United States District Court, District of Montana, Billings Division
DALE MORTENSEN and MELISSA BECKER, individually, and on behalf of themselves and all others similarly situated, Plaintiffs,
BRESNAN COMMUNICATIONS, L.L.C., Defendant.
FINDINGS AND RECOMMENDATIONS OF UNITED STATES MAGISTRATE JUDGE
Keith Strong, United States Magistrate Judge
Defendant Bresnan Communications (“Bresnan”) moved to the compel arbitration of the claims of Plaintiffs Dale Mortensen and Melissa Becker (collectively “Plaintiffs”). That motion was previously denied. The motion was denied again upon reconsideration. Bresnan took appeal. The Ninth Circuit remanded and directed the application of New York law rather than Montana law.
Arbitration should be compelled upon analysis of New York law. The service agreement represents a validly formed contract under New York law. The arbitration provision of that contract is not unconscionable because the potential for high costs to the plaintiffs is speculative.
The Court has personal jurisdiction over the parties, all of whom are found in Montana. Fed.R.Civ.P. 4(k)(1)(A); Mont. R. Civ. P. 4(b). Plaintiffs reside in Montana and Defendants conduct extensive, pervasive business in the state. See Complaint, Doc. 1 at 4-6; Answer, Doc. 31 at 2-3. The case was initially assigned to District Judge Richard Cebull, but was reassigned to Chief Judge Dana Christensen upon Judge Cebull's retirement. (Doc. 57 at 3.) Chief Judge Christensen referred this matter to the under Dated: June 11, 2013, in compliance with D. Mont. L. R. 72.2(b). (Doc. 59.). Subject matter jurisdiction exists both because the parties are diverse and because the case presents issues of federal law. See Complaint, Doc. 1 at 6; 28 U.S.C. §§ 1331, 1332.
The United States Court of Appeals for the Ninth Circuit vacated Judge Cebull’s decision that declined to reconsider whether to compel arbitration under Montana law (doc. 48), and remanded for consideration of Bresnan’s motion to compel arbitration under New York law. (Doc. 61); Mortensen v. Bresnan Commc'ns, LLC, 722 F.3d 1151 (9th Cir. 2013) [hereinafter Mortensen]. Both the Plaintiffs and Bresnan have briefed how New York law affects Bresnan’s motion to compel arbitration. (Docs. 64, 65.)
A. Arbitration Under the Federal Arbitration Act
The Federal Arbitration Act (“FAA”) makes arbitration agreements in contracts involving interstate commerce presumptively “valid, irrevocable, and enforceable.” Mortensen, 722 F.3d at 1157 (internal quotations omitted); see also 9 U.S.C. § 2. The FAA “mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Mortensen, 722 F.3d at 1157. To determine whether to compel arbitration, courts must consider (1) whether there was a valid agreement to arbitrate between the parties, and (2) whether the arbitration agreement covers the dispute at issue. Kilgore v. KeyBank, Nat. Ass'n, 718 F.3d 1052, 1058 (9th Cir. 2013).
The FAA preempts contrary state law, but the FAA savings clause does not require enforcement of arbitration agreements on “such grounds as exist at law or in equity for the revocation of any contract.” Mortensen, 722 F.3d at 1158 (quoting 9 U.S.C. § 2). Recent cases from the Supreme Court have made clear that state law rules that stand as obstacles to arbitration are preempted. Mortensen, 722 F.3d at 1158; Marmet Health Care Center, Inc. v. Brown, ___ U.S. ___, ___, 132 S.Ct. 1201, 1203 (2012) (“When state law prohibits . . . the arbitration of a particular type of claim, the analysis is straightforward: [t]he conflicting rule is displaced by the FAA.”).
The FAA favors arbitration rather than merely affording it equal footing. Mortensen, 722 F.3d at 1158. The FAA pre-empts state laws that are unfavorable to arbitration, regardless of the savings clause. Id. Any “general state-law contract defense, based in unconscionability or otherwise, that has a disproportionate effect on arbitration is displaced by the FAA.” Id.
Under the FAA, the determination as to whether the parties have entered into an agreement to arbitrate is made by applying ordinary state law principles governing the formation of contracts. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Perry v. Thomas, 482 U.S. 483, ...