The opinion of the court was delivered by: Koeltl, District Judge.
This is a purported class action brought by Lewis Tree
Service, Inc. ("Lewis Tree") and Ironman Magazine ("Ironman")
(collectively the "plaintiffs") against AT & T Corporation (AT &
T) and AT & T's successor, Lucent Technologies, Inc. ("Lucent")
(collectively the "defendants") on behalf of purchasers of
various telecommunications equipment sold by the defendants. The
plaintiffs in their Third Amended Complaint (the "Complaint"),
asserting that the products sold by the defendants were "Y2K
defective," alleged six causes of actions, namely (1) statutory
claims under the New Jersey Consumer Fraud Act ("NJCFA")
N.J.S.A. 56:8-1 et seq.; (2) breach of implied warranties of
merchantability and fitness for a particular purpose; (3) breach
of contract; (4) breach of express warranty; (5) fraud; and (6)
breach of duty of good faith and fair dealing. This action was
removed to this Court from New York state court pursuant to
15 U.S.C. § 6614(c)(1) (the "Y2K Act").
The defendants now move to compel arbitration of the claims by
the plaintiff Ironman on the grounds that the agreement
governing the purchase of telecommunications equipment between
Ironman and AT & T requires that all grievances arising out of
the agreement, if not resolved by non-binding mediation, be
arbitrated. Ironman, in response, argues that its claims under
the NJCFA cannot be arbitrated, because class action claims are
not covered by agreements to arbitrate, and that the arbitration
clause in the purchase agreement is unenforceable because the
contract is a contract of adhesion.
Pursuant to a Business Product Purchase Agreement (the
"Purchase Agreement") signed on March 15, 1996, Ironman
purchased various telecommunications equipment, including a
system, from AT & T for a total price of $91,351.28. (Purchase
Agreement attached as Ex. A to Decl. of James Tyrrell ("Tyrell
Decl.") sworn to November 15, 2001.) This equipment, like much
of the equipment sold by the defendants and other companies, was
not programmed to be Y2K compliant. Consequently, on January 1,
2000 the equipment had the potential to experience technical
glitches or malfunctions. In December, 1999 as part of the
defendants' attempts to make equipment it had sold Y2K
compliant, Ironman was offered various options for correcting
the flaws in the technology it had purchased. (See Dep. of
Komla Ametu dated October 3, 2001 at 115-119 attached as Exh. Q
to Plaintiffs' Index of Exhibits.)
Under the Purchase Agreement's "Terms and Conditions"
provisions, all disputes related to the purchase from the
defendants were subject to certain mediation and arbitration
procedures. (Purchase Agreement ¶ 16.) It is the sales of these
products and the Purchase Agreement's arbitration provisions
that are at the center of this motion to compel.
The defendants' motion to compel arbitration is governed by
the Federal Arbitration Act (the "FAA"), pursuant to the
explicit terms of the Purchase Agreement's arbitration
provision, which provides, in relevant part,
A. Any controversy or claim . . . related directly or
indirectly to this Agreement . . . shall be resolved
solely in accordance with the terms of this
[section]. B. If [a dispute] cannot be settled by
good faith negotiation between the parties, AT & T
and [the purchaser] will submit the [d]ispute to
non-binding mediation. If complete agreement cannot
be reached within thirty (30) days of submission to
mediation, any remaining issues will be resolved by
binding arbitration . . . The Federal Arbitration
Act, 9 U.S.C. § 1 to 15, not state law, will
govern the arbitrability of all [d]isputes.
(Purchase Agreement ¶ 16.) The parties agreed at oral argument
that any question regarding the arbitrability of any particular
dispute was governed by the FAA.*fn1
The FAA creates a "body of federal substantive law of
arbitrability, applicable to any arbitration agreement within
the coverage of the [FAA]." Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74
L.Ed.2d 765 (1983); see also Oldroyd v. Elmira Sav. Bank, FSB,
134 F.3d 72, 75 (2d Cir. 1998). In accordance with the FAA, a
district court may stay proceedings if it finds a valid
arbitration agreement and may compel arbitration when a party
does not abide by an arbitration agreement. See 9 U.S.C. § 3
& 4; see also Aerotel, Ltd. v. RSL Comm., Ltd., 99 F. Supp.2d 368,
372 (S.D.N.Y. 2000).
When considering a motion to compel arbitration under the FAA,
a court must resolve four issues:
Oldroyd, 134 F.3d at 75-76 (citing Genesco, Inc. v. T.
Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir. 1987) (citation
omitted)). "There is a strong federal policy favoring
arbitration as an alternative means of dispute resolution."
Oldroyd, 134 F.3d at 76 (citation omitted); see also Hartford
Accident and Indemnity Co. v. Swiss Reinsurance Am. Corp.,
246 F.3d 219, 226 (2d Cir. 2001). In accordance with that policy,
courts should "construe arbitration clauses as broadly as
possible," Oldroyd, 134 F.3d at 76 (citation and quotation
omitted), and "any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration." Moses H.
Cone, 460 U.S. at ...