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Dispute Not Covered by Arbitration Agreement

Vanessa Kamberis

Dispute Not Covered by Arbitration Agreement
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In Hearn v. Comcast Cable Communs., LLC, 2019 U.S. Dist. LEXIS 1811430 *23 (October 21, 2019), the court held a plaintiff’s claim for relief under the Fair Credit Reporting Act (FCRA) did not relate to the service agreement between plaintiff and defendant, and therefore did not fall within the scope of their arbitration agreement.   

Plaintiff Michael Hearn contracted for services from defendant Comcast Cable Communications (Comcast). The parties entered into an agreement that contained a binding arbitration clause, an opt out provision, and a survival clause which stated that the “parties’ agreement to arbitrate survives termination of the agreement.” After a period of time, plaintiff terminated his use of defendant’s services. Plaintiff then filed suit for various violations of the FCRA arguing that Comcast obtained his consumer report for an impermissible purpose. In response, Comcast argued that the plaintiff’s claims were covered by the arbitration agreement in the parties’ contract.  

In deciding the case, the court considered whether the arbitration clause continued to bind the parties after termination of the agreement and whether the plaintiff’s FCRA claim was within the scope of the arbitration clause. The court explained that based on the plain language of the contract “the parties intended for the arbitration provision to survive termination” of the agreement. However, the court ultimately denied arbitration because the plaintiff’s claims did not arise out of the agreement and therefore were outside the scope of the arbitration clause. 

The court stated that plaintiff’s FCRA claim did not arise out of the defendant’s performance of its contractual duties.  The court analyzed the principles of contract law and explained courts should not compel arbitration for claims that are “unmoored from the agreements containing arbitration provisions.” The court ruled that no reasonable customer would expect to waive their right to sue the defendant with regard to a claim unrelated to the parties’ agreement. Similarly, the court went on to state that no reasonable company in the defendant’s position could expect the plaintiff to absolutely waive their right to sue in court. Because the plaintiff’s claim was outside the agreement to arbitrate, the defendant’s motion to compel arbitration was denied.

Practice Tip

Although courts generally favor arbitration, they will not compel the arbitration of claims that are outside the scope of the parties’ arbitration agreement. Thus, if the parties want to arbitrate any and all claims relating to their relationship, they need to clearly express this intent in their written agreement.