United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
KINKEADE UNITED STATES DISTRICT JUDGE
the Court is Defendants Sprint Solutions, Inc. and Sprint
Nextel Corp.'s Motion to Compel Arbitration and Dismiss,
or in the Alternative, Stay Proceedings (Doc. No. 8). After
careful consideration of the motion, the response, the reply,
the supporting exhibits, the applicable law, and any relevant
portions of the record, the Court GRANTS the
motion and dismisses with prejudice
Factual and Procedural Background
L2 Wireless, LLC (“Plaintiff”) served as an
Authorized Business Representative (“ABR”) of
Defendants Sprint Solutions, Inc. and Sprint Nextel Corp.
(collectively “Defendants”) for approximately 14
years. Plaintiff and Defendants entered into their most
recent Authorized Business Representative Agreement
(“the Agreement”) in February 2017. Under the
Agreement, Plaintiff acted as an ABR of Defendants,
soliciting and subscribing customers to Defendants'
services and selling Defendants' products. Defendants
would then pay Plaintiff commissions for the subscribed
services and products sold.
August 2017, Defendants notified Plaintiff by letter that the
Agreement was being terminated immediately because Defendants
uncovered “a pattern and practice” by Plaintiff
that violated the Agreement. Plaintiff contends that the
Agreement was terminated without warning and without details
of the alleged violations of the Agreement. Furthermore,
Plaintiff complains it was not given an opportunity to cure.
Upon the termination, Defendants stopped payment of any
further compensation, and any compensation Plaintiff had
already earned was subject to an offset of any amounts it
owed to Defendants.
filed this lawsuit in this Court on the basis of diversity
jurisdiction. Plaintiff asserts claims for breach of
contract, fraud, negligent misrepresentation, tortious
interference, unjust enrichment, defamation, and quantum
meruit. Defendants subsequently filed this motion to compel
arbitration arguing an arbitration provision in the Agreement
requires Plaintiff to submit its claims to arbitration.
Federal Arbitration Act (“FAA”) provides that a
written agreement to arbitrate disputes arising out of a
contract “shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. The
statute does not permit the trial court to exercise any
discretion, “but instead mandates that district courts
shall direct the parties to proceed to arbitration
on issues as to which an arbitration agreement has been
signed.” Dean Witter Reynolds, Inc. v. Byrd,
470 U.S. 213, 218 (1985).
motion to compel arbitration, the court conducts a two-step
analysis. Webb v. Investacorp., Inc., 89 F.3d 252,
257-58 (5th Cir. 1996). The Court first determines whether
there is a valid agreement between the parties to arbitrate a
dispute. See Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985);
Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429
(5th Cir. 2004). In making this determination, the court
looks to (1) whether the arbitration agreement is valid and
enforceable and (2) whether the claims fall within the scope
of that arbitration agreement. Banc One, 367 F.3d at
429; see Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins.
Co., 304 F.3d 476, 486 (5th Cir. 2002)(“Courts are
limited to determinations regarding whether a valid agreement
to arbitrate exists and the scope and enforcement of the
agreement.”). Once the court determines there is a
valid arbitration agreement, the strong federal policy
favoring the enforcement of arbitration agreements applies,
and all ambiguities must be resolved in favor of arbitration.
Banc One, 367 F.3d at 429. In the second step, the
Court must determine “‘whether legal constraints
external to the parties' agreement foreclosed the
arbitration of those claims.'” Webb, 89
F.3d at 258 (quoting Mitsubishi Motors, 473 U.S. at
party seeking to compel arbitration need only prove the
existence of an agreement to arbitrate by a preponderance of
the evidence.” Grant v. Houser, 469 Fed.Appx.
310, 315 (5th Cir. 2012)(per curiam). The party opposing
arbitration bears the burden of establishing the invalidity
of the agreement or that the claims are outside the scope of
the agreement. See Carter v. Countrywide Credit Indus.,
Inc., 362 F.3d 294, 297 (5th Cir. 2004).
Application of the Law to the Facts
their motion, Defendants contend the Agreement between the
parties contains a valid agreement to arbitrate disputes. In
support of this contention, Defendants submit the Dispute
Resolution provision (“Arbitration Provision”),
which is incorporated as Exhibit E to the Agreement.
According to Defendants, this Arbitration Provision governs
the resolution of disputes arising under or related to the
Agreement and encompasses all of Plaintiff's claims;
therefore, the Court must compel Plaintiff to arbitration.
Plaintiff responds that the Arbitration Provision is invalid
and unenforceable because: (1) it violates Kansas state law
in limiting Defendants' liability and precluding certain
remedies available to Plaintiff; (2) it is unconscionable on
several grounds and, therefore, void; and (3) Plaintiff's
claims do not fall within the scope of the Arbitration
Provision. In their reply, Defendants again contend that the
Arbitration Provision is valid, and argue that Plaintiff
failed to sufficiently establish the Arbitration Provision is
invalid and unenforceable for any of the reasons it asserts.
Agreement to Arbitrate Between the Parties
threshold question for the court is whether the parties
agreed to arbitrate the dispute. Mitsubishi Motors,
473 U.S. at 628. In determining whether an agreement to
arbitrate exists, courts apply state law. Banc One,
367 F.3d at 429. In accordance with state law, the court must
decide (1) whether the parties have a valid agreement to
arbitrate and (2) whether the dispute falls within the scope
of that arbitration agreement. Id. at 429-30. In
this case, the parties contracted in the Agreement for a
choice-of-law provision agreeing to Kansas law. The parties
do not dispute the validity of that provision, therefore the
Court applies Kansas law. See Overstreet v. Contigroup
Cos., Inc., 462 F.3d 409, 411 (5th Cir. 2006).
Valid Agreement to Arbitrate
Turning first to whether there is a valid agreement to
arbitrate, Plaintiff does not dispute the existence of the
Agreement with Defendants. Instead, Plaintiff contends the
Arbitration Provision is invalid and unenforceable because:
(1) the Arbitration Provision violates Kansas public policy
because it unlawfully limits Defendants' liability and
precludes Plaintiff from recovering certain damages; and (2)
the Arbitration Provision is unconscionable for several
reasons, including unequal bargaining power between Plaintiff
and Defendants. At first blush, Plaintiff's arguments
appear to challenge the validity or enforceability of the
Arbitration Provision which would be a determination for this
Court to make rather ...