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Chruby v. Global Tel*Link Corp.

United States District Court, W.D. Arkansas, Fayetteville Division

September 28, 2017

WALTER CHRUBY, et al. PLAINTIFFS
v.
GLOBAL TEL*LINK CORPORATION DEFENDANT

          MEMORANDUM OPINION AND ORDER

          TIMOTHY L. BROOKS JUDGE

         Currently before the Court are:

• Defendant Global Tel*Link Corporation's ("GTL") Motion to Compel Arbitration and Stay the Proceedings (Doc. 67) and Memorandum of Law in Support (Doc. 68); Plaintiffs Walter Chruby's, Earl Reese's, Stephen Orosz, Sr.'s, Stephen Orosz, Jr.'s, Michael Veon's, Stefanie Veon's, Lewis Brooks's, Jacqueline Jacobs's, and Shondra Caldwell's (collectively, "Plaintiffs") Response in Opposition (Doc. 77); GTL's Reply (Doc. 80); and Plaintiffs' Notice of Supplemental Authority (Doc. 83); and
• Plaintiffs' Motion for Class Certification, Appointment of Class Representatives, and Appointment of Class Counsel (Doc. 63) and Memorandum of Law in Support (Doc. 65); GTL's Opposition (Doc. 73) and Statement of Facts (Doc. 74); Plaintiffs' Reply (Doc. 85); GTL's Supplemental Brief (Doc. 90); and Plaintiffs' Supplemental Brief (Doc. 92).

         For the reasons given below, both Motions are DENIED.

         I. BACKGROUND

         This case is one of four lawsuits on the topic of inmate calling services ("ICS") currently pending in this Court. Two of them are concerned with interstate calls, and two of them are concerned with intrastate calls. This is one of the intrastate cases. The Defendant in this case, GTL, is also the defendant in one of the interstate cases. A company called Securus Technologies, Inc. ("Securus") is the defendant in the other two cases.

         In the instant case, Plaintiffs filed their original Complaint (Doc. 1) in this Court on June 12, 2015, followed by an Amended Complaint (Doc. 25) on August 28 of that same year. On May 17, 2016, the Court entered an Order (Doc. 46) granting in part and denying in part GTL's Motion to Dismiss (Doc. 28). Soon thereafter, venue of a related case in the Eastern District of Pennsylvania was transferred to this Court, and on July 25 of that year, this Court entered an Order consolidating that case with this one. See Doc. 51.

         This case, like all of the ICS cases, was brought as a putative class action. As in the GTL interstate case, Plaintiffs "allege that GTL obtained exclusive contracts to provide telephone services to inmates at correctional facilities throughout the United States in exchange for the payment of kickbacks to those correctional facilities known as 'site commissions.'" In re Global Tel*Link Corp. ICS Litig., 2017 WL 471571, at *1 (W.D. Ark. Feb. 3, 2017). And as in the GTL interstate case, Plaintiffs further allege "that GTL charged them excessive rates to cover the costs of site commissions it paid to correctional facilities, and charged them deposit fees that unreasonably exceeded the cost of processing deposits into prepaid accounts." Id.

         In the GTL interstate case, the plaintiffs sought to recover these allegedly unjust rates and fees through two claims for relief-one brought under the Federal Communications Act ("FCA") through 47 U.S.C. §§ 201(b) and 206, and one brought under the common-law doctrine of unjust enrichment. See Id. The plaintiffs in the Securus interstate case made substantially identical allegations and asserted the same two causes of action. See Mojica v. Securus Techs., Inc., 2017 WL 470910, at *1 (W.D. Ark. Feb. 3, 2017). In each interstate case, the Court eventually certified one nationwide class for the FCA claims and several multi-state subclasses for the unjust enrichment claims. See Id. at *9-*10; In re Global Tel*Link Corp. ICS Litig., 2017 WL 471571, at *10-*11 (W.D. Ark. Feb. 3, 2017).

         However, in June of 2017, the Court of Appeals for the D.C. Circuit issued an opinion in a separate proceeding that this Court was concerned might be binding authority and might undermine this Court's justification for certifying the FCA classes. See Global Tel*Link v. FCC, 859 F.3d 39 (D.C. Cir. 2017), amended and superseded by Global Tel*Link v. FCC, 866 F.3d 397 (D.C. Cir. 2017). Anticipating that a petition for rehearing en banc would be filed in that D.C. Circuit case, this Court entered administrative stays of both interstate cases pending the resolution of any such petition. The expected petition was indeed filed on July 28, 2017. It was denied only earlier this week on September 26, see D.C. Cir. Case No. 15-1461, Doc. 1694853, but this Court has not yet lifted the stays in the interstate cases. As for the Securus intrastate case, it was not filed until January of this year, and discovery is ongoing. No motion for class certification has yet been filed in that case.

         In the instant case, Plaintiffs originally brought their claims under the FCA, the common-law doctrine of unjust enrichment, the Arkansas Deceptive Trade Practices Act ("ADTPA"), and California's Unfair Competition Law ("UCL"). However, the Court dismissed Plaintiffs' FCA claims without prejudice, essentially on the grounds that the FCA does not apply to the sort of purely intrastate communications services described in the Amended Complaint. See Doc. 46, pp. 5-8. The case that was subsequently consolidated with the instant one also brought claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL").

         On February 17 of this year, Plaintiffs filed their Motion for Class Certification, Appointment of Class Representatives, and Appointment of Class Counsel (Doc. 63). A couple of weeks later, on March 1, 2017, GTL filed its Motion to Compel Arbitration and Stay the Proceedings (Doc. 67). Both Motions have been extensively briefed, and on May 10 of this year the Court heard oral argument on them for several hours. Accordingly, both Motions are ripe for decision. Below, the Court will address GTL's arbitration Motion first. Then, the Court will take up Plaintiffs' class certification Motion.

         II. GTL'S MOTION TO COMPEL ARBITRATION (Doc. 67)

         GTL has moved to compel four of the Plaintiffs to arbitrate their claims: Shondra Caldwell, Jacqueline Jacobs, Stefanie Veon, and Stephen Orosz, Sr. (collectively, "the Arbitrating Plaintiffs"). The Federal Arbitration Act ("FAA") provides that "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon any grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Supreme Court has repeatedly recognized this to be the enunciation of a "liberal federal policy favoring arbitration." AT&T Mobility LLC v. Conception, 566 U.S. 333, 339 (2011) (quoting Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).

         However, the Arbitrating Plaintiffs contend that here, GTL has waived any right it may have to arbitrate their claims. "A party waives its right to arbitration if it '(1) knew of an existing right to arbitration; (2) acted inconsistently with that right; and (3) prejudiced the other party by these inconsistent acts.'" Messina v. N. Cent. Distrib., Inc., 821 F.3d 1047, 1050 (8th Cir. 2016) (quoting Lewallen v. Green Tree Servicing, LLC, 487 F.3d 1085, 1090 (8th Cir. 2007)). The Arbitrating Plaintiffs bear-the burden of demonstrating that these elements are satisfied here. See Stifel, Nicolaus & Co. Inc. v. Freeman, 924 F.2d 157, 158 (8th Cir. 1991). Whether these elements are met is an issue for this Court-not an arbitrator-to decide. See N & D Fashions, Inc. v. DHJ Indus., Inc., 548 F.2d722, 728 (8th Cir. 1976).

         All three elements of waiver are easily satisfied with respect to Ms. Caldwell, Ms. Jacobs, and Ms. Veon. GTL contends that all three of these individuals agreed to arbitrate their claims before any of them filed their instant lawsuits, see Doc. 68, p. 7, so GTL surely knew of its right to arbitrate given that it possessed these arbitration agreements, see Messina, 821 F.3d at 1050.[1] Yet, GTL waited well over a year and a half after the instant litigation began before attempting to compel these Plaintiffs to arbitrate their claims. In the meantime, GTL forced these Plaintiffs to defend against a motion before the Multidistrict Litigation Panel to transfer all related actions to the Eastern District of Pennsylvania, see E.D. Pa. Case No. 2:15-cv-2197, Doc. 10, pp. 1, 3, and forced Ms. Jacobs and Ms. Caldwell to defend against a motion here in the Western District of Arkansas that sought dismissal of their claims on the merits, see W.D. Ark. Case No. 5:15-cv-5136, Doc. 28.

         A party acts inconsistently with its right to arbitration "if it substantially invokes the litigation machinery before asserting its arbitration right, whenrfor example, it. . . fails to move to compel arbitration and stay litigation in a timely manner." Messina, 821 F.3d at 1050 (internal quotation marks and alterations omitted). And "[prejudice from a failure to assert an arbitration right occurs when, for example, parties . . . litigate substantial issues on the merits, or when compelling arbitration would require a duplication of efforts, " or when a party is "forced to defend against [a] motion to transfer venue." See Id. at 1051. The aforementioned motion to dismiss was granted with respect to Plaintiffs' claims under the FCA, and denied with respect to Plaintiffs' state-law claims-rulings which established law of the case for all of the subsequently consolidated Plaintiffs as well. Seeking "an immediate and total victory in the parties' dispute" in federal court, and then only subsequently seeking to compel arbitration smacks of "wantpng] to see how the case was going in federal district court before deciding whether it would be better off there or in arbitration"-a form of "heads I win, tails you lose, which is the worst possible reason for failing to move for arbitration sooner than it did." See Hooper v. Advance Am., Cash Advance Ctrs. of Missouri, Inc., 589 F.3d 917, 922 (8th Cir. 2009) (internal quotation marks omitted).

         The issue of waiver would appear at first glance to be a bit closer with respect to Mr. Orosz, Sr. GTL contends that he signed an arbitration agreement on May 4, 2016, see Doc. 68, pp. 7-8, which was half a year after contested briefing was completed on the issue of venue in Mr. Orosz, Sr.'s case, see, e.g., Case No. 5:16-cv-5165, Doc. 25, and one month after contested briefing was completed on GTL's motion to dismiss in the case with which Mr. Orosz, Sr.'s case was ultimately consolidated, see, e.g., Case No. 5:15-cv-5136, Docs. 45, 51. After May 4, 2016, GTL did not file any contested or substantive motions until roughly ten months later, when it moved to compel arbitration. GTL represents that it has demanded minimal discovery from the Plaintiffs during that period. See Doc. 88, p. 30. If these facts were the whole story, then there might be a good argument that Mr. Orosz, Sr. was not prejudiced by GTL's ten-month delay. Cf. James v. Global Tel*Link Corp., 2016 WL 589676, at *10 (D.N.J. Feb. 11, 2016) ("Here, the discovery, while not de minimus, does not rise to a level sufficient to constitute prejudice to the Plaintiffs.").

         However, GTL knew this was a putative class action, see Case No. 5:16-cv-5165, Doc. 1 (styled "Class Action Complaint"), and that at some point on or before February 17, 2017-nine months after it claims he signed the arbitration agreement-Mr. Orosz, Sr. would move to certify a class and be appointed as a class representative, see Case No. 5:15-cv-5136, Docs. 52, 57. Yet, GTL chose not to move to compel arbitration of Mr. Orosz, Sr.'s claims until a month after the deadline had passed for him to move for class certification, even though GTL contends that Mr. Orosz, Sr.'s arbitration agreement prohibits him from arbitrating his claims on behalf of a class. See Doc. 68, pp. 5-6; Doc. 68-1, ¶¶ 6, 8. By this Court's tally, the Motion for Class Certification and supporting documents that Mr. Orosz, Sr. and his fellow Plaintiffs filed on February 17, 2017 consist of 3, 191 pages. See Docs. 63-66. Thus, if there is in fact a valid, enforceable arbitration agreement between GTL and Mr. Orosz, Sr., and if that arbitration agreement means what GTL says it means, then GTL's delay in moving for arbitration of Mr. Orosz, Sr.'s claims resulted 4n him devoting some substantial amount of time -and effort towards the litigation of class certification issues that would be of utterly no use to him in arbitration, and that he never would have undertaken if GTL had simply moved to compel arbitration in a timely manner. That is a textbook example of prejudice.

         Ultimately, then, all three elements of waiver are satisfied with respect to each of the Arbitrating Plaintiffs. Therefore, GTL's Motion to Compel Arbitration will be DENIED. Now the Court will turn to Plaintiffs' class certification Motion.

         III. PLAINTIFFS' MOTION FOR CLASS CERTIFICATION (Doc. 63)

         Plaintiffs seek certification of the following four classes:

Unjust Enrichment Class 1: All persons who at any time on or after April 24, 2011, paid to use inmate calling services provided by Global Tel*Link (including its operating subsidiaries) to make or receive one or more intrastate phone calls from a correctional facility in Arkansas, California, Indiana, or Vermont, during a period of time when Global Tel*Link paid the facility a commission of any type in connection with the intrastate calls;
Unjust Enrichment Class 2: All persons who at any time on or after April 24, 2011, paid to use inmate calling services provided by Global Tel*Link (including its operating subsidiaries) to make or receive one or more intrastate phone calls from a correctional facility in Pennsylvania, Georgia, Florida, Maryland, Mississippi, South Dakota, or Virginia, during a period of time when Global Tel*Link paid the facility a commission of any type in connection with the intrastate calls;
ADTPA Class: All persons who at any time on or after June 12, 2010: (1) paid to use inmate calling services provided by Global Tel*link (including its operating subsidiaries) to make or receive one or more intrastate phone calls from a correctional facility in Arkansas, during a period of time when Global Tel*Link paid the facility a commission of any type in connection with the intrastate calls; and/or (2) paid deposit fees to Global Tel*link in order to fund a prepaid account used to pay for any intrastate calls within Arkansas; and
UCL Class: All persons who at any time on or after August 28, 2011: (1) paid to use inmate calling services provided by Global Tel*link (including its operating subsidiaries) to make or receive one or more intrastate phone calls from a correctional facility in California, during a period of time when Global Tel*Lin-k paid the facility a commission of any type in connection with the intrastate calls; and/or (2) paid deposit fees to Global TelTink in order to fund a prepaid account used to pay for any intrastate calls within California.

See Doc. 63, ¶¶ 1-2; Doc. 85-1, ¶ 18; Doc. 88, pp. 69-70. Plaintiffs also initially sought certification of a UTPCPL class, see Doc. 63 at ¶ 2, but they have since withdrawn that particular request, see Doc. 85, p. 7 n.2; Doc. 85-1, ΒΆ 17. After reciting the legal standard for class certification ...


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