Here’s a pop a quiz, drawn from Judge Netburn’s Report and Recommendation in Borecki v. Raymours Furniture Co., Inc. Is the following arbitration provision in a contract between a store and its customer a broad or narrow arbitration requirement: “[A]ny claim, dispute, or controversy between you and us that in any way arises from or relates to the goods and/or services you have purchased or are purchasing from us (the “Purchases”), now or in the past, including . . . any information we seek from you . . . .”?
Many lawyers, accustomed to courts’ deference to arbitration provisions, would answer “broad, arbitration will apply to any dispute.” But they’d fail the test.
Scott Borecki purchased a bedroom set from Raymours, and left his cell-phone number for the furniture company to contact him when the set was ready for pick up. The sale and pick up went smoothly. But three years later, Raymours texted Borecki four times promoting its local Raymour and Flanigan store. Borecki was not interested in the local promotion; instead, he brought a putative class action asserting that Raymours violated the Telephone Consumer Protection Act, a federal law which restricts unauthorized telemarketing.
Raymours moved to compel arbitration, arguing that Borecki’s claim “arises from or relates to” the purchase of his bedroom set. After all, but for Borecki’s purchase Raymours wouldn’t have his cell number. Therefore, Raymours assumed, the claim “relates to” the purchase.
But Judge Netburn drew a finer line. The question she posed was whether Raymour’s text messages were related to Borecki’s purchase of the bedroom set—not whether the means by which Raymours obtained Borecki’s contact information related to the purchase. Even though the arbitration agreement defined “claim” to require the “broadest reasonable meaning,” Judge Netburn concluded that the text messages were sale promotions unrelated to the purchase of the bedroom set, and that Borecki’s claim was not subject to arbitration. Judge Netburn distinguished Borecki’s claim from claims that she said would be arbitrable, such as false advertising, a product defect, or even text messages asking Borecki to rate its furniture favorably.
Rubbing salt in to Raymours’ wound, Judge Netburn also found that a class action waiver included as part of the arbitration provision could not be enforced: “Because the Agreement’s class action waiver is applicable only to arbitrable claims, and because I recommend finding that the Arbitration Agreement does not require Borecki to arbitrate his TCPA claim, Borecki’s TCPA claim may be asserted as a class action.”
Under court rules, Judge Netburn’s Report and Recommendation now goes to Judge Kaplan for his review (since she sits as a Magistrate-Judge). Regardless of the case’s ultimate outcome, Borecki is a cautionary tale for companies that expect that customer-related litigation will take place in the privacy of an arbitration forum, not in the glare of a class action courtroom.
Hat tip again to Christine Choi for helping with this post.