the arbitration context are given a broad construction." StoneMor Ala., LLC v. Summers, 36 So.3d 5, 8 (Ala.2009) (internal quotation marks and citations omitted). On the other hand, "the phrase `arising under' in an arbitration agreement contemplates a narrow scope of operation." Cato, 968 So.2d at 7 (citing Koullas v. Ramsey, 683 So.2d 415, 416 (Ala.1996)). The RSA's arbitration provision applies to "claims arising out of ... any aspect of the relationship between us," which is in addition to the provision's inclusion of the term "relating to." (Doc. 25-1, § 9a (emphasis added.))

All defendants invoke the terms of the arbitration agreement; that is (1) Bell-South Telecommunications, Inc. d/b/a AT & T Alabama; (2) AT & T Operations, Inc.; and (3) Innotrac Corporation. Bell-South was the signatory to the RSA and therefore may clearly invoke the arbitration agreement. Defendants argue that the arbitration agreement explicitly provides that defendants AT & T Operations and Innotrac were intended to be included. In particular, they argue that defendant AT & T Operations is an "affiliate" and defendant Innotrac is an "agent," and that the two would squarely fall within the definitions as used in the arbitration provision. (See Doc. 25-1, § 9a ("In this Section, references to `AT & T', `you', and `us' include our respective subsidiaries, affiliates, agents....")).

Olshan Found. Repair Co. v. Schultz, No. 1090800, ___ So.3d ___, ___, 2010 WL 4034866, at *5, 2010 Ala. LEXIS 200, at *14 (Ala. Oct. 15, 2010) (internal quotation marks omitted) (quoting Elizabeth Homes, L.L.C. v. Cato, 968 So.2d 1, 7 (Ala.2007)).

In this case, the arbitration agreement provides: "AT & T and you agree to arbitrate all disputes and claims between us. This agreement to arbitrate is intended to be broadly interpreted. It includes ... claims arising out of or relating to any aspect of the relationship between us...." (Doc. 25-1, § 9a (emphasis in original)). Such an agreement to arbitrate is quite similar to one addressed by the Alabama Supreme Court in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kirton which applied to "all controversies which may arise between us...." 719 So.2d 201, 202 (Ala.1998). As to the scope of that provision, the Alabama Supreme Court held:

Finally, Alabama courts have consistently followed the following unconscionability standard:

Blue Cross Blue Shield of Ala. v. Rigas, 923 So.2d 1077, 1086 (Ala.2005). That definition does not fit here.

This court will overrule the objection.1

ORDER

In accordance with a Memorandum Opinion filed contemporaneously herewith, the court ADOPTS and APPROVES the Report and Recommendation of the magistrate judge filed on December 10, 2010. The court OVERRULES the objection thereto of the plaintiff filed on December 22, 2010. The defendants' Motion to Compel Arbitration filed on April 26, 2010 and the joinders thereto are GRANTED. The arbitration process is to be initiated by the defendants within ten (10) calendar days. Further proceedings in this case are STAYED pending arbitration.

REPORT AND RECOMMENDATION

HARWELL G. DAVIS, III, United States Magistrate Judge.

Plaintiff, Richard Matthews, is seeking to proceed in his second amended complaint (Doc. 16), on behalf of himself and others similarly situated, against BellSouth Telecommunications, Inc. d/b/a AT & T Alabama (BellSouth), AT & T Operations, Inc. (AT & T Operations) and Innotrac Corporation (Innotrac) on claims for fraud, civil conspiracy, conversion, breach of the implied covenant of good faith and unjust enrichment. Now pending before the court is the Motion to Compel Arbitration and Dismiss or Stay Pursuant to the Federal Arbitration Act filed by AT & T Operations and BellSouth.1 (Doc. 24). The Motion to Compel Arbitration has been joined in by Innotrac. (See Doc. 37, Motion to Join, and docket entry of June 22, 2010, granting Motion to Join). Also pending are a Motion to Dismiss filed by Innotrac (Doc. 22) and a Motion to Dismiss filed by AT & T Operations and BellSouth (Doc. 23). Because of its potential to moot consideration of the motions to dismiss, the arbitration motion is considered first.

In his complaint, plaintiff alleges that on or about August 1, 2009, he received a package containing a Clarity cordless telephone with a digital answering machine and expandable headset. The package was delivered by United Parcel Service from Innotrac Corporation.

According to plaintiff, he did not order or request this equipment. After receiving it, he contacted AT & T and asked what authority it had to send this unrequested equipment. AT & T stated that it could not answer the question, but referred him to Innotrac's telephone number where he could call and request the equipment. AT & T also stated that, if he did not return the equipment, he would be billed for it through his residential telephone service. The following month, the equipment was charged to plaintiffs telephone bill.

Furthermore, plaintiff asserts that in September 2009, his residential telephone package was changed from the Complete Choice package to the Complete Choice Enhanced package. This was accomplished without plaintiff's authorization or knowledge. This caused his telephone bill to increase by $18.00 per month.

As a result, plaintiff called AT & T and asked what authority it had to change his telephone service. He was told that AT & T was not sure why his service was changed. He was also told that customer authorization was required to change telephone services.

ARBITRATION AGREEMENT

For purposes of its motion to compel arbitration, AT & T submitted the declaration of Elizabeth Stockdale. Stockdale is a Senior Product Marketing Manager with AT & T Operations. According to her, Matthews was an AT & T customer who received residential telephone services pursuant to the AT & T Residential Services Agreement (RSA) during the August-September 2009 time period referenced in the Second Amended Class Action Complaint. (Doc. 25, Stockdale Decl., at ¶ 3). The RSA contains an arbitration agreement. Notification of the arbitration agreement is set out in all capital letters on its first page. (Id. at ¶ 7).

Section 9 of the RSA contains a summary of the arbitration conditions, including statements that disputes will be resolved "through binding arbitration or small claims court instead of in courts of general jurisdiction" and that "[a]ny arbitration under this Agreement will take place on an individual basis; class arbitrations and class actions are not permitted." (Id. at ¶ 8 and at Ex. A, RSA, § 9) (emphasis in original).

Section 9 of the RSA also states, in pertinent part:

In this Section, references to "AT & T," "you," and "us" include our respective subsidiaries, affiliates, agents, officers, employees, predecessors in interest, successors, and assigns, as well as all authorized and unauthorized users or beneficiaries of services or equipment under this or prior Agreements between us.

Notwithstanding the foregoing, either party may bring an individual action in small claims court. You agree that, by entering into this agreement, you and AT & T are each waiving the right to a trial by jury and to participate in a class action. This agreement evidences a transaction in interstate commerce, and thus the Federal Arbitration Act governs the interpretation and enforcement of this provision. This arbitration shall survive termination of this Agreement.

(Doc. 25 at Ex. A, § 9a).

The AT & T dispute resolution process also features a provision wherein AT & T agrees that it will pay all AAA filing, administration and arbitrator fees, unless the arbitrator finds that the claim is substantively frivolous or brought for an improper purpose. (Id. at § 9c). It also provides that, if the arbitrator issues an award in the customer's favor that is "greater than the value of AT & T's last written settlement offer made before an arbitrator was selected, then AT & T will pay you the amount of the award or $10,000 (`the alternative payment') whichever is greater...." (Id. at § 9d). In such a case, the Agreement also specifies that AT & T will pay double attorney's fees. (Id. at § 9d-e). It also states that the arbitration will take place in the county of the customer's billing address and that a customer may attend the arbitration by telephone for any claim for $10,000 or less. (Id. at § 9c).

ANALYSIS AND RECOMMENDATION

Defendants BellSouth and AT & T Operations assert that plaintiff should be compelled to arbitrate his claims against them as required by the arbitration agreement contained in his RSA. Innotrac also seeks to have plaintiff's claims against it submitted to arbitration. Plaintiff asserts that his claims and the claims of the Class are not subject to the RSA. According to Matthews, his claims are separate and apart from the RSA and the RSA is void as to all defendants as being procedurally and substantively unconscionable.

Matthews asserts that the arbitration agreement is unenforceable because it was not applicable to a subsequently-created, new contract that was created by Bell-South and AT & T Operations, with the assistance of Innotrac. He is referring to a separate Retail Sales Installment Contract which reflected his purchase of the Innotrac Clarity telephone equipment. This contract merely reflects that he is being charged $131.71 for this telephone and the amount due in each of five monthly payments that will be included in his AT & T phone bill. Plaintiff states that he paid for this equipment despite his claim that it was not solicited by him. He also states that his telephone bill was changed to reflect an enhanced service that he did not request.

Thus, according to plaintiff, the new Retail Installment Contract, which contains no dispute resolution language, somehow vitiates his RSA with AT & T. Matthews asserts that the arbitration agreement applies only to issues arising from the purchase and financing of defendants' telephone plan and does not cover fraud issues that arose out of a later, unconsented and defendant-originated unilateral contract for a different plan and new equipment, citing Capitol Chevrolet & Imps., Inc. v. Payne, 876 So.2d 1106 (Ala.2003).

Plaintiff also asserts that AT & T Operations and Innotrac were not parties to the original RSA that included only BellSouth, citing Ex parte Discount Foods, Inc., 789 So.2d 842 (Ala.2001), and Alabama Catalog Sales v. Gloria Harris, 794 So.2d 312 (Ala. 2000).

The language of the RSA provides that "AT & T and you agree to arbitrate all disputes and claims between us. This agreement to arbitrate is intended to be broadly interpreted." (Doc. 25 at Ex. A, § 9a) (emphasis in original). It further states that the arbitration agreement applies to "claims arising out of or relating to any aspect of the relationship between us." (Id.). Thus, the plain language of the arbitration agreement appears to cover plaintiff's dispute with AT & T. The Capitol Chevrolet case cited by plaintiff and referenced supra, does not apply here because the plain language of the arbitration agreement in that case limited its applicability to disputes arising from the initial sale of an automobile. 876 So.2d at 1110. Here, the RSA unambiguously applies to disputes arising between AT & T and Matthews, including "claims that may arise after the termination of this Agreement." (Doc. 25 at Ex. A, § 9a). The addition of the charge for the telephone and the charge for the enhanced service package are both directly tied to plaintiff's telephone service that was covered by the RSA. The RSA unambiguously applies to the billing relationship between the parties. (Doc. 25 at Ex. A, § 4).

There is no basis for concluding that the RSA somehow has been superseded by the Retail Installment Contract. Matthews' claim centers, in part, around his assertion that he did not order the Clarity telephone. He maintains that he was "coerced" into entering into the Retail Installment Contract, although why this is so is not particularly clear. Nonetheless, he cannot on the one hand allege that the Retail Installment Contract is void because he was coerced into entering into that agreement and, on the other, attempt to maintain that it is a valid contract that somehow superseded the RSA with AT & T.

In that respect, it is important to note that there is no provision in the Retail Installment Contract that purports to supersede the RSA. Thus, there is no reason to conclude that the arbitration clause is not applicable even if the parties had entered into a subsequent contract regarding the purchase of the Clarity telephone because it contains no terms that are inconsistent with the operation of the arbitration agreement.

Likewise, nothing in the terms of the Retail Installment Contract pertaining to the Clarity telephone have any application to plaintiff's claim about being charged for the enhanced telephone service. The dispute regarding the putative "coerced" purchase of the Clarity telephone and the dispute over the charges imposed for the unrequested enhanced telephone service are two completely different matters.

Petitioner's unconscionability argument also fails. Unconscionability is an affirmative defense, and the party asserting the defense bears the burden of proving unconscionability. Conseco Fin. v. Murphy, 841 So.2d 1241, 1245 (Ala.2002). A contractual agreement to arbitrate may be found invalid only "upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Under Alabama law, the burden of presenting substantial evidence indicating that the arbitration provision in the policy is unconscionable is on the plaintiff. See Ex parte Napier, 723 So.2d 49, 53 (Ala.1998). "An unconscionable ... contractual provision is defined as a ... provision `such as no man in his sense and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.'" Layne v. Garner, 612 So.2d 404, 408 (Ala. 1992) (quoting Lloyd v. Service Corp. of Alabama, 453 So.2d 735, 739 (Ala.1984), and Hume v. United States, 132 U.S. 406, 410, 10 S.Ct. 134, 33 L.Ed. 393 (1889)). In Layne v. Garner, the Alabama Supreme Court set out four factors it considered important in determining whether a contract was unconscionable:

612 So.2d at 408.

The Alabama Supreme Court has recognized a distinction between "substantive unconscionability" and "procedural unconscionability" and categorized the above factors as either substantive or procedural. Substantive unconscionability

Ex parte Thicklin, 824 So.2d 723, 731 (Ala. 2002) (emphasis omitted) (quoting Ex parte Foster, 758 So.2d 516, 520 n. 4 (Ala. 1999), quoting in turn 8 Richard A. Lord, Williston on Contracts § 18:10 (4th ed.1998)). See also Leeman v. Cook's Pest Control, Inc., 902 So.2d 641 (Ala.2004) (discussing and rejecting claim of unconscionable arbitration clause).

Procedural unconscionability, on the other hand, "deals with `procedural deficiencies in the contract formation process, such as deception or a refusal to bargain over contract terms, today often analyzed in terms of whether the imposedupon party had meaningful choice about whether and how to enter into the transaction.'" Thicklin, 824 So.2d at 731 (quoting Foster, 758 So.2d at 520 n. 4, quoting in turn 8 Williston on Contracts § 18:10). To avoid an arbitration provision on the ground of unconscionability, the party objecting to arbitration must show both procedural and substantive unconscionability. "[A] finding of a procedural abuse, inherent in the formation process, must be coupled as well with a substantive abuse." 8 Williston on Contracts § 18:10 at 62.

Plaintiff has made no showing that the arbitration provision is procedurally unreasonable. The burden of demonstrating that the product cannot be obtained without signing an arbitration agreement is on the party asserting unconscionability. Leeman, 902 So.2d at 645 ("unconscionability is an affirmative defense, and the party asserting the defense bears the burden of proof" (citing Conseco Fin. v. Murphy, 841 So.2d at 1245)).

Plaintiff asserts that the arbitration clause is substantively unconscionable because it deprives him of meaningful recourse and recovery. However, a review of that clause reflects that this is simply not so. As a general rule, the Eleventh Circuit has held that arbitration agreements precluding class action relief are valid and enforceable. See Jenkins v. First Am. Cash Advance of Georgia, LLC, 400 F.3d 868, 877-78 (11th Cir.2005); Randolph v. Green Tree Fin. Corp., 244 F.3d 814, 819 (11th Cir.2001) (holding "a contractual provision to arbitrate TILA claims is enforceable even if it precludes a plaintiff from utilizing class action procedures in vindicating statutory rights under TILA"). Other federal circuit courts have similarly enforced arbitration agreements despite the fact that class-wide relief was unavailable. See, e.g., Snowden v. Check-Point Check Cashing, 290 F.3d 631, 638 (4th Cir.2002) (rejecting the borrower's argument "that the Arbitration Agreement is unenforceable as unconscionable because without the class action vehicle, she will be unable to maintain her legal representation given the small amount of her individual damages"); Johnson v. West Suburban Bank, 225 F.3d 366, 369 (3d Cir.2000) (holding arbitration "clauses are effective even though they may render class actions to pursue statutory claims under the TILA or the EFTA unavailable"); cf. Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 559 (7th Cir.2003) ("The Arbitration Agreement at issue here explicitly precludes the [borrowers] from bringing class claims or pursuing `class action arbitration,' so we are therefore `obliged to enforce the type of arbitration to which these parties agreed, which does not include arbitration on a class basis.'") (citations omitted). These decisions turn, in part, on the fact that the arbitration agreements in each case, while excluding class actions, do not cut off the plaintiff from all practical avenues of relief.

In Leonard v. Terminix Int'l Co., 854 So.2d 529 (Ala.2002), the Alabama Supreme Court concluded that the plaintiffs' challenge to an arbitration clause was one of "unconscionability by reason of economic feasibility." Id. at 537. Noting that the costs of arbitration included: "(1) a $500 arbitration filing fee; (2) a minimum $150 administrative fee per party; (3) an administrative fee of $150-$250 per day per party for each hearing date; (4) one-half of the average arbitrator's fee of $700 per day; (5) one-half the cost of the charge for a meeting room; and (6) the cost of an attorney," id. at 535, the court sided with the plaintiffs' contention that "the arbitration clause mandates a procedure involving costs so great in comparison to the potential recovery that the injured person is effectively precluded from a remedy" id. at 537. Because the agreement precluded class actions and limited damages by prohibiting recovery for "indirect, special, and consequential damages or loss of anticipated profits," the Alabama Supreme Court concluded that the arbitration clause in Leonard was substantively unconscionable. Id. at 538. However, similar facts and circumstances have not been established in this case.

The arbitration agreement in this case requires AT & T to pay all AAA filing, administration and arbitrator fees, unless the arbitrator finds that the claim is substantively frivolous or brought for an improper purpose. If the arbitrator issues an award in the customer's favor that is "greater than the value of AT & T's last written settlement offer made before an arbitrator was selected, then AT & T will pay you the amount of the award or $10,000, whichever is greater." In such a case, the Agreement also specifies that AT & T will pay double attorney's fees. It also states that the arbitration will take place in the county of the customer's billing address and that a customer may attend the arbitration by telephone for any claim for $10,000 or less. Thus, any claim that consumers likely would be unable to obtain legal representation without the class action vehicle is unfounded. Likewise, arbitration costs would not be prohibitively expensive.

The court concludes that plaintiff has not met his burden of showing that the arbitration provision included in the RSA is unenforceable or inapplicable. The arbitration provision is neither substantively nor procedurally unconscionable. Therefore, it is enforceable as a matter of contract law.

Plaintiff also argues that the arbitration agreement applies only to Bell-South (AT & T Alabama) and not to AT & T Operations or Innotrac. However, Bell-South, AT & T Operations, and Innotrac assert that the agreement to arbitrate encompasses them all. They assert that, because the RSA states that it applies to "AT & T," which is defined to include AT & T's "respective subsidiaries, affiliates, agents, officers, employees, predecessors in interest, successors and assigns, ..." (Doc. 25, Ex. A, § 9a), AT & T Operations and Innotrac may compel arbitration of the claims against them as well. According to the Alabama Supreme Court:

Ex parte Stamey, 776 So.2d 85, 88-91 (Ala. 2000).

In the present case, the claims made by plaintiff are the same for all three defendants. This is partly the basis for plaintiff's attempt to seek class action status. All claims surround the billing for the Clarity telephone and for the enhanced telephone service. The claims made against AT & T Operations and Innotrac are so "intimately founded in and intertwined with" the claims made against Bell-South, which is a signatory to the contract, that plaintiff is equitably estopped from refusing to arbitrate the claims against them as well.

This very point was addressed in E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187 (3d Cir.2001), where the United States Court of Appeals for the Third Circuit noted that one of the theories relied upon to obtain arbitration was that "courts have bound a signatory to arbitrate with a non-signatory `at the nonsignatory's insistence because of "the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the nonsignatory's obligations and duties in the contract ... and [the fact that] the claims were intimately founded in and intertwined with the underlying contract obligations."'" 269 F.3d at 199 (quoting Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir.1993)) (quoting in turn McBro Planning & Dev. Co. v. Triangle Elec. Constr. Co., 741 F.2d 342, 344 (11th Cir.1984)).

Likewise, the description of the parties subject to the arbitration agreement is not so restrictive as to preclude arbitration of plaintiff's claims against AT & T Operations and Innotrac. The arbitration agreement encompassed "all disputes and claims between us," and "us" included BellSouth and its agents and affiliates. Plaintiff has lumped all his claims against these three defendants into one basket. The complaint repeatedly refers to the acts of the "Defendants" without distinction. Plaintiff clearly anticipates that AT & T Operations and Innotrac are agents or affiliates of BellSouth because the complaint asserts the same causes of action against Bell-South and the other two defendants for the same alleged conduct, arising out of the same transaction. See Kenworth of Mobile, Inc. v. Dolphin Line, Inc., 988 So.2d 534, 543-45 (Ala.2008).

Because both parts of the test set out in Stamey, supra, have been met, Matthews is equitably estopped from asserting that the arbitration clause cannot be enforced by AT & T Operations and Innotrac. Thus, it is RECOMMENDED that defendants' motions to compel arbitration be GRANTED and that this matter be DISMISSED WITHOUT PREJUDICE.2

NOTICE OF RIGHT TO OBJECT

The parties are DIRECTED to file any objections to this Report and Recommendation within a period of fourteen (14) days from the date of entry. Any objections filed must specifically identify the findings in the magistrate judge's recommendation objected to. Frivolous, conclusive, or general objections will not be considered by the district court.

Failure to file written objections to the proposed findings and recommendations of the magistrate judge's report shall bar the party from a de novo determination by the district court of issues covered in the report and shall bar the party from attacking on appeal factual findings in the report accepted or adopted by the district court except on grounds of plain error or manifest injustice. Nettles v. Wainwright, 677 F.2d 404 (5th Cir. Unit B 1982). See Stein v. Reynolds Securities, Inc., 667 F.2d 33 (11th Cir.1982). See also Bonner v. Prichard, 661 F.2d 1206 (11th Cir.1981) (en banc), adopting as binding precedent all of the decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981.

DONE this 10th day of December, 2010.