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LEWIS TREE SERVICE v. LUCENT TECHNOLOGIES

November 20, 2002

LEWIS TREE SERVICE, INC., ET AL., PLAINTIFFS,
V.
LUCENT TECHNOLOGIES INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Koeltl, District Judge.

  OPINION AND ORDER

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.

I.

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.

II.

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 ...


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