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Katz v. Cellco P'ship

United States Court of Appeals, Second Circuit

July 28, 2015

MICHAEL A. KATZ, individually and on behalf of all others similarly situated, Plaintiff-Appellant-Cross-Appellee,
v.
CELLCO PARTNERSHIP, DBA VERIZON WIRELESS, Defendant-Appellee-Cross-Appellant

Argued March 5, 2015

Page 342

Appeal from the United States District Court for the Southern District of New York (Briccetti, J.). Plaintiff-Appellant-Cross-Appellee Michael A. Katz initiated a putative class action against Defendant-Appellee-Cross-Appellant Cellco Partnership d/b/a Verizon Wireless (" Verizon" ), asserting various state law claims and seeking declaratory judgment that application of the Federal Arbitration Act, 9 U.S.C. § 1 et seq., to compel arbitration of those claims pursuant to a contractual arbitration clause is unconstitutional. Katz moved for partial summary judgment on his declaratory judgment claim while Verizon cross-moved to compel arbitration and to stay proceedings. The District Court denied declaratory relief, compelled arbitration of all claims, and dismissed the action. We AFFIRM IN PART and VACATE and REMAND IN PART.

WILLIAM ROBERT WEINSTEIN, Law Offices of William R. Weinstein, White Plains, NY, for Plaintiff-Appellant-Cross-Appellee.

ANDREW G. MCBRIDE, (J. Michael Connolly, on the brief), Wiley Rein LLP, Washington, DC, for Defendant-Appellee-Cross-Appellant.

Before: WESLEY, LIVINGSTON, and CARNEY, Circuit Judges.

OPINION

Page 343

Wesley, Circuit Judge :

In an effort to more efficiently manage their dockets, some district courts in this Circuit will dismiss an action after having compelled arbitration pursuant to a binding arbitration agreement between the parties. That is what happened here. After the District Court (Briccetti, J.) found Michael A. Katz's state law claims against Cellco Partnership d/b/a Verizon Wireless (" Verizon" ) to be arbitrable, the court compelled arbitration but denied Verizon's request to stay proceedings.[1] By dismissing the case, however, the District Court made the matter immediately appealable as a final order, provoking additional litigation--specifically, this appeal. Although we recognize the administrative advantages of a rule permitting dismissal, we hold that the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (" FAA" ), requires a stay of proceedings when all claims are referred to arbitration and a stay requested. Moreover, Katz's various constitutional challenges to the FAA are meritless, as explained by the well-reasoned opinion of the District Court. Accordingly, we AFFIRM the District Court's judgment denying summary judgment and compelling arbitration, VACATE the District Court's dismissal of the action, and REMAND with instructions to stay the action pending arbitration.

Background

Katz sued Verizon on behalf of a putative class of New York-area Verizon wireless telephone subscribers, asserting breach of contract and consumer fraud claims under New York state law on the basis of a monthly administrative charge assessed by Verizon. Katz alleged that--contrary to Verizon's representations that the administrative charge was imposed for recovery of government-related costs--the charge was actually a discretionary pass-through of Verizon's general costs and, so, constituted a concealed rate increase.

Katz's contract with Verizon incorporated the company's wireless customer agreement, which contained an arbitration clause that invoked the FAA and required the arbitration of disputes arising from the agreement or from Verizon's wireless services. Thus, in addition to his state law claims, Katz also sought a declaratory judgment that application of the FAA to those claims was, on various grounds, unconstitutional.[2]

The parties filed cross-motions. Katz moved for partial summary judgment for declaratory relief, which Verizon opposed as foreclosed by controlling precedent. Verizon moved to compel arbitration and to stay proceedings. Katz conceded in response that " Verizon's Customer Agreement is enforceable under the FAA with ...


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