In an unpublished opinion, the U.S. Court of Appeals for the Eleventh Circuit recently affirmed a trial court’s order denying an auto finance company’s motion to compel arbitration pursuant to the terms of a retail installment sales contract with a consumer.
In so ruling, the Eleventh Circuit concluded that the consumer’s TCPA claims were an independent cause of action based on rights created under the TCPA, and not subject to the arbitration provision that only covered disputes arising from or related to the agreement or the motor vehicle collateral.
A copy of the opinion in Hope Gamble v. New England Auto Finance, Inc. is available at: Link to Opinion.
A consumer entered into a retail installment sales contract (“RISC”) that was sold and assigned to an automotive finance company (“creditor”). The RISC included a clause requiring arbitration of any “claim, dispute or controversy… whether preexisting, present or future, that in any way arises from or relates to [the RISC] or the Motor Vehicle securing [the RISC],” hereafter, the “arbitration provision”. The RISC further provided the creditor the right to send its customers “emails, text messages and other electronic communications” (the “text consent provision”). However, the text consent provision required separate signatures, and was never executed by the consumer.
Several months after the consumer paid off the RISC, the creditor began sending text messages to the consumer offering her a new loan. Even after she requested by telephone that the creditor stop sending these texts, the consumer received nine additional text messages.
The consumer filed a class action lawsuit in federal district court against the creditor under the federal Telephone Consumer Protection Act, 47 U.S.C. § 227, alleging that the creditor used an automatic telephone dialing system to send her, and others similarly situated, non-emergency text messages without their prior express consent, in violation of subsection § 227(b)(1)(A)(iii) of the TCPA.
In response, the creditor moved to compel arbitration pursuant to the arbitration provision. The trial court denied the creditor’s motion on the grounds that the consumer’s TCPA claim fell outside the scope of the arbitration provision. This appeal followed.
On appeal, the Eleventh Circuit first examined the creditor’s argument that because the consumer’s complaint asserts that the text consent provision governs her alleged lack of express consent to send text messages to her cell phone, the complaint inextricably ties a prima facie element of the TCPA claim — the lack of consent — to the RISC, thus triggering the arbitration provision.
The Appellate Court disagreed with the creditor, concluding that the consumer’s rights to not to receive unconsented-to text messages were established by law under the TCPA — well before she signed the RISC and refused to sign the text consent provision. See generally, 47 U.S.C. § 227.
The Eleventh Circuit further rejected the creditor’s argument that the arbitration provision was broad enough to encompass the consumer’s claims. While acknowledging that the plain language of the arbitration provision makes the arbitration provision broad, it does not make it limitless. See Princess Cruise Lines, 657 F.3d at 1218 (stating “the term ‘arising out of’ is broad, but not all encompassing” while recognizing that the dispute in question must be “an immediate, foreseeable result of the performance of contractual duties”).
Here, the consumer signed the RISC, but refused to sign the text consent provision, and the creditor did not violate the RISC. Thus, in the Court’s view, the consumer’s claims did not arise from the RISC or any breach thereof, but rather from post-agreement conduct in alleged violation of a separate, distinct federal law — the TCPA.
Moreover, the Eleventh Circuit determined text messages do not relate to the financing terms set forth in the RISC, and the text consent provision is a separate stand-alone provision which the consumer never signed, and thus no agreement regarding text messages exists between the parties. See Telecom Italia, SpA v. Wholesale Telecom Corp., 248 F.3d 1109, 1116 (11th Cir. 2001) (“Disputes that are not related—with at least some directness—to performance of duties specified by the contract do not count as disputes ‘arising out of’ the contract, and are not covered by the standard arbitration clause.”).
Put another way, the Eleventh Circuit explained that the existence of the RISC was irrelevant, unless it had specifically contemplated future TCPA claims — which it did not — and the consumer could have filed suit under the TCPA without there ever having been a contract between the parties.
Because the consumer’s TCPA claims did not “in any way arise from or relate to” the RISC, and the arbitration provision covered only those disputes arising from or related to the RISC or the motor vehicle securing that agreement, the trial court’s denial of the creditor’s motion to compel arbitration was affirmed.