The California Court of Appeal has affirmed a trial court’s ruling in which it declined to hear the defendant’s motion to compel arbitration because to do so would have exceeded the trial court’s jurisdiction. See Ayyad v. Sprint Spectrum, L.P., __ Cal. App. 4th __ (Cal. Ct. App. 2012).
This ruling seemingly marks the end of a case with a long procedural history, including appeals to the California and U.S. Supreme Courts. Filed in 2003, the Ayyad complaint alleged that Sprint’s mandatory early-termination fees violated California consumer protection statutes. In 2006, the class was certified, but the certification order included a provision whereby Sprint would be able, upon a finding of liability on the termination fee claims, to offset the class’s damages with its own breach of contract claims. Thereafter, the case became one of the few class actions to go to trial, providing a rare illustration of classwide claims being adjudicated.
The month-long jury trial found the early-termination fees to be unenforceable contract terms and determined that the class was entitled to monetary damages in excess of $73 million as well as injunctive relief. However, the jury also found in favor of Sprint on its breach of contract cross claim, and assessed damages more than three times that of the class award, yielding a net recovery of some $151 million for Sprint. Because the class certification order provided that only the class could recover money damages, the $151 million was negated, and Sprint was required to enact the injunctive relief that was awarded to the class.
The arbitration dispute arose when Sprint, after unsuccessful appeals to the California and U.S. Supreme Courts, won a motion for a new trial, but as to damages only. Sprint appealed, but the Court of Appeal affirmed the trial court in all respects, circumscribing the trial court’s jurisdiction on remand only to the retrial of damages. Sprint moved to compel the new trial to arbitration, which the trial court denied.
In yet another appeal — the one that generated the instant ruling — Sprint invoked the U.S. Supreme Court’s then recently issued AT&T Mobility v. Concepcion ruling. See slip op. at 5-6. Sprint argued that Concepcion required that the entire matter be retried, not in court but in arbitration, and not as a class action, but rather as individual arbitrations. Id.
Rather than being grounded in an interpretation of Concepcion, as Sprint had urged, the Court of Appeal’s Ayyad decision is an exemplar of procedural formalism: “Our directions permitted the trial court to take the steps necessary to adjudicate the issues of Sprint’s damages and the setoff calculation; they ‘did not leave open the option of reconsidering prior rulings or reopening the case on the facts and allowing a trial.’” Id. at 13 (citation omitted). As such, “[t]he trial court correctly rejected Sprint’s eleventh-hour attempt to undo the result of years of litigation.” Id. (footnote omitted).
The Court of Appeal held to the strict terms of its remand order in denying Sprint’s attempt to begin anew with individual arbitration, and did not reach Concepcion, but for the implicit holding that Concepcion did not trump the remand order’s narrowly drawn mandate.