The opinion of the court was delivered by: DENISE COTE, District Judge
In this consolidated antitrust action brought against the nation's
five largest providers of wireless telephone service for allegedly tying
the sales of handsets to the sale of service, defendants Cingular Wireless LLC and Pacific Telesis Mobile
Services LLC (collectively "Cingular") have brought a motion to strike
the plaintiffs' class action allegations against Cingular based on the
existence of arbitration clauses in the "overwhelming majority" of
Cingular's contracts with its customers.*fn1 Cingular contends that
those arbitration clauses must be enforced and since those customers who
did not have arbitration clauses in their contracts cannot be readily
identified, the plaintiffs will not be able to prevail on any motion they
bring to certify a class. This Opinion considers the intersection of the
law concerning the class action device and arbitration agreements.
The plaintiffs contend, inter alia, that the arbitration
clauses are unenforceable and that Cingular has waived its right to rely
on the clauses through its conduct in this litigation.*fn2 Six named
plaintiffs are current or former Cingular subscribers and Cingular has not moved to compel arbitration as to any of them.
In addition, Cingular requested that plaintiffs' counsel not file
additional actions on behalf of Cingular customers, and that they
litigate through this MDL proceeding the five suits that had already been
filed. That litigation has survived a motion to dismiss. The defendants
substantially completed their document production some weeks ago, and
fact discovery is scheduled to conclude on October 8, 2004. The
plaintiffs also point out that Cingular did not assert the existence of
any arbitration agreement as an affirmative defense in its answer.
Federal policy strongly favors arbitration. Oldroyd v. Elmira
Savings Bank, FSB, 134 F.3d 72, 76 (2d Cir. 1998). A party waives
its right to arbitrate, however, "if it engages in protracted litigation
that results in prejudice to the opposing party." S & R Co. of
Kingston v. Latona Trucking, Inc., 159 F.3d 80, 83 (2d Cir.
1998)(citation omitted). Waiver is an equitable defense that is decided
by a court. Doctor's Assoc., Inc. v. Distaju, 66 F.3d 438,
454-56 (2d Cir. 1995). In the context of litigation other than litigation
brought on behalf of a class, the standards for evaluating a waiver are
While waiver of arbitration is not to be lightly
inferred, the issue is fact-specific and there are
no bright-line rules. Factors to consider include
(1) the time elapsed from the commencement of the
litigation to the request for arbitration; (2) the
amount of litigation (including exchanges of
pleadings, any substantive motions, and
discovery); and (3) proof of prejudice, including
taking advantage of pre-trial discovery not
available in arbitration, delay, and expense. Latona Trucking, 159 F.3d at 83 (citation omitted).
See also Leadertex, Inc. v. Morganton Dyeing & Finishing
Corp., 67 F.3d 20, 25-26 (2d Cir. 1995); Distajo, 66 F.3d
at 457. "The key to the waiver analysis is prejudice." Thyssen, Inc.
v. Calypso Shipping Corp., 310 F.3d 102, 105 (2d Cir. 2002). There
are two types of prejudice: substantive prejudice, such as when a party
loses a motion on the merits and the attempts, in effect to relitigate
the issue by invoking arbitration; and prejudice due to excessive cost
and time delay. Id. If there is a doubt as to the existence of
a waiver, the doubt must be resolved in favor of arbitration. PPG
Indus., Inc. v. Webster Auto Parts Inc., 128 F.3d 103, 107 (2d Cir.
1997). In other words, the court should decide these issues with a
"healthy regard for the policy of promoting arbitration."
Leadertex, 67 F.3d at 25. See also Oldroyd, 134 F.3d
at 76. Arbitration agreements, however, are "as enforceable as other
contracts, but not more so." Opals On Ice Lingerie v. Body Lines
Inc., 320 F.3d 362, 369 (2d Cir. 2003) (emphasis in original).
As noted, Cingular does not seek to enforce any arbitration clause vis
a vis any of the named plaintiffs. As the analysis set forth below shows,
it has in any event clearly waived its right to do so.
This litigation has been pending for approximately two years. The
litigation is composed of five putative class actions, the first of which was filed on April 5, 2002, and the
last of which was filed on September 30, 2002. The actions were filed in
this district, the District of Massachusetts, the Northern District of
California, the Southern District of Texas, and the Northern District of
Illinois. On March 5, 2003, the Judicial Panel on Multi-District
Litigation (the "MDL Panel") granted defendants' motion to transfer all
pending actions to the Southern District of New York. The plaintiffs
consented to the motion.
This case has been actively litigated for at least a year and a half.
The first of the five actions Brook v. AT&T Cellular
Services, 02 Civ. 2637 (the "Brook Action") was filed in
this district on April 5, 2002, and assigned on June 14 to the Honorable
Milton Pollack. In June, the defendants moved to dismiss the Brook
Action. The case was eventually reassigned to this Court on October
24.*fn3 At a conference on November 19, the plaintiffs gave notice of an
intent to file a further amendment to the complaint in the Brook Action.
With the understanding that this would, with identified exceptions, be
essentially the final amendment, it was agreed that an amended pleading
would be filed and that the pending motions to dismiss would be dismissed as moot. The amended complaint was filed on January 9, and the
defendants moved to dismiss the pleading.
On March 12, 2003, the MDL Panel transferred the other four actions to
this Court. The parties had agreed to stay those actions pending the MDL
transfer. At a July 29 conference, transfer and consolidation issues were
addressed. It was agreed that if the Brook Action survived the pending
motion to dismiss, that the plaintiffs would be permitted to amend their
pleading of the market definition, and that the five actions would be
consolidated. An Order of August 11, consolidated the five actions for
pretrial purposes, and an Opinion of August 12 granted the motions to
dismiss in part. In re Wireless Tel. Serv. Antitrust Litig.,
No. 02 Civ. 2637 (DLC), 2003 WL 21912603 (S.D.N.Y. Aug. 12, 2003). The
tying claim contained in the plaintiffs' first claim survived.
A schedule for the litigation was set at an October 3 conference. In
particular, document production was to be substantially completed by
February 20, 2004. At a conference on November 6, the Court announced
that it did not appear, based on a review of the parties' submissions,
that there was a discrete dispositive issue within the tying claim that
could be the focus of early discovery and motion practice.*fn4 A
schedule was set for the remainder of the litigation. The plaintiffs and
defendants were unanimous in requesting that the class certification motion be
made after all discovery had concluded.
On December 23, one defendant, VoiceStream, moved for summary judgment
on the ground that its service agreements do not require consumers to
purchase handsets from it. At the January 21 conference, the Court denied
VoiceStream's request to stay discovery pending the resolution of its
motion. Its summary judgment motion was denied in an Opinion of April 9,
2004. In re Wireless Tel. Serv. Antitrust Litig., No. 02 Civ.
2637 (DLC), 2004 WL 764833 (S.D.N.Y. Apr. 9, 2004).
On January 5, 2004, Cingular brought the instant motion. Each of the
other defendants indicated that they also had arbitration clauses in
their agreements with customers, but did not intend to assert that the
clauses were a bar to class ...