Phone calls made by a lawn care company after the termination of a customer's contract were beyond the scope of the parties' agreement to arbitrate any claim "arising from or relating to" their contract, the U.S. Court of Appeals for the Sixth Circuit recently held. In an unpublished opinion, Stevens-Bratton v. TruGreen Inc., the panel reversed the district court's decision denying class certification and compelling individual arbitration of the customer's putative Telephone Consumer Protection Act (TCPA) class action.

In May 2013, the plaintiff entered into a contract with TruGreen, a national lawn care services company. The plaintiff gave permission for TruGreen to contact her at the cell phone number she provided "using an automatic telephone dialing system or artificial voice to discuss my account and lawn care services, including current and possible future services." The contract further provided that "any claim, dispute or controversy . . . arising from or relating to" the contract, "including but not limited to any tort or statutory [c]laim" was subject to arbitration. The plaintiff also expressly waived any ability to maintain any class action "in any forum whatsoever." However, the contract did not expressly provide that the arbitration clause would survive the termination of the contract.

In May 2014, the plaintiff terminated the contract. Eight months later, TruGreen used an autodialer to solicit its former customer. The plaintiff requested that TruGreen stop calling her, but she continued to receive calls and filed a class action for violation of the TCPA. In response to TruGreen's motion to compel arbitration, the plaintiff argued that because the calls were made after the termination of the contract, the arbitration clause did not apply to the dispute.

The U.S. Supreme Court has held that under the Federal Arbitration Act, broadly worded arbitration clauses must be enforced "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Accordingly, to defeat a motion to compel arbitration, plaintiffs are obligated to show that an arbitration clause is negated "expressly" or "by clear implication." Where there is a question whether the arbitration agreement survived the termination of the contract in which it is contained, courts must analyze whether:

  • the dispute involves facts and occurrences that arose before termination;

  • an action taken after termination infringes a right that accrued or vested under the agreement; and

  • under normal principles of contract interpretation, the disputed contractual right survives termination of the remainder of the agreement.
Applying this inquiry, the Sixth Circuit concluded that the arbitration clause did not survive the termination of the customer's contract.

First, with respect to the "facts and occurrences" prong of the analysis, the court held that the proper inquiry is whether a majority of the material facts and occurrences arose before termination. In this case, the plaintiff's dispute exclusively involved phone calls made after the termination of the contract. Second, the Sixth Circuit concluded that "the right to call a person's number is not the type of right that would accrue or vest under a contract," particularly since consent to be called can be revoked at any time. Finally, the court held that because the contract had no explicit survival clause, the arbitration clause should be construed against TruGreen, the drafter, under general principles of contract interpretation.

The Sixth Circuit's decision should be heeded by companies who assume that arbitration clauses in their customer contracts will automatically apply to conduct that occurs after the contract's termination, including telephone calls made to prior customers. We routinely counsel clients to draft their arbitration clauses in a manner that covers not only existing, but also future, disputes.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

Ballard Spahr's TCPA Task Force assists clients in navigating the complex and challenging issues that arise under the TCPA. The Task Force, which comprises regulatory attorneys and litigators, provides counsel on TCPA compliance and avoiding TCPA liability, including reviewing policies and practices and helping to design mobile text message and prerecorded and autodialed call campaigns. It also assists clients in commenting on regulatory proposals and handling scrutiny from regulators, including preparing for examinations, responding to investigations, and defending against enforcement actions. Task Force members also defend clients against TCPA class or individual actions.

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