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Financial Services Law Insights and Observations

4th Circuit: Arbitration agreement applies to acquired company

Courts Appellate Fourth Circuit TCPA Arbitration


On August 7, the U.S. Court of Appeals for the Fourth Circuit issued a split opinion vacating a district court’s decision against arbitration in a proposed class action, which accused a satellite TV provider (defendant) of violating the TCPA by allegedly making automated and prerecorded telemarketing calls to an individual even though her number was on the National Do Not Call Registry. The plaintiff filed a lawsuit against the defendant and several other entities and individuals seeking class certification as well as statutory damages and injunctive relief. The defendant moved to compel arbitration, claiming that the plaintiff’s dispute was covered by an arbitration agreement in the contract governing her cell phone service with a telecommunications company, which is an affiliate of the defendant. The district court denied the request, ruling that the allegations “did not fall within the scope of the arbitration agreement.” The plaintiff appealed, “defend[ing] the district court’s scope ruling,” but arguing that no agreement was formed.

On appeal, the majority concluded that not only did the plaintiff form an agreement to arbitrate with the defendant, the allegations fit within the broad scope of the arbitration agreement. Specifically, the appellate court determined that an arbitration agreement signed by the plaintiff with the telecommunications company in 2012 when she opened a new line of service was extended to potential TCPA allegations against the defendant when the telecommunications company acquired the defendant in 2015. Even though the acquisition happened several years after the plaintiff signed the contract, the majority stated the arbitration agreement had a “forward-looking nature” and that it seemed unlikely that the telecommunications company and its affiliates “intended to restrict the covered entities to those existing at the time the agreement was signed.” According to the majority, “[w]e need not define the outer limits of this arbitration agreement to conclude, based on the arbitration provisions and the contract as a whole, that [the plaintiff’s] TCPA claims about [the defendant’s] advertising calls fall within its scope.” As to the plaintiff’s argument that she only signed the account on behalf of her husband who was the account holder, the majority said the agreement covered “all authorized or unauthorized users,” which the plaintiff was at the time.